Finding a Broker
In building your business, you have undoubtedly made many contacts in the funeral home industry. You have also likely had occasions to develop your negotiating skills. It may come as no surprise that many funeral home owners are tempted to sell their business themselves.
Yet, as the saying goes, a doctor who performs surgery on himself has a fool for a patient.
Selling a business can be a complex and time-consuming proposition. Many legal, tax, and accounting issues have to be addressed. An appropriate buyer has to be found. A deal has to be structured, negotiated and brought to a conclusion.
The sale of your business could be the most important economic event in your life. A professional intermediary can work with you to navigate this transaction. The intermediary is an agent authorized by you to act on your behalf to arrange a transaction.
Intermediaries work with you to prepare your business for sale, to search for appropriate acquisition candidates, and then to negotiate and structure a deal. An intermediary will guide you through the entire sales process, from developing your initial strategy to closing the deal and seeing you through a successful transition. An intermediary will help you get the best price and terms for your business.
The intermediary acts in your interest, but is not authorized to commit you to anything. Ultimately, you retain the right to make all the decisions.
What an intermediary does
- Determines advisability of a sale, estimates a range of potential values.
- Works with you to prepare the business for sale - making sure you have in place the accounting practices, tax strategies, and legal structure - to improve the price you can achieve for the business and the ease and speed of the transaction.
- Develops a selling strategy and prepares a selling memorandum which describes in detail your company’s operations and prospects for the future.
- Finds and contacts potential buyers, introduces the opportunity to them.
- Schedules and conducts meetings with qualified and serious potential buyers.
- Helps buyers obtain the information they need about the business to evaluate the acquisition.
- Negotiates price and other terms.
- Works with all parties to prepare and close the sale contract.
- Remains available to the seller during the transition process.
How an intermediary is paid
Professional intermediaries are paid when the deal closes. Their fee is based on a percentage of the sale price. Beware of intermediaries that want to charge fees up front or that can’t fully describe their fees to you .
Reasons to use an intermediary
You may be questioning the need for an intermediary. Can’t I do this myself? Is it necessary to give up a percentage of the sale to another person?
A competent intermediary will more than make up for the fee you pay by getting you a higher price, better terms, and a smoother transaction. Some of the reasons to use an intermediary include:
Experience - Like you, competent intermediaries have invested years to become a specialist in their field. A professional intermediary brings an understanding of the acquisition process and the market for funeral homes. Your intermediary can help you to package and price your business, work with you on the technical aspects of the sale, and resolve accounting, legal and tax issues.
Objectivity - You have a big emotional stake in the sale of your business. It’s hard to separate issues from emotions when we are close to a situation. An intermediary can maintain this separation. The intermediary will stay focused on resolving the issues that arise in the course of selling a business.
Knowledge of buyers - Just as you wouldn’t expect someone to become an expert in the needs of your local customers, it will be difficult for you to quickly become an expert in the market for funeral homes. An intermediary that specializes in your market lives and breathes the patterns and rhythms of the buying and selling of funeral home businesses. An intermediary will not only find a buyer, but it will be a qualified buyer that can make it to the finish line of completing the purchase and successfully transitioning the company.
Confidentiality - The sale of a funeral home business is a particularly sensitive transaction. If information is leaked to employees, suppliers or customers it could cause a serious disruption in the business and a loss in valuation. An intermediary can orchestrate and control the process by restricting most contact with buyers to a remote site. An intermediary can maintain confidentiality throughout the process by carefully screening buyers and by using strong non-disclosure agreements.
Skill at negotiations - It’s likely that your buyer will be an individual who has little experience at acquisitions. Whether the buyer has an intermediary or not, it is in your interest to have someone negotiating on your behalf that is experienced at negotiating the best terms and price for your business. And because the intermediary can’t legally commit for you, you will have more flexibility because the intermediary has to check with you before agreeing to anything.
Role as a buffer - The buyer and seller of a funeral home will likely be working with each other after the sale to successfully transition the business. It’s important that they develop and retain a good working relationship during the selling process. Yet this is hard to do in the emotionally charged atmosphere of a negotiation, especially if the negotiating gets tough. An intermediary can act as a buffer between both parties, allowing you to negotiate tough deals without direct confrontation.
What to look for in an intermediary
While a professional, experienced intermediary can add tremendous value to the transaction, an ill-informed, inexperienced advisor can do more harm than good.
Look for these qualities:
Professionalism - An intermediary’s reputation can have a profound impact on your ability to sell your business. Be certain that your intermediary has the required education and experience. The intermediary also must have a solid reputation with the funeral home industry and within the lending community.
Experience - Your intermediary should have a solid track record of successful funeral home transactions.
Focused Effort - This transaction is important to you, it may be one of the most important economic events in your life. You want an intermediary that also takes it seriously. Avoid intermediaries who take a “listings” approach, working on many companies simultaneously in hopes that one can be sold. Find an intermediary who has the time, the experience and the will to focus on the sale of your business and who will see it through to the end.
Senior level attention - Avoid an intermediary who will hand off your work to a junior person on the staff. Find an intermediary who is anxious enough for your business to devote a senior person to the project.
Sensitivity to your objectives - A competent intermediary will bring a wealth of experience to the table. A good intermediary will also listen to the client and the client’s specific goals. If the person is truly capable, this careful listening will translate into a customized approach that produces a successful sale and that meets your objectives.
Seller representation only - Sometimes your representative will find a qualified buyer who does not have representation. In this situation it might be tempting to agree to let the intermediary work for both parties. This would create conflicts of interest that are best avoided.
Personal compatibility - Finally, select a person with whom you are comfortable working. The process of preparing and selling your business is intense. You are more likely to successfully navigate difficult waters if the two of you establish a good working relationship.