Acquisitions: The price that is paid is all about “The Present Value of Future Cash-Flow”

September 30, 2026/Business, Finance/

Acquisitions are big in Death Care. . . .and we are being told that with so many retiring funeral home owners. . . about to become bigger. If that is the case, we will have many people in our profession starting to ask the question, “How much is my funeral home worth”?

I’ve been watching the acqusition business for over 40 years — back to about 1980 when the “mix” of business as to traditional services and cremation services was not even thought about in the acquisition process. That fact alone brings to reality the following quote from this recent article in Yahoo Finance titled “3 Brilliant quotes on the challenge of valuing companes”:

“If you look back at history, I’m not sure you’ll find a single company whose future path was easily predictable, especially considering the swings in the economy, the shifts in consumer interests, and the direction of technology.”

That’s just one of the interesting observations brought up by New York University Professor Aswath Damodaran, referred to as the “Dean of Valuation”, from a podcast that the article written by Sam Ro is based on. Damodaran’s thoughts are used as he speculates on the real value of Elon Musk’s company Space Exploration Technologies Corporation or SpaceX for short.

The article points out that SpaceX, based on its stock price value, had a range of total value that fluctated by over $400 billion in about a six week period from its June public offering until about the 1st of August. The initial public offering set the market value at about $1.77 trillion and it had fluctuated to as low as $1.3 trillion during that period. As of last Friday, SpaceX had a market valuation of about $2.02 trillion.

Damodaran points out that it is the future of SpaceX that makes the company valuable when he says, “If you’re numbers-bound, I’ll tell you up front: SpaceX looks awful as an investment if all you can focus on is what they have in their books.”

Tom Anderson
Funeral Director Daily

Funeral Director Daily take: As the Death Care business changes it is that question — “What is the future of a certain business?” — that makes valuations of funeral homes so difficult at this time. We can look at the past performance. . . .but that does not provide the answers about what will be the future performance, especially when you look at changing consumer behaviors, new methods of dispositions, the quality and quantity of Death Care management available to non-owner facilities, a demographically and geographically changing population and more.

Damodaren makes this comment that is also quoted in the article about valuing the future, “If you get any of these assumptions wrong, you’ll have something that professional financial analysts call a “garbage in, garbage out” problem. He also notes it is this “assumption” situation that makes SpaceX valuations so difficult and varied because “. . . the nature of these assumptions is arguably unusually uncertain with SpaceX and all of the speculative areas the company intends to explore.”

So, while the consolidators’ accountants and actuaries may come up with what the business is worth today using their methods, it is my belief that the odds of getting assumptions correct for the future are not nearly as good as they once were back when the businesses were much more stable in their performance.

That’s why, if you happen to be a funeral home owner who is thinking about selling, having a professional on your side of the table is essential. When I sold my funeral home I was most happy with the performance of Johnson Consulting Group and the advice that they were able to give to me. You can learn more about them here.

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