How Do You Calculate the Value of a Funeral Home?
How do you calculate the value of a funeral home? A funeral home is only worth as much as a buyer will pay for it. This means there are no ironclad rules that can be used to pin down the exact value of a funeral home before selling it, although there are plenty of well-established guidelines.
Becoming familiar with the most common valuation strategies and contributing factors will make funeral home valuation less mysterious. The market always has the ultimate say when it comes to determining the value of a funeral home, but there are some rules of thumb that can be used for estimating it.
Compare Other Funeral Homes in the Same Market
The easiest way to get a rough idea about the value of a funeral home will be to compare it to others in the same area that have recently changed hands at known prices. Since no two funeral homes are the same, factors including the following will then need to be accounted for to arrive at a valuation:
Ideally, the best way to these figures will be to find funeral homes in the area that have sold fairly recently and are relatively close matches. Looking at several such transactions will make it possible to get an idea regarding what sort of multiple of revenue buyers are currently offering for local funeral homes of the same general class.
Of course, it will often be necessary to cast the net more widely just to have enough candidates to assess. In many cases, though, locally dominant trends will become apparent. If smaller homes have been selling to buyers at multiples of well over twice gross revenues, and larger ones command significantly less, then a home that slots in between with regard to size would likely do the same on the market.
Taking Additional Factors into Account
Even having a general idea about what a funeral home will be worth on the market can be helpful. In practice, though, it will almost always be necessary to go beyond basics like call volume and gross revenue to arrive at a remotely reliable estimate.
Some of the other factors that will almost always help better define a funeral home’s price are:
As with the fundamentals discussed earlier, these factors can only ever be taken as suggestive of a funeral
home’s value, not determinative. Delving into details like these and learning as much as possible about the
local market, though, should make it possible to estimate a funeral home’s value fairly accurately.
Contact the experts at BSF today.