Picture this in your mind: The magical moment that you decide that you are ready to join the ranks of the retired. You have fought the good fight, missed birthdays and holidays so now it is time for you to lay back on a beach with a tropical drink in hand, right?
Not quite! You are done with this business and are ready to begin life anew –BUT can you answer these five questions definitively:
1. Can you retire?
You know you want to, but the real question is can you AFFORD to retire. Will the income you receive from the proceeds of the sale as well as your investments allow you to continue the lifestyle that you have been living? Can you still afford the car payments that were manageable during your working years? Do you know how to calculate your retirement need? How old are you? How many years past retirement do you think you will live? There are seven questions I can ask you that will give you your retirement number.
Once you do this math it may surprise how close (or distant) you are from the real figure that you MUST know before you even consider selling and retiring.
2. Is your funeral home sellable?
I’m not just talking about fresh paint on the shutters and a neatly kept yard. Any potential buyer will want to see a history of strong financial performance and stable market share. They will check the age of your accounts receivable, the longevity of your staff and the depth of the tread on your hearse tires (ok, that last one is a stretch, but you get the picture).
Other questions a potential buyer might ask: Is your pricing up to date? Are you compliant with FTC and OSHA? Is your case count up or down? What is your casketed call vs. non-casketed call ratio? Are your facilities appealing and in good working order? Is your staff performing to expectation? What are people saying about you online? What marketing are you doing/have you done? Do you have a website?
You need a stunning Profit & Loss Statement to match your pretty furniture and shiny cars.
3. How much is your funeral home worth?
Here’s the rub. Have you any idea what your business is worth? Your real estate is only part of the equation, and your golfing buddy the accountant (who has probably never valued a funeral home before) is not the guy to ask. A professional valuation done by a qualified firm with funeral home experience is the best way to ensure that you aren’t overpricing or undercutting yourself. Note that I used the term “qualified.” An inexpensive unqualified valuation isn’t worth the paper it is printed on. Beware the scoundrels pandering to you on price only.
4. Who will buy your business (Or who would you sell it to)?
If you have family or key employees just waiting for you to retire so they can man the helm, count yourself lucky. If you don’t, you will have to turn outward for possible buyers. That means that you may be approached by the #@!&% that you’ve been competing with forever. Or one of those large national chains may swoop in with an offer. You will have to decide before you put your business on the market who you are willing to sell to.
Selling your business is complicated. There are many funeral directors who found out the hard way that even after you sell, you may find yourself embroiled in some controversy or legal battle if you don’t protect yourself properly during the sale process.
5. What will you do after?
Do you want to walk away whistling to a faraway beach? Do you want to stay on in a consultant capacity? Do you want to be able to come in and handle arrangements for personal friends and family? These are the types of questions you will want to consider. Your post-ownership life may require some negotiation during the sale process. Having a clear idea of what you want will save time during the sale.
By answering these five big questions (and all of the little ones that accompany them) you will learn quickly if this is indeed the right time to retire and sell. Do yourself a huge favor and ask yourself these questions about five years before you actually put your business up on the market. That way if there are some changes you can make to increase your profitability you will also see an exponential increase in your business value and sale price. Which brings those drinks on the beach much faster and more often! FBA
Dan Heaman, CFSP is a licensed funeral director and an associate with The Foresight Companies, LLC. Dan can be reached at 314-640-9770 and [email protected]