How to Sell a Funeral Home Business

Looking for advice on how to sell a funeral home business in the UK? You’re in the right place. The UK’s funeral home market is a lucrative sector, worth around 2.7 billion as of 2022. Many existing owners who are looking to retire can now look forward to competitive interest from buyers as demand ramps up. 

However, with the sector being specialised and requiring certain qualifications, selling a funeral home isn’t as simple as selling residential property or a more traditional business such as a retail unit. Instead, you’ll need to list via specialised agents and find buyers who can secure funeral home finance to fund their purchase. 

Before you sell, it’s worth recapping the current UK funeral market to see what sort of buyers you may attract and how you can increase your selling value… 

Why sell your funeral home?

Selling your funeral home is a challenging decision. It likely represents years of hard work and a great reputation you’ve built up with customers in your local area. If you’re looking towards retirement, however, then selling is generally the most sensible way to profit from your hard work and receive a lump sum that secures your financial future. 

To sell to existing employees (click here to jump to a detailed section on this) as part of a succession plan requires a different approach to selling on the open market. Instead of having to contact selling agents and listing sites, you can approach the potential new owner directly with your idea and see how receptive they are. If you’ve got a good relationship with them, you can even help them find the right finance options to make the buyout seem more achievable. 

At Rangewell, we work with Funeral Directors across the UK to secure finance for business purchases. We can take your potential buyer through the existing market, showing them the entire landscape of lenders from mainstream banks through to specialists and independents. 

We’ll then work with them on their application to increase their chances of raising the finance they need. As an owner looking to sell, you should assist them with creating a business plan, as they will need one to secure lender interest. You can help give them detailed background information on the business and let them outline a new direction with your support. 

Ultimately this is for your own benefit – the more you can increase the borrower’s chance of success, the more you’ll 

The UK’s funeral market at-a-glance

The emergence of low-cost services has shifted the UK’s funeral market, with customers opting for direct cremations and simple funerals as they seek to minimise spending. This will impact how future businesses have to operate, as more consumers will expect to see these low-cost services. Cremation is far more popular than burial at an almost 80/20 ratio. 

The UK’s Competition and Markets Authority (CMA) recently marked the funeral industry as sub-optimal due to the difficulty customers have in accessing competitors and navigating growing prices. As a seller, you need to be aware of this – your next buyer may face increased demand to offer lower prices or more affordable options.

Another consideration is that of religious preference. The majority of UK citizens still identified as Christian in 2011 (around 65%), with 25% atheist or agnostic and the rest composed of Muslims, Hindus, Sikhs, Jews and Buddhists. 

If the area you’re selling in has a particularly high number of certain religions, it may impact the way you can carry out funeral services and will need to be a consideration for the buyer. If you’ve recently invested in some of the more modern funeral preferences such as eco-friendly burials, you can also capitalise on growing interest in this and market it as a bonus to potential buyers. 

Finding buyers

As a seller, you face two main choices: do you sell to your existing employees or partners, or look externally? We’ll look at selling to employees below, but let’s quickly discuss external buyers. 

To find them, you’ll need to list your business on the open market, or solicit a selling agent to do this for you. If you don’t want to advertise that the business is for sale (such as if you’re in a competitive area), you can instead ask the selling agent to approach buyers on your behalf without openly advertising. 

In the UK, the main buyers will either be other independents looking to expand or larger corporate groups who want to capitalise on your opportunity. Both will need a different approach – with independents offering more personal quirk and negotiation and larger corporates offering smoother sales negtotiations but with more strict processes and post-sale considerations for your remaining employees.

To put that simply, if you sell to large corporate groups such as the Co-Op, you can’t expect to see much of your business remain as it was. To protect the brand and employees, selling to another independent can be preferable – but only if you believe the buyer will respect your wishes.  

You can also explore this topic from the other side in our guide on how to buy a funeral home business. 

Selling to employees

If you’re selling to existing employees, you need to make the succession plan clear and outline it in legally-binding terms. You can’t rely on goodwill and honesty when it comes to a business sale, so even if you know your buyer very well, you must plan accordingly. 

The most important thing to establish is how they will fund the purchase and what liabilities they will take on after you leave. As an owner, you’ll have existing agreements and liabilities in place that you’ll need to outline in a sales agreement. The buyer then has to agree to either take them on or have you create warranties or take care of them before the sale can finalise. That means any existing litigation or disputes are better-solved pre-sale. 

Existing employees need to raise finance with different criteria to external buyers. They need a lender who is willing to give them enough capital to purchase your business, with terms and rates that aren’t too restrictive given their lack of ownership experience. 

How finance for buying a funeral home business works

As a seller, you need to understand the finance process as it’ll be important to your buyer’s chances of completing the purchase. The buyer must apply for a type of finance product such as a business loan. That means securing a lender who is willing to work in the funeral industry sector and can offer rates that aren’t too restrictive to the buyer. 

The buyer must apply for the finance by providing a business plan that helps to convince the lender of their goals and competency. You can help at this stage and increase their chances of success. If you connect us with your buyer, Rangewell will also work with them to enhance their application and help them raise the finance they need. 

The lender will do their own due diligence into your business to ensure it’s a worthwhile investment and that the seller will be able to pay them back. They will almost always send an independent valuer to check against your asking price, so don’t be offended if the buyer has to try to renegotiate with you once they have a lender’s interest – they are only offering what they can after the lender’s valuation. 

TUPE Law

Selling your business doesn’t mean all of your existing employees have to find new workplaces. Instead, they come under TUPE protection – the Transfer of Undertakings (Protection of Employment) Regulations which help ensure the buyer retains your employees on the same contracts they already have.

When selling, you’ll need to meet your employees and discuss how TUPE works and how the new buyer’s changes might affect them. The employees can then raise concerns and negotiate, but ultimately they will have to choose if they want to leave or stay with the business. 

In most cases, those who stay will see their existing contracts and terms honoured – but things like changing opening hours or holiday allowance can impact these decisions so you’ll need to ensure the buyer understands the full implication of TUPE and your existing team. This is easier when it’s an existing employee who is taking over, but any pre-existing conflicts in your team could boil over if an involved employee becomes an owner, so be aware of that when discussing succession. 

Drafting a sales agreement

Negotiations involve you outlining the liabilities and warranties you’re willing to provide to a buyer. These are written agreements such as “I know of no outstanding litigation against my Funeral Home” and help protect the buyer post-sale. 

The sales and purchase (SPA) agreement is a legal document put together by your solicitor that specifically states all of the assets and value they are being sold. It outlines the due diligence periods required by both parties and any language around warranties or guarantees. You may also have to outline the process for damages or remedies in case your assets are damaged before the sale completes. 

Essentially, this document is what binds the purchase of your business – so you need to scrutinise it thoroughly to make sure you’re happy with everything it states before you sign it. 

Completion

Once you've agreed on the terms of the sale, solicitors from both parties will review your agreement and then advise each party to sign. Once that’s done, the buyer’s lender will release funds to you – provided they have passed the lender’s own application process and your business has satisfied the lender’s expectations around value and due diligence. 

Once the agreement is signed and contracts exchanged, your solicitors will instruct the buyer to pay and the lender will release the credit to them. How you are paid will depend on your agreement – some sellers want a lump sum while others offer a deferred payment scheme.

In conclusion, if you’re looking to sell your funeral home, it pays to be in the know about the lending market. The more you understand about how lending works and how your buyer will fund their purchase, the more realistic you can be about the whole process and your asking price. If you’d like to learn more or connect your potential buyer to our team, get in touch today.