Ask the Expert: Any Advice on Whether or Not to Sell My Business?
Jeff Boutwell, President, Dwight Glover, Director – Advisory Services, and Tony Kumming, Senior Advisor, Midwest Region for NewBridge Group
This is an ongoing series provided by NewBridge Group Mergers & Acquisition Consultants. Have a question about business and finance? Email it to us at Carolyn (at) NewBridgeGroup (dot) com.
I’m getting close to retirement, but I’m not sure what my next steps should be. My funeral home has been a family business for generations, but I’m thinking of selling to be able to retire completely. I’m not sure I can let go of the sentimental value and memories I’ve invested in my business though. How do I know it is the right time to sell?
Selling a business that has been in the family for multiple generations is more than a simple financial decision. In deciding to sell the family business there are many issues to consider. While we can’t answer the question, “Should I sell and when?” We can definitely ask you the questions that will help you come up with the best answer.
Do you still enjoy coming to work every day? It may sound unusual to start with this question rather than a financial one, but we think it’s an extremely important question to ask yourself. Life is short, if you don’t still love the daily responsibilities of operating a funeral home, then why would you do it? You may feel obligated for family reasons or to serve the community and for some people those obligations may override their own personal happiness. Others may love serving families but don’t like managing the business issues like accounting, employee problems, insurance, etc. Some may be worn down from working weekends and making all those middle of the night calls. None of us is getting any younger. You need to love where you go every day.
Do you predict your revenue will be higher in 5 years than it is today? With increasing cremations and discount funeral operators opening up in markets across the country, many owners have struggled to keep their revenue at prior levels. You may have a business that is gaining market share and is able to raise prices with no increase in cremations. If you have not been so fortunate, you should consider that higher revenues generally equate to a more valuable business so if your revenue has started to decline, your values may be starting to decline as well.
Do you see families wanting to spend less on funerals? Part of the answer to this question is, obviously, “Are your cremations increasing every year?” More than likely the answer is yes. However, some owners have been extremely proactive about expanding their service and merchandise offerings to families that are interested in a cremation rather than a burial. If you’re not proactive about it yet, you’ll need to be soon. Rising cremations can erode the value of a business unless the Funeral Directors can communicate effectively that there is still significant value in visitations and memorial services. You may not be experiencing increasing cremations, but still having families moving toward lower priced services or merchandise.
Are your expenses increasing each year? Health insurance costs seem to continue to increase each year. Property taxes also seem to find a way to continue to increase even as the economy has slowed. Vendors certainly aren’t looking for ways to reduce the amounts they want to charge funeral home owners. The casket companies are still doing their annual October price increases. The businesses that we see reducing costs are the ones that are extremely proactive about it. They’re almost negotiating as if their business lives depended on it. And maybe they’re right. If you’re revenues are not increasing each year, then you need to do anything you can to reduce the costs to operate your business.
Do you have a family member or employee who is ready to take over the business? Many funeral homes have the luxury of a family member who has followed in the footsteps of the past generations and have the business skills and financial wherewithal to continue the long legacy you established. However, more and more of the current generation are deciding to pursue other opportunities rather than making the commitment to serving the families in your community.
Once I make the decision to sell, what can I do to assure that the legacy for great service is continued? Almost all buyers we talk to tell us that they would prefer for the former owner to stay and work for as long as they want. The business is more valuable if the former owner will stay on and continue to serve the families even if it is at a reduced capacity. In fact, selling is an opportunity to get rid of most of the back office activities you don’t like and focusing strictly on serving your families. An added benefit is that you can do this while eliminating the risk of the value of the business going down in the future, and reducing or eliminating your weekend and middle of the night hours.
So, those are most of the questions you can answer for yourself to decide if now is a good time to explore a sale. More than likely you’ll realize it probably is a good time to think about it.
For more information on buying or selling a funeral home, visit NewBridgeGroup.com or call DwightGlover at 404-249-9582. If you have a question you’d like answered here, email it to Carolyn (at) NewBridgeGroup (dot)com.