Strength in Numbers, Part II: How Funeral Consolidation Works

How Both Sides Can Win in a Sale to a Consolidator

In part one of this series, we broke down why funeral home consolidators want to buy independent funeral homes and how they can use certain advantages available to them to increase the value of those businesses. While this sheds some light on the operations of these buyers, you might be left wondering if they are getting the better end of a deal in a sale of an independent funeral home.

In many scenarios, both the buyer and seller can win in a sale to a consolidator through a combination of a mutually beneficial deal structure, an improved work environment for directors and staff, and finding the buyer with the right fit that can convert their advantages as a consolidator into a great offer for your business. The considerations below outline some ways that both sides can work together before and after a sale to create financial value and improved services for families and employees, leading to a win for both sides.

Quantifying the Opportunity for Additional Value

Considering that many owners are relying on the sale of their business for retirement, it’s important to understand how a disciplined buyer will view your business and what steps you can take to get its full value.

A sale to a consolidator can be a non-zero-sum transaction where the buyer relies on the advantages discussed in part one to create value above how a business is operating before a sale. Because they can assume they’ll create synergies after a sale, the buyer doesn’t need to underpay the seller to get a return on their investment. When combined with a generally favorable financing structure, these advantages create additional cashflow that allows buyers to pay full value for your business without their gain equaling your loss.

As a seller, the best way to take advantage of this is to be prepared to discuss potentially unlocked cashflow with buyers. For example, if your funeral home hasn’t raised prices to keep up with competitors, or expenses are run through the business that aren’t related to operating the funeral home (like personal vehicles), making the buyer aware of these considerations could improve the valuation of the business. Working with a merger and acquisitions advisor like the NewBridge Group is the best way to ensure that hidden opportunities like these do not go unnoticed by a buyer. 

Getting the Best Deal Structure for You

A funeral home transaction can be structured in many ways to achieve the best outcome for both the buyer and seller. While the focus in a sale is usually on the purchase price, your post-sale role, salary, and say in how the business is run are also up for negotiation.

In our experience, when an owner is ready to hand in the keys and head to the beach, it’s too late to get optimal value for the business. Most buyers value a business for its standing in the community, and a lot of that is due to the owner’s relationships and drive. Because of this, selling to a consolidator two to three years before full retirement is often the best option for both parties, as you can earn additional compensation and work part-time while making sure that your legacy remains intact with your team.

Most consolidators are flexible when structuring a sale and will work with you and your advisor to plan what your role will be after a sale, how you’ll be paid for your business, the best way to staff the business going forward, your retirement timeline, and any other concerns you might have to make sure you both have a clear picture of what a sale would look like.

Operations After a Sale

Finally, one of the most important considerations for owners is how the funeral home will operate after a sale. Luckily, consolidators bring lots of support to staff and services. As outlined in part one, if a buyer is building a cluster of funeral homes in your area, they’ll be able to share resources with one another and even allow staff at different locations to cover for one another. These advantages – combined with back-office accounting, legal, recruiting, and administrative functions – should give staff room to focus on providing quality services to families without worrying about running a standalone business.

When these advantages are combined with corporate benefits like healthcare, retirement plans, and the opportunity for staff to work at a regional or national level, the right buyer can bring a lot to the table to create a healthy work environment that ensures the long-term success of the funeral home without compromising service.

How Can NewBridge Help Me Find the Right Buyer?

NewBridge Group will work with you and a prospective buyer to develop a comprehensive transition plan that outlines the timeline, responsibilities, and milestones for the transfer of ownership. Clear communication and collaboration between the seller and buyer are essential to ensure a seamless transition and minimize disruptions to business operations.

Preparing your funeral home for sale requires careful planning, expertise, and collaboration with experienced professionals like NewBridge Group. With our industry knowledge and specialized services, we can help you navigate the complexities of selling your funeral home and achieve a successful outcome. We believe we know all of the active national and regional funeral home buyers (public and private) in the market today. Contact Alex Little at 678-571-0828 today to learn more about how we can assist you in preparing your funeral home for sale.