How to Buy a Funeral Home Business

In our full guide, How To Start A Funeral Home Business, we discussed the lucrative nature of the UK’s funeral service market. For Funeral Directors who want to start their ownership journey, buying an existing funeral home business is a good way to step out from employee status and take control of a business. 

This article will take a closer look at the stages you’ll need to follow when buying a funeral home business, many of which are shared when buying any professional service business. However, funeral care has unique considerations for a buyer.

As a Funeral Director looking to buy, you’ll need to take time to do research into the seller’s market. You need to analyse each listing and scrutinise what is on offer: which means placing an increased focus on what specialised equipment the seller is offering, what type of logistic structure they have to deliver services between their business and local churches, what is the ageing population like in the area of sale, etc. 

When you’ve identified an opportunity that suits your requirements, you’ll likely need some form of finance to purchase it. Whether you have significant capital saved for a deposit or you’re just an experienced Director looking to buy out a competitor, lenders will base their decision to issue a Funeral Home Business Loan on the strength of your application and your background. 

Rangewell’s team of professional service finance experts can help you make the entire process easier. We don’t just assess the lender market and negotiate loans on your behalf – we’ll also help you strengthen your application and understand the buying process. 

In light of that, we’ve put together this guide to buying a funeral home business. 

Why buy a Funeral Home?

The majority of funeral home buyers will fall into three different camps: 

1. Funeral professionals who have worked as employees in another business and want to buy to become owners. 
2. Existing owners who want to buy a competitor’s business, or capitalise on an opportunity in the open market. 
3. An employee at an existing funeral business who wants to buy into ownership - generally when the existing owner retires as part of a succession plan. 

All three of these buyer types have the same basic requirements in terms of buying approach, though you’ll have to consider some specific things unique to your scenario. The most obvious are:

1. Lenders will be less likely to offer good rates or terms to a borrower who does not have ownership experience. You’ll need to identify affordable listings or even consider converting an existing building into a funeral facility. 
2. Buying a competitor’s business generally means lending against your own business’ assets and performance – so you need to understand what your current financial projections are and how they might affect your ability to get a loan. 
3. Succession planning can be a challenge and owners often set prices that are unrealistic for existing employees. You’ll need to navigate the right approach, negotiate with the existing owner and secure finance to make the purchase. 

Finding the right Funeral Home for sale

In most cases, you’ll already know about the funeral business for sale as it will be a competitor opportunity or even your own manager who is selling up. However, you can also look into the open market, with many ‘business for sale’ websites offering Funeral Homes on their listing pages. 

If you go down the open market route, consider finding a buying agent to help guide you through the process and identify opportunities which won’t have any nasty surprises or hidden costs. A buying agent’s expertise will pay for itself in such a vital purchase, so don’t be dissuaded when considering one. 

When looking at listings, you need to pay close attention to: 

• Asking price: this will, more often than not, be ‘on request’, so it may help to have a buying agent helping you work out potential figures. 
• Financial performance: most existing businesses can list their turnover and net profits, though many who are selling are likely doing so because profits are falling. 
• Assets: what assets come with the sale? Are you receiving all of their embalming equipment etc, or just the business itself? 
• Lease: will you own the property the business is housed in, or take on the lease? Is it a freehold or leasehold? 

Ownership structure

Are you planning to buy the business alone or with other people? You can be a solo owner, but many Funeral Directors are managed via partnerships. If you do buy with other people who want equal stakes in the business, each of you will need to raise finance individually rather than as a whole. 

The majority of Funeral Homes are ran as independent entities, typically as limited businesses. In a LTD structure, you won’t be affected by any poor personal credit history when looking for a business loan – but any business credit issues can cause an impact. If you’ve had any CCJS or CVAs, read out Funeral Home Finance with Bad Credit article. 

Raising finance to buy a funeral home

Once you’ve decided on the home you’d like to buy, you need to arrange an initial chat with the seller. This will be a way to gauge better answers to the questions above and learn more about the business. You can also request for the seller to give you first preference, but until any form of binding agreement is made, they can still choose to sell to someone else. 

The first thing you need to do is ensure you can afford the purchase, which means approaching lenders for their support. Various business loans are available and will depend on you, your background and your business circumstances. The lender’s decision will be based on those factors but also on your application – so if you’ve got a great business plan and can show your idea for growing the business post-purchase, it can help. 

You need to talk to lenders first because they play a crucial role in the arrangement of the purchase – they will send a valuation professional to the seller to make sure their asking price is what the market expects. Most lenders have their own preferred solicitors and valuation experts that they can send to you, which saves you hassle and ensures you get the best out of the purchase. 

Identifying the right lender is crucial, as those with experience in the Funeral Service sector will be able to offer better terms and more complementary credit facilities. We can help you find the right lender and negotiate the best agreement, all without any up-front cost to you. As a broker, we act as your upper hand in working with the lender’s market. Get in touch today to find out more. 

Liabilities & Legality

When you’ve secured finance and identified the right seller, you’ll be able to begin negotiating the Sales Agreement. The initial part of this should focus on the liabilities the business may have: these are any outstanding liabilities that could impact a new owner – for example, ongoing litigation from a disgruntled family member of a deceased client. 

As part of the negotiation, you’ll be able to discuss whether you’re willing to take on these liabilities or not and perhaps bargain down the asking price as a result. Any other legal issues must also be discussed openly, as a solicitor will only reveal them later in the process and damage any trust between both parties if anything is kept hidden. 

Legal issues that impact funeral care providers range from insurance claims against fleet hire funeral cars, litigation by customers, death registration etc. 

A seller can include ‘warranties’ as part of a sales agreement, which are written statements such as ‘I know of no outstanding litigation against my business’ that can be viewed as legal promises to the buyer. 

TUPE Law

When you buy a business, you’ll also buy the existing workforce’s contracts. TUPE law governs this process and essentially demands a buyer takes on the seller’s employees (as long as they themselves wish to stay with the business) on the same terms and salaries they had with the seller. 

This can be good or bad, depending on your goals for the future. Purchasing a business where employees have a bad reputation will mean having to negotiate ways to either improve their behaviour or remove them from the company – but this can only be done in line with their existing contract of employment. 

Sales agreement

Once you’ve reviewed all of the above and you’re ready to purchase, you’ll need to arrange for your lender to issue the funds. Each party’s solicitor will draft the sales agreement, which is a legal document that outlines what is being sold and at what value. This agreement is where any warranties and liability will be outlined clearly, so make sure you’re fully happy with it before signing anything. 

Once the sales agreement is signed and funds are issued, the purchase can be completed and you’ll become the new owner. From there, it’s all about rebranding the Funeral Home business from what it was to something more in line with your business plan and vision. 

Growing your new business

You’ll have to pay any employee salaries that come across to you under TUPE, but you’ll also need to find further financing if you want to expand the business or add new parts to it. For example, if you’ve bought a home that specialises in burial services, do you want to add an eco-friendly burial service? Make sure you have money left over from the purchase to pay for the equipment and land you’ll need. 

For anything else, you can always approach lenders again for further finance options. Specific loans such as asset finance can help you acquire new equipment. Rangewell will be happy to help you secure further funding, so get in touch to learn more.