The Process of Selling a Funeral Home
Selling your funeral home is like any other sale—you have to understand your product, find buyers who are interested and qualified to buy, show the product to buyers in the best possible light, and pursue sales opportunities actively and diligently.
There are no shortcuts. Preparation, diligence, and attention to the needs of the buyer—these are the criteria to succeed at selling your funeral home business.
Some owners take a more casual approach. Serious buyers quickly see that they are unprepared and uncommitted and these buyers move on to better opportunities. If you aren’t ready to sell, if you can’t commit to the time and energy required, then it is best to wait.
Once you are ready, the steps in the process are straightforward. Establish your goals, prepare the business, find qualified buyers, and actively promote the quality and value of your business to these buyers.
Establish your goals
You might be surprised to be told that it’s necessary to establish your goals. Isn’t the goal to sell the business? Yes, but within that broader goal lie many others. A prioritized list of all your goals will help you to form your selling strategy and will inform many of your decisions along the way.
Some of the questions to consider are:
- What are your main reasons for considering a sale? What do you want personally from a sale? What do you want for your company?
- What characteristics are you looking for in a buyer?
- How quickly do you want to transition away from the company? How long are you willing to consult or be available after the sale?
- What deal structure will enable you to achieve your financial goals? Are you willing to accept terms in exchange for a higher price? Are you willing to finance part of the sale?
- Do you feel an financial or other obligations to your management team? Employees?
- How important is confidentiality to you? How vital is it that your employees and customers not know that you are for sale?
Different funeral home owners have different priorities. Some want to maximize the price they get for their business, regardless of who the buyer is. Other funeral home owners place a high importance on finding the “right buyer” and will make concessions in price and terms for the buyer that they believe is the best fit to continue to run their business.
The reality is that most sellers believe that multiple priorities are important—price, the buyer, the local community. By going through the exercise of identifying and prioritizing your goals, you’ll have a better sense of what’s important to you and be able to approach your selling with a clearer strategy.
Once you have your goals prioritized you can create a strategy to achieve them. A haphazard approach rarely produces a successful transaction. A well-conceived plan will inform which types buyers you should approach, what kind of deal you want to structure, and the schedule for moving forward.
Set up a timetable at the beginning and track your progress against the schedule. Six months is a rule of thumb to sell a funeral home, though it can take as long as a year.
Prepare the business to be sold
When it is time to show your business to a buyer, it should look its best. Fix any characteristics that reduce your ability to transfer ownership at a high price. Make these changes before you enter the selling process.
Is the legal structure of the business separate from any personal assets or other businesses? Perhaps the business owns vehicles that are used for personal use. Or the business owns another unrelated business that needs to be sold. One seller came to us and his funeral home also owned a car wash that the owner was attached to. Before the funeral home could be put on the market, the owner had to sell the car wash.
Does your financial structure show the business as profitable as possible? Are the assets realistic? Your CPA can help you clean up your accounts and even change your reported earnings and file amended tax returns.
Prepare presentation materials
Buyers will look at multiple funeral home opportunities. They are only going to take seriously sellers who provide a complete and understandable description of the business. Your advisor can work with you to prepare a complete descriptive memorandum before you go to market. This memorandum will show your business in the best light and highlight the aspects of your company that are most likely to impress buyers.
Identify prospective buyers
You may have some prospective buyers already in mind. Perhaps an employee or a nearby funeral home owner who would like to expand. But more than likely you will need to cast a wider net and look for buyers more broadly.
Although corporate funeral home businesses made many purchases in the nineties, those days are over. They overpaid and found that the operational efficiencies they hoped to gain were not possible.
Who is buying today? Mainly individuals who are looking for funeral homes that are doing 75 – 100 calls per year.
It’s impossible for you to avoid looking like you want it too badly if you approach a potential buyer directly. It’s always better to have a third party, preferably a skilled professional approach the buyer for you. This method lets you find out the buyer’s interest in a purchase, it maintains your confidentiality until you know there is interest, and finally, it lets you continue to run your business while the third party makes the time-consuming efforts to approach potential buyers.
Once you have a potential buyer, the best action you can take is to get them excited about your business. The facts of the acquisition can only say so much. It’s your ability to personally influence the buyer that will increase the probability of a successful sale.
- Learn about the buyer and the buyer’s criteria for purchase.
- Structure your meeting with the buyer so that you cover all topics that the buyer needs to become confident about your offer.
- Answer the buyer’s questions openly and honestly. The buyer doesn’t expect everything to be perfect, but the buyer will want to know the full story in order to make an informed decision.
If you can help the buyer become excited and can answer all questions about your business, you are on the way to receiving an offer. From that point the process is straightforward—work with your intermediary to negotiate terms of sale, respond to all due diligence requests, and complete a contract.