Assistance for Every Funeral Home Seller

BSF is your trusted partner in funeral home financing. Whether you’re a funeral home seller, buyer, or looking for financing options, we’re here to assist you every step of the way. Our experienced funeral home loan officer has the expertise to help directors expand their businesses, guide first-time funeral home buyers through the purchase of a mortuary, and help sellers maximize the value of their business.

With our in-depth market knowledge and personalized approach, we strive to ensure a successful transaction for all parties involved. Contact us today to discuss your funeral home financing needs, and let us help you achieve your goals.

 

Valuing a funeral home can be challenging due to variations in business operations and management. Each business is unique, which can impact its value when sold.

Understanding the market is crucial when selling a funeral home. Consider the following factors:

When selling a funeral home, the current market prices offered by individuals and small regional firms range from 4 to 6 times adjusted cash flow or up to 2.25 times net revenue. It’s important to note that the final price is not determined by net revenue, although it may be expressed that way. Instead, the final price directly correlates with the adjusted cash flow, indicating the business’s ability to handle debt service. Competitive financing plays a role here, as lower interest rates enable more debt financing.

It is worth noting that in today’s market, funeral home sellers often seek expert advice. However, caution should be exercised when encountering individuals or firms exhibiting the following behaviors:

•  Claiming They Can Sell Your Business for More Than 2.25 Times Revenue
•  Attempting to Sell You an Expensive Business Appraisal
•  Proposing an Outside Management Contract
•  Offering Accounting Services without Involving a Certified Public Accountant (CPA)
•  Persuading You to Sign an Exclusive Listing Agreement

Selling a funeral home is a detailed and time-consuming process, and there is no secret formula that guarantees a quick and effortless sale. However, there are steps you can take to navigate the process effectively.

Preparing to sell your funeral home business involves answering many questions. The following are some of the common questions that you should consider:

• Why are you selling your business?

• Are you prepared to retire? If so, are you ready to relinquish the income, control, and relationships you have worked hard to establish?

• How will your employees cope with the transition?

• Will the new owner retain your employees?

• Will the new owner harmonize with your customers?

• Will the new owner maintain your reputation in the community?

• What is the accurate value of your business?

• Who should you approach to value your business?

• Will the sale of the business meet your financial needs?

• Who can you trust to negotiate with potential buyers?

• How many potential buyers do you need to visit your business to find the right one?

• How much will you incur in selling your business?

• How long will the selling process take?

• Have you adequately prepared for the sale?

• Are your records maintained and organized efficiently?

• Can confidentiality be maintained throughout the process?

As a funeral home seller, you must be prepared for the buyer’s thorough review of your records during the due diligence process. The buyer will require complete access to your financials, tax returns, and other relevant documents. They will closely examine your revenues, expenses, and supporting documentation to ensure accuracy.

You will need to provide copies of various documents, including but not limited to:

It is crucial to assess your funeral home’s cash flow and debt service capability to determine how much debt your business can afford to carry. Consulting with a CPA can help you analyze your cash flow and identify the available funds for debt service on an annual basis.

Lenders usually calculate a minimum debt coverage ratio, which serves as a cushion for the transaction. For example, if your CPA determines that your business generates around $125,000 of available cash flow annually to service debt, the buyer’s lender may have a minimum debt coverage ratio of 1.25.

In this scenario, the lender would only finance debt with annual payments up to $100,000, as exceeding this threshold would not meet their minimum debt coverage requirement.

Valuing your funeral home business for sale is a delicate process that requires careful consideration. As a funeral home seller, avoiding mistakes such as over- or undervaluing your business is essential. Relying on a rule of thumb or multiple to determine your funeral home valuation is not recommended. Instead, consider having a formal business appraisal or valuation to determine your business’s most appropriate asking price.