Illustrative example: a high-burial Southern funeral home sold to a neighboring firm

The owner had two offers on the table from the same buyer: $1,390,000 in cash, or $1,580,000 with part of the price paid over seven years. This page follows that choice from the financials to the after-tax result. It is an illustrative composite, not a real client deal; the firm, the families involved, and all figures are invented from patterns we see in small-town Southern funeral homes. The setting is a county-seat town in the Deep South, and no real place is named.

The owner, 69, is the second generation. His firm handles about 165 families a year, most of them burials tied to a few large congregations and two church cemeteries. The buyer is the family firm 12 miles down the highway, which has competed with him for forty years and wants his calls, his chapel, and his name on the door.

Why does a burial-heavy firm look different on paper?

Its revenue per family is higher, and so is its cost of goods. Burial was 64% of this firm’s calls, against a national burial rate NFDA projected at 31.6% for 2025.

That projection comes from NFDA’s media center statistics. CANA’s 2025 statistics preview noted that only six states then had cremation rates below 50%, so a firm like this one is increasingly rare. Prices follow the mix: the 2023 NFDA General Price List Study, as reported by Funeral Director Daily, put the national median for a funeral with viewing and burial at $8,300, against $6,280 with cremation.

Calls ran 172, 168, and 165 over three years, a compound decline of about 2.1% a year. Expenses were $988,360, led by staff payroll ($326,000), caskets and vaults ($231,000), and the owner’s $120,000 salary. Pre-tax income was $166,490.

Which add-backs did the neighbor accept?

Three of five. The result was $340,290 of seller’s discretionary earnings, a 29.5% margin.

Family payroll is an add-back only when nobody does the work. Sponsorships in a church-centered market are marketing, not perks.

What did the preneed book do to the price?

It took $55,000 off. The firm held 236 preneed contracts, mostly trust-funded, and burial contracts carry the most merchandise to deliver.

Following The Preneed Reconciliation Ladder, the buyer matched every contract to its trust sub-account or policy, confirmed balances with the trustee and insurers, and re-priced each guaranteed contract at today’s price list. Funded value was $1,093,000; the cost to deliver was $1,148,000. Funding ratio: $1,093,000 ÷ $1,148,000 = 95.2%. The $55,000 gap is a preneed trust shortfall, and the buyer deducted it dollar for dollar.

How did the buyer price the drift toward cremation?

By modeling a slow shift in mix rather than a collapse in calls. The neighbor assumed that each year, about three of the firm’s burial families would choose direct cremation instead.

Each switch replaces $8,900 of revenue with $1,950, a loss of $6,950. About $2,100 of that comes back in casket and vault cost the firm no longer pays, so earnings fall roughly $4,850 per switch. Three switches a year: 3 × $4,850 = $14,550 less earnings each year, compounding. After three years, SDE would be about $43,650 lower if nothing else changed.

That is why the agreed multiple sat in the middle of the assumed band rather than the top. The buyer was not betting against the town’s traditions; it was pricing the national trend into a local business. A seller can soften this discount by showing a growing cremation-with-services line, which keeps revenue per family closer to burial levels.

How did the parties reach $1,580,000?

By valuing the business on SDE at assumed multiples, deducting the shortfall, and adding the appraised building. The multiples are assumptions for this example, not published market data.

The neighbor’s own math explains why it could reach that number. It would add one licensed director ($68,000) but save about $47,000 a year by closing the preparation room, selling a duplicate hearse, and merging bookkeeping. Its view of earnings was $340,290 − $68,000 + $47,000 = $319,290. The owner also secured non-price terms in the purchase agreement: his family name stays on the chapel and in obituaries for at least seven years, matching the note term, and both of his full-time employees receive offers at current pay. Our profile of the neighboring family funeral home buyer explains why such buyers rarely pay for those savings in price.

How was the seller note built?

As 30% of the price, $474,000, over seven years at an assumed 7.25%, behind the buyer’s bank loan. The bank lent $950,000 and the buyer added $156,000 of cash, for $1,106,000 at closing.

The note pays $7,212 a month, or $86,544 a year. With bank payments of about $105,679 a year, total debt service was about $192,223. Coverage on the neighbor’s earnings view: $319,290 ÷ $192,223 = 1.66 times. That margin is why the owner agreed to carry paper at all.

Security for the note:

1. A security agreement covering equipment, vehicles, and intangibles, signed by the buyer and describing the collateral, the elements UCC § 9-203 requires for an enforceable interest.
2. A second mortgage on the building, behind the bank.
3. Personal guaranties from both of the buyer’s owners and their spouses.
4. Cross-default with the bank loan, plus quarterly call reports and annual financial statements.
5. A standstill the bank required: 120 days after a default before the owner can enforce.

The trade-offs of this structure are laid out in our guide to seller financing a funeral home, and how it compares with a government-backed loan in SBA 7(a) vs. seller financing.

What does the owner net, and when?

About $723,518 after first-year taxes, then note payments for seven years. If every payment arrives, the note route beats the all-cash offer by roughly $143,000 after tax, before interest. Tax rates are assumptions; your CPA must run your facts.

Model your own version in the seller net proceeds calculator.

What is the lesson from this sale?

A burial-heavy firm sells on durable relationships, and a neighbor will pay for them, but often only with terms. The owner earned about $220,000 more by accepting risk, so the note’s security mattered as much as its rate.

Sellers in this position should run the all-cash number and the note number side by side, after tax, and ask what the note is worth if payments stop in year three. Our valuation hub and the guide to taxes on selling a funeral home cover the wider method.