Illustrative example: a 650-call suburban funeral home and crematory weighing a consolidator offer

What follows is an illustrative composite, not a real client deal. We built the firm, the buyer, and the offer from situations we see repeatedly, and every figure is made up but realistic. No buyer is named, because the point is how to read any consolidator’s letter.

The firm is a family-owned funeral home with an on-site crematory in a suburb of a mid-sized Southeastern metro. The second-generation owner is 61. He had not planned to sell, but a letter of intent arrived with a large number at the top, and he wanted to know what it was worth.

What were the firm’s numbers before the offer?

It handled 650 calls in its latest year, cremated for nearby funeral homes, and earned $1,005,000 of adjusted EBITDA on $4.46 million of revenue. Volume had grown slowly for three years.

Calls ran 629, 641, and 650, a three-year average of 640 and compound growth of (650 ÷ 629)^(1/2) − 1 = 1.7% a year.

The mix matters. Carriage Services’ FY2025 Form 10-K says average cremation revenue is about one-third of a traditional burial and describes funeral homes as having a relatively large fixed cost structure. A buyer modeling this firm will assume burial share keeps falling, which is why the crematory’s trade work counts for more than its $131,750 suggests.

How was adjusted EBITDA built?

The owner’s accountant reported $814,000 of EBITDA. Four add-backs and one deduction, all documented, took it to $1,005,000, a 22.5% margin.

The maintenance deduction was the seller’s own idea. A retort that is nine years old with a deferred reline would have been found in diligence anyway. Putting it in first kept the buyer from opening a larger discussion. Our guide to the quality of earnings work a buyer’s accountant will do explains why self-reported deductions build credibility for every add-back.

What did the letter actually offer?

The headline was $8.75 million for the business and the real estate. Only $6.9 million of that was price paid at closing, and $345,000 of the closing price sat in escrow for 18 months.

Two things stood out. The consulting fee is compensation for two years of full-time work, so it does not belong in a price comparison. And the earnout threshold was set at the best of the three years, not the average, so the owner had to beat his own record each year to collect.

What was the offer worth after adjusting for risk and timing?

About $7.72 million, using assumptions the owner chose and could change. The discount rates and the 60% earnout probability below are illustrations, not forecasts.

The method, in order:

1. Remove pay for work. The $400,000 consulting fee comes out entirely.
2. Separate the escrow. $6,900,000 − $345,000 = $6,555,000 delivered at closing.
3. Discount fixed deferrals. Escrow at 8% for 18 months: $345,000 ÷ 1.08^1.5 = $307,386. Non-compete: $90,000 a year for five years at 8% = $359,344.
4. Weight and discount the earnout. Each $333,333 tranche × 60% chance, discounted at 10%: $497,370.
5. Add the pieces. $6,555,000 + $307,386 + $359,344 + $497,370 = $7,719,100.

Then compare multiples on the business alone. The real estate appraised at $1,600,000, so the business share of closing price was $5,300,000, or 5.3x adjusted EBITDA. On the headline less consulting it was $6,750,000, or 6.7x.

For context, Carriage Services told investors on its Q4 2025 earnings call that it expected 7x to 9x EBITDA on its own planned 2026 acquisitions. That is one public company’s guidance for deals it selects, and buyers define EBITDA differently, so it is a reference point, not a benchmark this letter had to meet. The useful question was narrower: how does the buyer define EBITDA, and does the multiple it quoted apply to the cash or to the headline? Our guide to whether a consolidator offer is fair lists the questions to ask.

How did the owner restructure the offer?

He asked for less contingency, not more headline. The counterproposal moved $400,000 into closing price and cut the earnout to $500,000, measured against the three-year average.

The headline fell $100,000 and the risk-adjusted value rose about $149,100. Buyers often accept this trade because their own cost of capital makes cash today cheaper for them than it is valuable to the seller. The tradeoff is laid out in our comparison of an earnout vs. a fixed price, and the earnout drafting points are in our guide to call-volume earnouts.

What reaches the owner after debt and estimated taxes?

About $4.08 million at closing and $4.45 million once the escrow is released, from a $7.3 million closing price. Tax rates are assumptions; the owner’s CPA would run the actual return.

The allocation follows the asset classes in the Form 8594 instructions. We assumed 37% federal tax on ordinary income, 20% on long-term capital gain and 25% on unrecaptured section 1250 gain (the maximums shown on the IRS capital gains topic page), and a 5% state rate.

Later money is taxed when it arrives. IRS Publication 537 explains installment reporting for deferred payments and notes that depreciation recapture is taxed in the year of sale regardless. At the assumed rates, the non-compete nets about $261,000 after tax over five years, and a fully earned earnout about $375,000. Run your own version in the seller net proceeds calculator.

Two items sit outside these tables. In this asset sale the owner kept receivables of about $310,000 and paid his own payables, so working capital was a separate, mostly neutral settlement. The $400,000 consulting fee is wage income, taxed as he earns it, and it obligates him to show up for two years.

What should another owner take from this?

Price the certainty, not the headline. In this example, 61% of the closing price reached the owner within 18 months, and the revised letter improved that while sounding smaller.

The crematory supported the price because its trade work and maintenance records were documented; our comparison of a funeral home with a crematory vs. without covers when that holds. Non-price terms deserved the same discipline. The letter promised to keep the family name and the staff, but only in general words; the owner scored each promise with the Legacy Terms Ledger before agreeing to exclusivity. The broader valuation method sits on our valuation hub.