Illustrative example: a 220-call third-generation Midwest funeral home with no successor

This page is an illustrative composite, not a real client deal. The firm, the family, and every number below were assembled from patterns we see in small family funeral homes, then rounded so the math is easy to follow. No town is named because there is no town.

The setting is a third-generation funeral home in a small Midwest town. The owner is 66, is the only licensed funeral director on staff, and has two adult children with careers elsewhere. His spouse keeps the books part time. Nobody is coming home to run it, and he wants to stop taking night calls within two years.

What did the funeral home look like on paper?

It served about 220 families a year, with calls drifting slightly down and a burial share well above the national average. Revenue, excluding cash advances, was $1,443,750 in the most recent year.

At 220 calls the firm sits just above a size line buyers watch. Glenn Gould, quoted in Funeral Director Daily’s October 2025 piece on small-volume firms, said 68% of firms handle fewer than 200 cases a year. The same article argued that smaller firms may realize more value by pricing the real estate on its own, which is the approach used here.

The cremation share here is 55%. The Cremation Association of North America’s statistics page put the 2025 U.S. rate at 62.8% and projects 69.1% by 2030. Any buyer will assume this firm’s mix keeps moving toward cremation, and will price the slow decline in revenue per call that comes with it.

Which add-backs survived the buyer’s review?

Most did, because the family kept receipts. One add-back was rejected outright, and the rent adjustment went the other way, reducing earnings.

The firm is an S corporation. It paid the owner’s real estate LLC $24,000 a year in rent for a building that would lease for about $52,000 at market. Because the building is valued separately, the business has to carry market rent first.

SDE margin: $324,140 ÷ $1,443,750 = 22.5%. Our guide to funeral home add-backs explains why the church advertising failed: if cutting a cost would cost calls, it is an operating expense.

What does it cost a buyer to replace the owner?

About $97,600 a year. SDE assumes the new owner does the old owner’s job, and in a firm with one licensee that job is director in charge, arranger, embalmer, and night-call coverage.

The Bureau of Labor Statistics reported a May 2025 median wage of $78,790 for funeral home managers. We assumed a hired manager at $80,000, plus 7.65% payroll tax and $11,500 of benefits:

• $80,000 × 1.0765 = $86,120
• $86,120 + $11,500 = $97,620
• Earnings after a hired manager: $324,140 − $97,620 = $226,520

That second number is what an absentee buyer can borrow against. Our SDE definition page covers why lenders and larger buyers look past SDE to this figure.

What value range did the numbers support?

Roughly $1.02 million to $1.25 million for the operating business, before the building and a small preneed deduction. Both multiple bands below are assumptions for this illustration, not market statistics.

No neutral survey of funeral home sale multiples exists that we can cite. The only verified figure is Carriage Services’ guidance, on its Q4 2025 earnings call, of 7x to 9x EBITDA for its own planned acquisitions. A 220-call firm with one licensee is not the kind of target that guidance describes, so we did not use it here.

The Four-Number screen put the firm in the middle of that overlap. Calls were slightly down, revenue per call was healthy for the region, the margin was well documented, and the preneed funding ratio was 96%, a $21,000 shortfall. The Four-Number Funeral Home Valuation Screen walks through each of those tests.

The parties settled on $1,120,000 for the business, less the $21,000 shortfall, or $1,099,000. The building and land appraised at $585,000. Total price: $1,684,000. You can test your own inputs in the funeral home valuation calculator below.

How was the deal structured?

The buyer was a neighboring family firm about 30 miles away, with two licensed directors who could cover the town on day one. It paid mostly cash at closing, held back a small escrow, and kept the owner on as a paid consultant.

The terms, in plain form:

1. Cash at closing: $1,600,000 for the business and the building.
2. Escrow holdback: $84,000 (about 5% of price) for 12 months, released if no undisclosed preneed contracts or liabilities appear.
3. Consulting agreement: 18 months at $2,500 a month ($45,000), for introductions to clergy, families, and preneed holders. It is pay for work, taxed as ordinary income, and is not part of the price.
4. Non-compete: $20,000 of the price allocated to a covenant covering the county and adjoining counties.
5. Family name: kept on the building and in obituaries for at least five years, written into the asset purchase agreement.

The owner tested that last item with the Legacy Terms Ledger. It passed on “written” and “duration” but has no stated remedy, which he accepted in exchange for the larger cash payment.

How much did the family keep after debt and taxes?

About $1,114,000, or 66% of the $1,684,000 price, with $84,000 of that arriving a year late. Tax rates below are assumptions; your CPA must run your own facts.

Allocation follows the asset classes in the IRS instructions for Form 8594. The IRS capital gains topic page confirms that long-term gains top out at 20% and unrecaptured section 1250 gain on buildings at 25%. We assumed 35% for ordinary income, 4.5% flat state tax on all gain, and no net investment income tax, which a CPA should confirm.

The consulting fee adds $45,000 before tax, spread over 18 months. Our guide to taxes on selling a funeral home covers allocation tactics in depth.

What is the lesson from this example?

For an owner with no successor, value is set by what the business earns once someone else does his job. Every other adjustment here was small by comparison.

The $97,620 replacement cost moved the earnings base by 30%. A buyer who could absorb the owner’s work into existing staff, as this neighbor could, had a reason to pay toward the top of the range. A buyer who had to hire would not. That is why the owner’s real decision was choosing which buyers to call first, which our page on selling with no family successor covers in detail. The wider method behind these tables is on our valuation hub.