Ask the Analyst: What does it look and feel like to sell my funeral home?

Have you considered selling your funeral business but didn’t know where to begin? We understand that the decision to sell can be overwhelming. We asked Jared Tanke to walk us through the process from start to finish.

Question: What does it looks and feel like to sell my funeral home?

 Jared Tanke: You may have had conversations with your fellow funeral home owner friends, and I am sure the topic of selling has come up. Maybe one of your friends has recounted his or her experience in selling, and you may have heard several buzzwords, including a “multiple” which is very common language when talking about a business acquisition. But what do these people actually go through? What does the process of selling your funeral home look and feel like? It is such a big life event, and there are several steps I want to touch on that will take place in order to arrive at that coveted final closing table.

Step 1 – What is your business worth?

This is critical in order to understand what to expect financially.  Everyone wants to know they are getting a great value for selling their business, especially when it has taken years, decades, or even generations to build it to this point. In a valuation, you will hear terms like Proforma, or Projection. This is used to determine what the business could produce for a potential buyer. Certain adjustments to expenses can be made to account for things that are non-business expenses running through the financials. You will also hear and see a term called EBITDA. This stands for Earnings Before Interest, Taxes, and Depreciation. This number is often used as a proxy for the cash flow of a business. Whatever the EBITDA number is, is what is left to pay taxes, debt, and invest in capital expenditures.

Step 2 – Producing a Confidential Information Memorandum.

In order to get the most value for your business, we must present the story of the business to potential buyers. This memorandum will include things like the company history, highlighting any big changes over the years, and the vision for the future. This will also present key financial data, and the proforma (mentioned from the valuation) to allow buyers a look into what may be expected post close. Other items may include key staff highlights, areas for growth, demographic trends of the city, the competitive landscape in your market, preneed information and an overview of any real estate involved.

Step 3 – Releasing to the market

A key point in the process, after we have identified and agreed upon who the potential buyers are, we can send out a one-page teaser to gauge interest. This teaser does not disclose the name of the business but gives buyers a quick snapshot of the opportunity. Once interested, they will sign NDAs and get access to the Confidential Information Memorandum mentioned in Step 2. Usually this process lasts about three weeks and we work to receive initial offers from as many parties as possible. Once we identify the top two or three offers, we would then bring them onsite to see the business and meet with the owners. After these meetings, we ask for the highest and best offer.

Step 4 – LOI and Due Diligence

Once a Letter of Intent is signed, we get to the longest part of the process, and sometimes very repetitive, due diligence phase. We will get a due diligence checklist from the buyer that lists out every document they would like to review. This list will be different depending on who the buyer is, but examples of items on the list include: Financial Information (Sales journals, access to accounting software) , Corporate Information (articles of incorporation, ownership), Human Resources Information (employee benefit plans, commission structures), among many other documents. During this period there may be requests to have a building appraisal, or an environmental inspection of the property. This will be coordinated with you as to not interrupt with ongoing business, and without raising questions from employees. While you as an owner are gathering due diligence materials, the attorneys are going back and forth drafting the purchase agreements.

Step 5 – Close

The long-awaited closing. At this point, if it has not already been announced to the staff, this would be the time to do it. Having you address the employees first, with the buyer coming in right after is the best practice so they can answer any questions on the spot.

As far as signing the purchase agreements, most of the signing can be done remotely via DocuSign and will be organized by the attorneys. Once signed, the assigned title company will release the funds, and you should be able to check your account within the day to verify.

The whole process from start to finish can vary depending on how quickly we can provide due diligence, back and forth with the attorneys, and the third-party reports. We know there is a lot to process as you move through this life changing occasion, and we would love the opportunity to guide you through this and provide a smooth transition.

Do you have a question for us? Email info@theforesightcompanies.com today for a chance to have your question spotlighted in our next blog!