Expert: Jeff Boutwell, President of 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.
Q. I’ve been in the funeral business my whole life, but I’m ready to slow down and retire. I’ve done a bit of research about selling, but I’m still not sure how I can get the highest value for my sale. I can only sell my business once, and I want to make sure I do it right. How do I get the highest value for the sale of my funeral home business?
A. You’re right! You only get one chance to sell your business. However, many funeral home buyers have decades of experience, which can put you at a slight disadvantage. These buyers may recognize the potential of your business, but may not be willing to pay for it unless it’s presented to them correctly. We’ve compiled a short list below of some simple steps you should take to position yourself to get the most from you sale.
Implement your own improvements. Follow the best practices that private equity firms employ when running portfolio companies— implement your own business improvements. After I buy a business, I implement a 100-day plan and try to excite the employees and drive strategy. In truth, 100-day planning can be a useful tool for you to enact change quickly while driving excitement among the employee base.
Point out your business flaws to buyers. This may seem counterintuitive, but it is important to point out the flaws of your business to buyers. Buyers will find these flaws eventually, so you should take the opportunity to frame the issues properly. In particular, point out weaknesses around things that buyers will view as “easy fixes,” such as sales, financial controls, operations controls, IT infrastructure, or any business process that investors have dealt with numerous times. Turn your deficiencies into opportunities. It’s all about how you frame it!
Show a detailed projection of the opportunities. It’s extremely important that you present to a buyer a projected financial statement showing the best operating at its highest potential. This means showing all revenues reported, adjustments that could increase merchandise averages, unnecessary expenses removed, marketing adjustments that could be made to increase the number of families served. A buyer is going to need a good projection to take to his bank and so it’s in your best interest to provide as much detail as possible that shows the business operating at its highest potential profitability.
Surround yourself with quality advisors. Make sure you have good advisors, particularly a good corporate lawyer and broker. I prefer to hire lawyers who have completed hundreds of deals, and often they are dealing with the seller’s counsel that may work on a couple deals each year. In several cases, I have seen lawyers negotiate favorable structures that the seller’s counsel originally didn’t understand. Most of parts of the deal’s structure (e.g., earn-outs, preferred stock, seller paper) tend to be favorable only to the buyer, so hire a good lawyer that understands these issues.
When it comes to getting the highest value for your business, sometimes it only takes a good third-party perspective and some focus; other times, it can be a little more complicated. As a business owner, you can help implement best practices to maximize value, but start now and take it seriously. When it comes time to sell, you will be viewed as more polished and professional, which is the best way to ensure you maximize value in any market.
For more information on buying or selling a funeral home, visit NewBridgeGroup.com or call Jeff at 404-249-9582. If you have a question you’d like answered here, email it to Carolyn (at) NewBridgeGroup (dot)com.
