Originally published in American Funeral Director.
As a funeral home owner, you have worked hard to build and grow your business over the years. Your funeral home is more than a source of income; it’s a valuable asset and key to succession planning. But how do you know what your business is worth?
Investment in the stock market comes with daily updates on the exact value of your holdings and how they can be used to prepare for retirement. Private investments like business ownership have no such daily “check-in.” Moreover, private valuations do not necessarily track with public market valuations, as they generally trade with a different set of investors and capital.
Many owners consult with friends, business partners or lawyers to develop their views on what their businesses are worth. However, how many of those well-intended advisers are prepared to write a check to buy your business?
In truth, the only meaningful valuation perspective is from an individual or organization actively investing in funeral homes. Receiving periodic valuations from potential buyers is one way to accurately assess the value of your business, whether you plan to sell and retire or want to partner with a larger firm to grow the business or share the responsibility of ownership.
Here are five reasons why seeking a periodic valuation is important:
- Helps you plan for retirement.
Retirement planning is not just about saving for the future; it also involves knowing the value of your assets, including your funeral home. A periodic valuation can give you an accurate picture of what your business is worth, which is crucial in determining your retirement plans. If you plan to sell your business to fund your retirement, knowing its value will help you make informed decisions. - Provides insight into business performance.
A periodic valuation also can provide insight into how well your business is performing. By comparing the current valuation to previous valuations, you can better understand if your business is growing or declining in value. This information can help you identify areas that need improvement and those that are performing well with additional upside opportunity. - Helps with estate and tax planning.
If you plan to pass your funeral home on to your heirs, a periodic valuation can help you determine how to distribute the assets fairly. Knowing the true value of your business will help you make more informed estate and tax planning decisions. - Gives you leverage in negotiations.
If you do decide to sell your business, having a periodic valuation can give you leverage in negotiations with potential buyers. You can use the valuation to justify your asking price and negotiate from a position of strength. - Protects your investment.
Finally, receiving periodic valuations helps protect your investment in your business. Staying up to date on the worth of your business will help you identify potential issues early on and take corrective action before they become bigger problems. It also can help ensure that your investment in your funeral home continues to grow over time.
An accurate valuation is often the deciding factor for business owners considering an exit strategy. We speak with funeral business owners every day and find that the most successful succession planners are those who begin early and accurately understand the value of their businesses.
Unfortunately, we also see owners who are on the doorstep of retirement with misinformed views on valuation. Many have never “channel checked” their expectations with a funeral home broker or buyer. By the time they learn they have overvalued their business, it may be too late for these owners to spend five-to-10 years reshaping their business growth profiles and cost structures to perform at the level their valuation expectations dictate.
The Foundation Partners industry-experienced business development team offers free, confidential, no obligation valuations at any time. These consultations provide owners with a timely, accurate view of their business performance that can inform their business planning, growth and investment strategies, and succession/retirement timelines.