Debunking Common Selling Myths – Part Two

Debunking Common Selling Myths: Part Two

This article is the second installment in a series that addresses common myths associated with selling a funeral home. In Part One, we covered myths related to formal business valuations, exclusive listing agreements, and buyer-paid broker fees. In this part, will explore additional misconceptions that could hinder your selling process and provide insights that can help you achieve a successful and profitable sale.

Selling a funeral home can be a complex and time-consuming endeavor. Understanding the truth behind these myths can save you time, money, and frustration, and give you a clearer understanding of the selling process.

Myth 1: I Need an Expert Consulting Agreement to Improve My Operations Before Selling

Reality: While it might seem beneficial to hire an expert consultant to optimize your business operations before selling, this isn’t always necessary. The idea behind this myth is that improving operations will increase your busines’s value, thereby fetching a higher sale price. However, the reality is more nuanced.

• Why It’s a Myth: Maximizing cash flows is the primary goal when improving operations before a sale, and this can often be done by your own CPA without the need for an expensive consultant. While an expert consultant might offer valuable industry-specific insights, these changes are unlikely to significantly impact the selling price unless they result in substantial improvements.
• What You Should Do Instead: Focus on leaning upâ operations 12-24 months before selling, with the help of your CPA. This involves reducing unnecessary expenses, streamlining processes, and ensuring your financials reflect a profitable and efficient business. These efforts will be more cost-effective and directly contribute to a higher valuation.

Myth 2: I Need an Expert Consulting Agreement to Operate My Business Before Selling

Reality: For business owners who have dedicated decades to their funeral homes, the idea of stepping back and letting a consultant take over operations before selling can be appealing. However, this approach is often misguided.

• Why It’s a Myth: While delegating operations to a consultant might seem like a way to reduce stress, it doesn’t change the fact that, as the owner, you remain ultimately responsible for the business’s performance. The personal relationships and trust you’ve built with your staff and customers are integral to the business’s success, and no outside consultant can replicate those connections.
• What You Should Do Instead: Stay actively involved in the day-to-day operations until the sale is complete. Your presence and leadership are critical to maintaining the business’s value and ensuring a smooth transition to the new owner. If you need to reduce your workload, consider delegating certain tasks to trusted employees rather than bringing in an outside consultant.

Myth 3: As a Seller, I Don’t Need to Worry About Financing That’s the Buyers Responsibility

Reality: While it’s true that securing financing is the buyer’s responsibility, the financing terms they obtain can have a significant impact on your selling price. This myth overlooks the critical role that competitive financing plays in the overall transaction.

• Why It’s a Myth: The amount a buyer can afford to pay for your business is directly influenced by the financing they secure. If a buyer obtains non-competitive financing with higher interest rates and shorter amortization periods, their available cash flow will be reduced, which could lead to a lower offer for your business.
• What You Should Do Instead: Take an active interest in ensuring that the buyer secures competitive financing. This includes longer amortization periods and favorable interest rates. For example, if a buyer secures a loan with competitive terms such as a 25-year amortization period and a 7.0% interest rate on real estate, and a 10-year amortization period with a 9.0% interest rate on the business portion they will have lower annual payments, which can support a higher purchase price.
• In contrast, if the buyer’s financing terms are less favorable, such as a 15-year amortization period at 11.75%, their annual debt payments will be significantly higher. This could reduce the amount they are willing to pay by hundreds of thousands of dollars.

Summary: Navigating the Selling Process with Confidence

Selling a funeral home is a significant financial transaction that requires careful planning and informed decision-making. By debunking these common selling myths, you can approach the process with greater confidence and avoid unnecessary expenses that could reduce your net proceeds.

Remember, the key to a successful sale is to educate yourself about the selling process and to be cautious of any agreements or services that promise more than they deliver. Consultants, brokers, and other experts can provide valuable assistance, but their fees should be reasonable and should not negatively impact your selling price.

Ready to sell your funeral home?

Contact us today for personalized guidance and support throughout the selling process. Stay informed, avoid common pitfalls, and maximize the value of your sale.

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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