By Jason Gazaille, Vice President of Finance

 

You’ve worked hard to build your funeral home.

 

Your reputation. Your facilities. Your service to the community. All of it matters.

 

But when it’s time to sell or grow, one financial metric often takes center stage.

 

While buyers and lenders do care about your history and the quality of your operations, they typically start by looking at EBITDA. Understanding and improving this number can significantly impact your business’s value, financing options, and future opportunities.

 

If you don’t know what EBITDA is or how to improve it, you could unintentionally leave hundreds of thousands of dollars on the table. But when you understand your funeral home’s EBITDA and take steps to strengthen it, you open the door to a higher business value, easier financing, and more!

 

Together, let’s explore what EBITDA means, why it matters, and how you can strengthen it to protect your future.

 

 

What is EBITDA?

EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization (sometimes rent, too).

 

In short, EBITDA measures your funeral home’s true operating cash flow. It strips out things like loan payments, taxes, and other unique items so lenders and buyers can see how much money your business really generates.

 

Here’s how to calculate your EBITDA:

  • Start with your funeral home’s net income

  • Add interest

    • Lenders add this back when assessing whether your funeral home generates enough cash flow to repay debt.

    • Lenders later recalculate interest based on a proposed loan structure.

  • Add taxes

    • Federal and state income taxes vary depending on your ownership structure, so these are added back for consistency.

  • Add depreciation and amortization

    • These are non-cash expenses that reduce taxable income (a great tax benefit!), but don’t impact your actual cash flow.

  • Sometimes add rent (if you pay rent to a related real estate entity)

    • If your funeral home pays rent to a related real estate entity, that expense is often added back.

    • In these cases, the holding company covers the mortgage, property taxes, and insurance.

    • From a valuation standpoint, that “rent” doesn’t reduce EBITDA.

  • Add other expenses that wouldn’t continue under different ownership

    • These can vary widely from funeral home to funeral home.

    • In some cases, these can include owner-related expenses (sometimes personal) such as personal vehicle expense, personal cell phone, etc.

All of that may seem like a lot, which is fair. And you may be asking yourself, “Why does this matter?”

 

Ultimately, EBITDA is the biggest factor in determining your funeral home’s value. Most buyers use a multiple of EBITDA to calculate what they’ll pay for a business.

 

 

Why does EBITDA matter so much?

When lenders and buyers look at your business, they’re asking: “How much cash does this funeral home really generate?”

 

If your EBITDA is strong, you’ll have options such as better offers, easier financing, and more control over your future.

 

If your EBITDA is weak, you could face lower offers for your business and difficulty obtaining financing.

 

Plus, most funeral home owners count on selling their business as their retirement plan. If this is your situation, the strategic choices you make will determine whether you leave with a premium value or money on the table when the time comes to sell.

 

 

How do you improve your EBITDA?

The good news? You have direct control over many of the factors that influence EBITDA!

 

Here are 6 practical steps you can start with today:

  • Grow your market share

    • More calls mean more revenue, which means more cash flow for your funeral home.

  • Price your services with confidence

    • Review your price list to ensure your pricing covers costs and provides healthy margins.

  • Operate lean and efficiently

    • Create a budget. Spend where it matters. Cut waste.

  • Invest in your preneed program

    • A proactive preneed program strengthens your current (and future) market share and long-term value.

  • Leverage technology

    • Tools for case management and accounting save time and money.

  • Keep your financials clean

    • Accurate, up-to-date books matter. Avoid mixing personal and business expenses.

 

 

What's next? Talk to our Lending team!

You’ve worked too hard to leave money on the table. Whether you’re planning to sell, expand, or just want peace of mind, understanding and improving your EBITDA is the key.

 

Our Lending team specializes in helping funeral home owners like you:

  • Understand their financial position

  • Improve cash flow and profitability

  • Secure financing for growth or succession

  • Value their funeral home

EBITDA isn’t just an accounting term. It’s the heartbeat of your funeral home’s value. By improving it now, you’re building long-term security for your business, your family, and your legacy.

 

Schedule a meeting with our Lending team today and take the first step toward protecting your future.