Nearly all studies on business succession readiness indicate that 70% of small and medium-sized business owners still need a written exit plan.
Even though funeral business owners know better than anyone the high cost and consequences of failing to plan, they are not alone.
Funeral directors are often faced with stressful situations every day. These include clients who don’t plan or are forced to make difficult decisions. It is likely that you also know that most of these plan failures can be traced back to humans’ intimate relationships with denial.
Neglecting the truth is a powerful and dual-edged sword. It helps us to cope with the most devastating events that may come our way. It can also lead us to abandon planning and preparation in favor of hoping and praying for the best.
Funeral directors fall prey to denial like everyone else. They should have planned for their business success instead of waiting and seeing.
Most funeral business owners want to see their businesses continue after retirement, but few have plans.
Owners who plan for retirement can maintain their ability to sell their businesses and retire independently.
Many believe they can quickly sell the business to a competitor if the time comes for them to leave the company.
Why Selling To A Competitor isn’t Always a Good Idea
In record numbers, over the last few years, large corporations bought up individual funeral homes. Many directors aren’t interested in joining a McBurial chain and have resisted this trend.
So it’s natural that directors will look for independent mortuary business owners to sell their lucrative business when they retire.
Be sure to understand the possible negative consequences of selling your business.
1. It is possible that the buyer may not be interested in buying. It is common for funeral homes and other businesses to pretend to be interested in buying a competitor to gain valuable information. Competitors may pose as potential buyers to gain access to trade secrets, marketing strategies, and customer lists.
You should only share sensitive information once you have done your due diligence and feel confident that the prospect is real. Asking for proof of financial ability to purchase such a property might help. Always ask potential buyers for a non-disclosure contract that has been reviewed and signed by you. This will protect your trade secrets and act as a deterrent for “fakers.” It is also a good idea to speak with trusted business associates about the integrity and reputation of any competitor looking to buy your business.
2. Sometimes, competitors have a lowball game plan.
Selling to a competitor is selling to someone with ostensibly as much knowledge about the funeral industry as you. They have the knowledge and experience to offer you a lower price than the best.
Competitors understand funeral home owners’ stress levels and problems. They also understand how to help them sell. They can understand you and your situation better than individual buyers or equity funds, so they won’t be as willing to offer you a price. They often attempt to extract the “goodwill” portion of the business valuation because they can perform the same services that you are.
3. This is a negotiation with a single buyer
Funeral service business owners who choose to sell to a competitor have a much lower chance of selling their business faster and for a higher price. The bidding war can lead to a higher price, just like in real estate deals. You are at a disadvantage if you have more than one buyer.
4. Your reputation could be at risk
Although it’s a sad statistic, there is only a 3% chance of selling a business here in the United States. Deals can and do fall apart even when qualified buyers are involved.
Expect business gossip to catch wind of your failure to sell. The word will spread quickly, and families who have relied on your business for many years may become worried that you are in financial trouble. Competitors could use this to convince clients to use your services over yours.
5. Third-party intermediaries could cause to fail
If this is your first acquisition of a business by your competitor, consider hiring a third-party intermediary, such as a business broker, to guide you through the buying phase.
Business brokers are less well-respected than real estate brokers when selling or buying businesses. A close look at failed deals shows that more people must speed up the process.
