Illustrative example: a direct-cremation business in a high-cremation Western market

Picture a founder who opened a cremation-only firm fourteen years ago in a growing metro area in the interior West, and now wants out. This page is an illustrative composite, not a real client deal: the founder, the firm, and every figure are invented from patterns we see in cremation-focused businesses, then rounded so each calculation can be checked by hand. No real town or company is described.

The firm leases a small office with an arrangement room and a refrigerated holding area. It owns two removal vans but no retort. Every cremation goes to an independent crematory 20 minutes away, under a per-case rate the founder agreed to on a handshake years ago. Two licensed arrangers and a part-time removal technician handle most families, and the founder is the funeral director in charge.

The market backdrop is strong. The Cremation Association of North America reports a 2025 U.S. cremation rate of 62.8%, and much of the West runs well above that. CANA’s 2025 statistics preview describes states that reach 80% and beyond as entering a “Plateau phase,” where yearly changes are small. High cremation means steady demand for this model, but also more competitors chasing the same online searches.

What was the business earning before any adjustments?

About $251,690 of pre-tax income on $1,291,810 of revenue, or a 19.5% margin. Calls rose from 610 to 702 over three years, and every call was a cremation.

Revenue per call is low by funeral home standards. Carriage Services’ fiscal 2025 Form 10-K says its average cremation service brings in about one-third of a traditional burial service. A cremation-only firm lives on volume and a lean cost base, so each cost line below matters.

Which adjustments did the buyer make, and in which direction?

The founder’s add-backs lifted earnings to $450,190 of seller’s discretionary earnings (SDE). The buyer accepted them, then made two cuts the founder had not expected.

The crematory cut is the one to study. The $310 rate was a personal favor, not a written agreement, and it would not follow the business to a new owner. The buyer priced the market rate it was quoted. The marketing cut followed the same logic: the founder’s unpaid hours managing search ads were a real cost a buyer would have to replace. Our guide to funeral home add-backs explains why adjustments can reduce earnings as easily as raise them.

Adjusted EBITDA margin: $298,580 ÷ $1,291,810 = 23.1%.

How did the Four-Number screen read a cremation-only firm?

Favorably on three counts, with the disposition mix as the one caution. The Four-Number Funeral Home Valuation Screen gives a direction within a range, not a price.

1. Call-volume trend: 610, 655, then 702 calls. Compound change: (702 ÷ 610)^(1/2) − 1 = 7.3% a year.
2. Average revenue per call, by disposition mix: $1,595 for direct cremation (88% of calls) and $3,150 with a memorial (12%). No burial calls at all. See average revenue per call for why mix drives this figure.
3. Normalized earnings margin: 23.1% on adjusted EBITDA, after the buyer’s cuts.
4. Preneed funding ratio: 214 insurance-funded contracts with $371,000 of policy value, against $356,000 to deliver them at today’s prices. $371,000 ÷ $356,000 = 104%, so no shortfall.

The caution is concentration. With no burial revenue and little service revenue, a new low-price competitor or a jump in ad costs hits this firm harder than a mixed-disposition funeral home.

What value range did the assumed multiples produce?

Roughly $1.10 million to $1.73 million, depending on which kind of buyer was doing the math. Every multiple here is an assumption chosen for this illustration, not a market statistic.

We know of no neutral published survey of funeral or cremation business multiples. The only verified figure we cite is Carriage Services’ guidance, given on its Q4 2025 earnings call, that deals it expects to close would price at 7x to 9x EBITDA. That guidance covers a public consolidator’s deals, not a leased, cremation-only firm with one key person, so we assumed lower bands.

The rising call trend and full preneed funding pushed the founder toward the second lens. A regional cremation operator with its own manager bench could use the EBITDA view, and it agreed to $1,560,000, near the middle of its band.

How did the parties structure the sale?

As an asset purchase with most of the cash at closing and a holdback tied to the transfer of the firm’s demand. The buyer type is profiled on our direct-cremation operator page.

1. Cash at closing: $1,435,200.
2. Escrow: $124,800 (8% of price) for 15 months, covering general indemnities and confirmation that call volume came through the transferred phone number, domain, and ad accounts.
3. Digital asset transfer: every account moved into the company’s name before closing, with the founder’s personal logins removed.
4. Consulting agreement: 24 months at $5,000 a month, paid separately and taxed as ordinary income.
5. Non-compete: five years within 75 miles, with $40,000 of the price allocated to it.

What did the founder net after taxes and debt?

About $1,052,340, or 67.5% of the price, with the escrow arriving 15 months late. The tax rates are assumptions; a CPA has to run the founder’s own facts.

The firm was a pass-through entity, so the gain flowed to the founder’s return. The IRS capital gains topic page sets a top 20% federal rate on long-term gain. We assumed 37% on ordinary income (equipment recapture and the non-compete), a flat 5% state tax on all gain, and no net investment income tax.

The consulting agreement adds $120,000 of pre-tax income over two years. Run your own version in the seller net proceeds calculator, and see taxes on selling a funeral home for allocation strategy.

What should a direct-cremation owner take from this?

Buyers pay for demand they can keep and costs they can verify. A favor-priced crematory deal and personal ad logins both looked like strengths until diligence.

Had the founder signed a written, assignable crematory agreement and moved every account into the company a year earlier, the $38,610 cut might have shrunk, and the escrow might have been smaller. Those are cheap fixes compared with the price they protect.

The second lesson concerns the market itself. A high cremation rate does not lift every cremation firm’s multiple. It draws more low-price competitors and raises the cost of each online lead, so buyers lean hardest on the trend line and the marketing math. The founder’s rising calls, documented ad spend, and clean preneed file did more for the price than the regional statistics did. Buyers on the other side of the table test the same points, as our guide to buying a direct-cremation business shows. More of the method behind these tables lives on our valuation hub.