I Paid $10,000 To Learn 1 Lesson
My business partner and I paid $10,000 to learn what makes a business “sellable”. This article will condense those $10k lessons into a 5-minute read that applies to funeral homes (Note: even if you never plan on selling your funeral home, this will be valuable to you).
A $46M Exit
The people we paid to teach us this lesson have sold multiple businesses; their first one sold for $46 million! They shared their journey with us.
Getting their business started was full of failures, late nights, and long days, but eventually they started to get a lot of traction, and after a couple of years, they were making over $1 million per month in profit (not just revenue)! They kept this up for a couple of years, but eventually got so burnt out that they decided that $1M profit per month was not worth the drudgery they were going through, so they decided to shut the business down.
They then called one of their friends and told him their plans. He was obviously surprised and asked why they weren’t selling it instead of shutting it down. Regardless of how successful these two business people were, they didn’t even know that selling their business was an option. This new insight started them on a quest to find someone to buy their business instead of shutting it down.
When I heard this story, I thought that was the end of it. I figured they had easily found someone to buy their business, sold it for tens of millions, and rode off into the sunset. But…it wasn’t that simple. Even though their business was making over $1M profit per month, they couldn’t find anyone who wanted to buy their business at a fair price. It turns out that their business was not “sellable” despite how successful it was.
After getting rejected and turned down from one buyer after another, they had to go back to the drawing board and restructure their business so it was more attractive to buyers. This took them an entire two years, but by the end of it they had investors knocking down their door wanting to buy their business.
Now here’s the shocking part about it all — by this point, they didn’t even want to sell the business. Remember at the beginning of the story, how they were just going to shut down the business and walk away from $1M profit per month because they hated working in their business so much? Well now they’re being offered $46M for their business, and they are hesitant to sell it because they now love their business so much.
So what changed?
In those two years that they worked on making their business more “sellable”, their business became more robust, reliable, and less dependent on them as owners to do everything. The business ran without them, and it was once again fun and enjoyable to own.
Can you see the difference between the situation at the beginning of the story and the end of the story? At the beginning, their business was successful, but they were miserable, overwhelmed, and no one wanted to buy their business. After making their business “sellable”, they were enjoying their busines,s and plenty of people wanted to buy it.
They did eventually decide to sell the business and move on, but they easily could have kept it or passed it down to a family member because the business had become robust and didn’t rely on them anymore.
How This Applies to Funeral Homes
This story is obviously an extreme example and not everything applies to funeral homes, but many of the principles do apply. The people in this story who sold their business for $46M now own another business (worth half a billion dollars) that buys, grows, and sells other businesses so they know a thing or two when it comes to selling businesses.
They taught us that the two main factors that affect how “sellable” a business is are:
How valuable the business is
How risky the business is
Value of the Business
The first factor, how valuable a business is, is pretty simple — people want to buy businesses that are valuable, and from a 30,000-foot view, this basically means that the business has good revenue, good profit margins, and is growing. I won’t discuss this factor since it is widely understood by most business owners, however many business owners (myself included) often overlook the second factor.
Risk of the Business
The second factor, how risky the business is, basically means how likely it is for a buyer to get their money back from the investment. For example, if you worked long hours for 30 years and saved up $1M, would you go and spend all of it on lottery tickets? Of course not.
Investors want to put their money in businesses where they are unlikely to lose their money. Therefore, making your funeral home less risky is an important step of making it more sellable. This is the step those two business owners from the story took to make their business sellable and it’s what allowed them to start to enjoy their business again.
Factors That Affect the “Riskiness” of a Funeral Home
There are several factors we discussed at the workshop that affect the riskiness of a business, but the two that I believe are most applicable to funeral homes are:
Single Channel Risk
Data Risk
Single-Channel Risk
Single-channel risk means that the business is overly dependent on only one or two channels for generating calls. For example, I know a funeral home owner who bought another funeral home that previously averaged 50 calls per year. All 50 calls came from the original owner’s reputation and connections in the community. The original owner kept working at the funeral home until he passed away. The year after he passed away, the funeral home literally did 0 calls and pretty much became worthless.
This is an extreme case, but it illustrates the riskiness of having the funeral home be solely dependent on one channel for calls.
As a marketer, I obviously have strong opinions about this, but I believe single-channel risk to be one of the biggest risks that most funeral homes face. I frequently talk with funeral home owners who have relied solely on repeat families and word-of-mouth to generate their calls for years. Many of them have been extremely successful with this in the past, but with the shift in consumer habits and loyalty, their call volume has become stagnant or dropped year over year.
Imagine speaking to a potential buyer and telling them that your call volume has remained flat or slowly declined over the years, and most of your calls come from word of mouth and repeat families. A buyer might be concerned that the business (1) has stagnant or declining growth and (2) that the amount of repeat or word-of-mouth business might decline when you (the face of the business) leave.
In contrast, now imagine speaking to a potential buyer and telling them that your call volume has steadily been increasing and you’re generating calls from five or six different sources. Can you see how much more attractive and less risky the second option is?
Here are some of the best channels to focus on generating calls from (in my opinion) thereby reducing your single-channel risk:
Word of Mouth
Word of mouth is important for funeral homes and should always be focused on (however, I recommend focusing on other channels as well). The best way to increase your word of mouth is by giving your family an incredible experience. This obviously involves the service you provide, but it also comes down to every interaction and touchpoint that a family has with you.
Repeat Families
Repeat families are similar to word-of-mouth referrals in the sense that you want to give your families an incredible experience. But on top of that, you can increase the amount of calls you receive from repeat families by helping them preplan.
You can manage preplanning yourself, or you can partner with a pre-need marketing company to handle everything for you. Imagine how much more valuable your funeral home would be if you had $10M preneeds written versus only having one or two hundred thousand. Another way to increase the number of families who come back to you is by providing exceptional aftercare for them. This can be done yourself or by partnering with a company that provides aftercare.
With consumer habits changing, more and more people are turning to Google to find funeral homes. In fact, we’ve run reports in most US cities analyzing how many people are turning to Google. We’ve found that most cities and suburban areas have hundreds or even thousands of people looking for funeral homes on Google each month!
Ranking well on Google is a powerful way to reach families who otherwise might not have found you. Google PPC ads and Google Guaranteed ads are also great ways to ensure that families in-need find you. You can work on your SEO and manage Google Ads yourself or you can partner with a funeral home marketing agency.
Social Media
Social media is where a lot of the eyeballs are nowadays, especially the demographic of people who will soon be making arrangements for their parents. Growing your brand and building a relationship with individuals in your community on Facebook and other social media platforms is another effective way to generate calls for your funeral home. This can be done yourself or by partnering with a funeral home social media company.
Relationships with Churches
Churches are often involved in end-of-life gatherings. Being a friend and support system for churches in an ethical and well-intentioned way can create strong relationships with clergy and congregation members, helping your funeral home stay top of mind with them.
Relationships with Hospices
There are laws that ensure hospices do not have conflicts of interest when it comes to providing families with their options. In most areas, hospices are not allowed to recommend a funeral home, but they are allowed to provide lists of options to families.
I would recommend ensuring that your funeral home is on that list. Also, all the little things go a long way and can help create a wholesome relationship with hospice staff members. For example, being timely and kind when you arrive for a removal is a way to develop a positive relationship with them. That being said, make sure that what you do is well-intentioned and obeys all the laws of your area.
By working on generating calls from all of these channels, your funeral home can become more robust because you have multiple sources generating calls.
Inaccurate Data Risk
If someone is going to pay hundreds of thousands of dollars or $1M+ for your business, they’re going to want to know what they’re buying. This is one reason why having accurate data affects how sellable your business is. Investors want to be able to see clear and accurate information such as revenues, profits, market share, acquisition costs, etc. This is why using a CMS and leveraging market data is valuable.
To Sell or Keep?
Whether you plan on selling your funeral home or keeping it in your family for generations, making your business “sellable” will help make it stronger, more robust, and more enjoyable.
If you decide you want to sell it, then you will be in a good position to do so. If you decide to keep it and pass it down to a family member, then it will make the business stronger and more enjoyable to be a part of (like what happened to the two people who sold their business for $46M).
