How to Buy a Funeral Home

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Whether you decide to buy an established funeral home or open a new funeral home business, the ability to maintain a competitive market position is a critical factor. Market conditions vary from one location to the next, but for individuals who are looking to buy and have the cash, the funeral industry usually weathers the ups and downs of the economic climate. Nonetheless, you need to consider many things before you make a final decision to buy.

  • Decide how will finance your business. Some people looking to buy a funeral home business often qualify for SBA financing while other buyers find investors. Another alternative is to negotiate an agreement to partner with someone else. Partner programs are becoming more popular in the funeral home business as regional funeral home companies provide the financing to family members or employees experienced in the funeral business who might not otherwise be able to purchase a funeral home on their own.

  • Contact a funeral home brokerage service. These services professionally market funeral homes, bringing qualified buyers and sellers together. According to the July/August 2009 issue of Funeral Business Advisor (see References), reports show that nationally owned companies have purchased fewer funeral homes in the last ten years, paving the way for more privately owned funeral home businesses.

  • Get an independent appraisal once you find a funeral home you are interested in buying. Hire someone who has had previous experience appraising funeral homes and can determine the true value of the business. Since you do not want to pay more for the business than it is worth, make certain that the appraiser examines the funeral home's financial statements, assets and fiscal performance over time.

  • Negotiate a price with the seller. After you do this, you have a period from 30 to 90 days to have your accountant and attorney examine the funeral home's financial records. These professionals will make certain that you will not be taking on any unknown liabilities. This is also the time to outline any contingencies relevant to completion of the purchase.

  • Request structural inspections of the property as well as careful inspection of any other assets included in the sale to confirm that they are in good working order. In all likelihood, the purchase price will include any land, buildings, vehicles, equipment, inventory and shares of stock owned by the business.

  • Verify that the funeral home business is in compliance with local building codes and zoning ordinances, state licensing requirements, OSHA (Occupational Safety & Health Administration) safety standards and FTC (Federal Trade Commission) rules.

  • Include a non-competition agreement as part of the purchase transaction with the seller. Providing funeral services is a high-demand business profession, so the fewer funeral homes in your market area, the stronger your funeral home's competitive advantage. Entering into a non-competition agreement precludes the seller from conducting funeral services for a specified length of time or within a certain radius of the funeral home you are purchasing.

Tips & Warnings

  • A funeral home that has fewer competitors within the same market area is going to be a more valuable business, and therefore will likely cost more to purchase. Other warranties for the purchase of a funeral home business usually include verifying inventory, surrender of complete financial records for examination, making certain that the seller is the owner of the property, confirming that all taxes and other liabilities are paid to date and checking for any liens against the property that have not been disclosed.

References

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