Debunking Common Selling Myths – Part One

Debunking Common Selling Myths: Part One

Selling a funeral home can be a challenging and time-consuming process. Whether you’re planning to sell or just exploring your options, understanding the common myths surrounding the selling process can save you time, money, and frustration. For buyers, this insight can also help you navigate the transaction from the seller’s perspective, making the process smoother for all parties involved.

Education is your first line of defense against making costly mistakes when selling your business. Appraisers, brokers, and consultants may use various tactics to entice sellers into paying for expensive services, such as business valuations, exclusive listing agreements, or consulting services. Understanding what’s truly necessary and what’s not can help you avoid unnecessary expenses and maximize the value of your sale.

This article is the first in a two-part series that will debunk some of the most common myths about selling a funeral home. By the end of this series, you’ll have a clearer understanding of the selling process and how to approach it strategically.

Myth 1: I Need a Formal Business Appraisal to Sell

Reality: While business appraisals, or evaluations, are often used to establish the market value of a business for various purposes such as selling, buying, refinancing, estate planning, or legal agreements, they are not always necessary for selling your funeral home.

• Why It’s a Myth: Most buyers will need a loan to finance the purchase of your funeral home. Lenders typically require their own independent valuations to ensure the appraisal is unbiased and accurate. This means that any appraisal you commission may not be usable by the buyers lender.
• What You Should Do Instead: If you decide to obtain a valuation, use a reputable national valuation company and confirm with the buyer’s lender that the appraisal can be used in the financing process. Avoid overpaying for the valuation basic business valuations generally cost between $1,500 and $2,500.

Myth 2: I Need to Sign an Exclusive Listing Agreement to Sell

Reality: Exclusive listing agreements can lock you into a long-term contract with a broker, often for 12 to 24 months, with standard industry commissions ranging from 5% to 10% of the sale price. These agreements are designed to secure the broker’s commission, even if you find the buyer yourself.

• Why It’s a Myth: You may already know the best buyer for your business, or it may not take long for a qualified buyer to be found. An exclusive listing agreement can limit your flexibility and may result in paying a commission even if you locate the buyer independently.
• What You Should Do Instead: Consider non-exclusive agreements that allow you to work with multiple brokers or find a buyer on your own without being locked into a commission. This approach provides more flexibility and could save you money on broker fees.

Myth 3: My Brokers Fees Are Paid by the Buyer, So the Sale Isn’t Costing Me Anything

Reality: While some brokers advertise that their fees are buyer-paid, this can be misleading. The total transaction costs, including the broker’s commission, ultimately impact the selling price of your business.

• Why It’s a Myth: Even if the buyer is technically paying the broker’s commission, the amount they can borrow and therefore, the price they can offer you is affected by these costs. Essentially, a higher commission could mean a lower net price for you.
• What You Should Do Instead: Focus on the total cost of commissions and transaction fees, regardless of who pays them. Negotiating lower commissions or seeking alternative arrangements can help you retain more of the sale proceeds.

Additional Tips for Selling Your Funeral Home

• Educate Yourself: Understanding the selling process and common pitfalls will help you make informed decisions and avoid unnecessary costs. Knowledge is power when it comes to navigating business transactions.
• Consult with Multiple Experts: Don’t rely solely on one appraiser, broker, or consultant. Getting multiple opinions and quotes can give you a clearer picture of what’s reasonable and help you avoid overpaying for services.
• Consider the Long-Term Impact: While it may be tempting to cut costs upfront, consider how each decision will affect your final sale price and long-term financial health.

Conclusion: Be Smart About Selling Your Funeral Home

Selling a funeral home is a complex process that requires careful planning and decision-making. By debunking these common selling myths, you can approach the process with greater confidence and avoid costly mistakes. Remember, the goal is to maximize the value of your sale while minimizing unnecessary expenses.

Considering selling your funeral home?

Reach out today to discuss your options and ensure a smooth, profitable sale. Stay tuned for Part Two of this series, where we’ll explore more selling myths and how to navigate them effectively.

For expert guidance on selling your funeral home, contact Matt Manske, Member of BSF LLC, at (913) 343-2357 or via email at [email protected]. Visit www.4BSF.com for more information..

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