To Sell or Not To Sell: Some Things To Consider Before You Take Action by John Schmitz, CPA

The decision to sell your funeral home or cemetery is one of the most significant decisions you will ever make in your life. Whether you are looking to retire fully, partially, or stay involved while cashing out equity, the decision will significantly influence your retirement funding. Unfortunately, many owners have not established an alternative source of retirement funds, making the decision to sell even more critical.

To determine the best course of action, it is crucial to consider your retirement plans and what you envision your retirement to look like. Do you wish to stay in the community and still be seen as the face of the firm? Is there anyone in the firm you could sell to? Are there multiple owners or corporate buy/sell agreements that need to be resolved before going out to market?

Additionally, it is essential to understand how the sale price is determined. Generally, the price is determined by EBITDA (earnings before interest, taxes, depreciation, and amortization) multiplied by a multiple. Accurate and current financial statements and case statistics are needed to determine the value of the firm. Therefore, before starting the selling process, it is essential to gather three years of financial statements and tax returns, and case statistics for five years.

To maximize the selling price, consider having someone take a deep look at your financial statements to determine how to improve net income without hurting the firm’s operations. Review that progress monthly or quarterly to ensure goals set are met. This will increase the offer by improving EBITDA. It is also essential to review which expenses will not be needed by the new owner. For instance, if the buyer has a bookkeeper, the salary in your firm may be eliminated, and the owner salaries and perks may be reduced, leading to increased EBITDA.

Due diligence will be performed after a contract is signed. If due diligence turns up items not correctly stated during the Letter of Intent (LOI) process, the purchase price may be adjusted. Therefore, it is essential to provide accurate information backed up by verifiable documentation.

When selling to a larger market, it is best to get multiple quotes from sources. However, in a smaller market, there may be only one or two competitors or individuals wanting to come into your market and run a smaller firm. Remember to negotiate in good faith with a competitor, as they may wait until you close your firm and then take over that business.

Finally, it is best to use an experienced attorney in the buy/sell practice area. They will have seen it all and be prepared to assist. It is crucial to treat the selling process as if you were the buyer and not the seller. Transparency and honesty will lead to a successful and profitable sale.

You can read more about John and his experience by visiting our Collaborative Network Partners page.

John Schmitz, CPA