Member Spotlight Succession Planning Why 2021 is the year to buy a new funeral home or sell yours 2 021 is shaping up to be a robust economic year. The pent-up consumer desire from the pandemic is driving the market. Throughout 2020, the pandemic wreaked havoc on our lives and livelihoods, creating unprecedented conditions in the stock market, food production, the housing market, the medical establishment — and the funeral business. Now we’ve moved into the next stage of the pandemic — containment. So what does that mean for the market? Some business owners are looking back at 2020 and deciding that this arduous year makes an opportune time to retire. Those sellers leaving the market create a golden opportunity for business owners in a growth phase. To be sure, this presents two-fold opportunities for business owners. Market conditions make this scenario a win-win for the seller and the buyer. Point-by-point, here is how the market appears to be looking in 2021: Business values are high This year is a lucrative time to sell your business in a growth phase. You can ask for more, especially if you’ve done your homework. High business value also means your business is worth more when you go for an expansion loan. A number of factors are working to increase the value of your business right now and this is a solid time to expand. But only expand if you are prepared. You need to have a strategic plan in place that directs your growth. Have you considered what markets fit your business model? Do you know where you want your business growth areas to be — pre-need, cremation? Small Business Administration lending programs are very attractive for buyers The federal government is trying to ensure there are buyers for all of those sellers. If you think you want to grow your business, this is a smart time to act. The SBA lending program has two powerful incentives that make buying better for you: • No lending fees • Six months' loan payments paid by the government These programs won’t last forever and, in fact, are designed to help spur the economy. If you pass them up, you’re also passing up free money to grow your business. As a seller, this can mean there are MORE buyers but are they the RIGHT buyers? Johnson Consulting Group maintains the largest database of qualified buyers. Having multiple buyers at the table helps you get the highest value for your business. At JCG, we’ve negotiated more than $2 billion in divestiture deals, so we’ve been around the block on this process. We’ve seen the horror stories from transactions that have gone wrong. We have expert questions that smooth out a transaction. Interest rates are low Smart buyers know the value of a low rate over a longterm investment. While the SBA incentives offer shortterm incentives, this low interest rate can benefit you for the entirety of your loan. Plus, low interest rates make this a great time to buy new equipment and make other improvements to a growing business. You could even refinance existing, higher-interest loans into a new loan with your purchase of new property, saving money there as well. You can also consider using accelerated deprecation to free up more cash (more on that below). Capital Gains rates ARE going to increase under the new administration An increase in capital gains taxes is not an if, it’s a when. What does this mean for you as a seller? If you are considering selling or planning for it in the next few years, you may want the ink to dry before rates increase and you receive less of your hard-earned equity. If you’re going to wait and sell in the next couple of years — and I don’t recommend that you do — I hope you can grow your business enough to account for the increased taxes you're going to owe — otherwise you're losing money waiting. You will most assuredly owe more in taxes when you sell in a couple of years. www.ogr.org | The Independent® 41
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