Funeral homes are local service businesses. Plumbers are local service businesses. So are roofers, HVAC operators, landscapers, electricians, dry cleaners, auto body shops, painters, and pest control companies. The economics rhyme more than most owners realize, and so does the exit math.
Dennis Yu flew to Austin to record a Coach Yu Show episode with Cody Jones, a fifth-generation funeral director who took over the family business at 24 and exited 20 years later at a multiple well above the top of the funeral industry’s typical range. Cody is now building Funeral Home Exit specifically for other funeral home owners, but the lessons from his interview apply directly to every local service business that’s owner-operated.
Most local service owners are going to face a sale, a succession, or a shutdown within the next 10 to 15 years. The boomer transfer is here. The kids don’t want the business. And almost none of these owners have done the preparation work that determines whether they retire well or sell the equipment for scrap.
Here’s what Cody walked Dennis through, mapped onto the local service playbook.
Most owners have a job, not a business
The single biggest indicator of whether your local service business is actually sellable is whether it runs without you.
Cody’s test: can you leave for two weeks without your phone ringing? If yes, try a month. If your team can run the business for a month without your input, you have a business. If they can’t, you have a job that pays you well and that disappears the day you walk away.
Most plumbing, HVAC, and roofing owners fail this test and don’t know they fail it. The customer-facing work goes through them. The big-job estimates go through them. The hiring goes through them. The vendor relationships are personal. They’ve conflated being important to the business with being irreplaceable, and acquirers can spot the difference inside an hour of due diligence.
The fix isn’t a software stack. It’s documented SOPs, a real management layer with hiring authority, and the discipline to let your team make decisions you would have made yourself.
Margin is the second indicator
The funeral profession typically runs on a 4 to 6 percent margin. That sounds low to anyone outside the industry, but the equivalent for residential roofing, HVAC service, and plumbing is similar or lower for the average owner-operated firm.
Cody made the point that the firms hitting multiples 2x to 3x the industry average aren’t the ones with the lowest prices. They’re the ones with the cleanest operations, the strongest brand, and the management depth to charge for value. In funeral services, the firms competing on price drive margins toward zero and don’t sell at premium multiples when they exit.
That maps directly to home services. The roofers running door-to-door storm-chasing operations at minimum margin are not the ones acquirers want. The firms with documented sales processes, ten-year warranties they can actually service, and customer review counts in the high hundreds, are the ones private equity is calling.
Your job, if you’re 18 to 36 months from an exit, is to fix the operations that drive margin (pricing discipline, recurring revenue programs, customer review velocity, technician training) before you start cleaning the books for sale.
The personal-expense problem
Cody flagged this and it applies to almost every local service business Dennis has audited: personal expenses are running through the company’s books and quietly destroying valuation.
The math: every dollar of personal spend run through the business reduces reported EBITDA by a dollar. At a 6x multiple, that’s 6 dollars off your sale price per dollar of personal expense. If you’ve been running 100,000 a year through the business for vehicles, vacations, family travel, and a couple of side properties, that’s roughly 600,000 dollars in valuation, gone.
Buyers may accept some of these as add-backs in due diligence, but the burden of proof is on you, the negotiation gets ugly, and acquirers who suspect the books are not clean will discount the multiple before they even ask. The clean play is to pay yourself a real salary, distribute profits explicitly, and keep your personal life out of the business books for at least the full preparation window.
The pre-need / at-need irony
Cody pointed out an irony specific to funeral services that generalizes immediately. Funeral home owners spend their careers coaching families to plan ahead (pre-need) rather than react in a crisis (at-need). Almost none of them apply that to their own businesses.
Local service business owners are guilty of the same pattern in their own version. Roofers tell homeowners to inspect their roofs before there’s visible damage, and then run their books on the back of an envelope. HVAC owners tell customers to schedule preventive maintenance, and then never schedule their own succession planning. The professional advice the owner gives to their customers is exactly the advice they’re not taking themselves.
The cost of running your business exit on at-need rather than pre-need is the same in every industry: roughly 50 to 60 percent off the sale price you would have received with 18 to 36 months of preparation, plus a different post-sale life.
“If you woke up tomorrow and had to sell your funeral home, would you receive what you believe it’s worth?”
That question applies to your plumbing business. To your roofing business. To your HVAC service company. To your landscaping operation. The honest answer for most owners is no, and the gap is the project.
Recurring revenue is the multiplier
In funeral services, Cody talked about pre-need contracts as the equivalent of recurring revenue. A strong pre-need backlog tells buyers there’s locked-in future revenue beyond this year’s at-need volume. That visibility reduces risk for acquirers and supports a higher multiple.
The local service equivalent is service plans, maintenance contracts, and monitored subscriptions. HVAC firms with active maintenance plans sell at higher multiples than equivalent-sized firms without them. Pest control with recurring quarterly contracts sells at higher multiples than spot-service operations. Roofing companies with warranty service programs that produce a trickle of revenue past the install date sell at higher multiples than pure new-construction firms.
The work is to build the recurring layer before you go to market, not while you’re already in conversations. Buyers reward the multi-year track record, not the program you launched last quarter.
Terms move more value than price
Inexperienced sellers focus on the headline number. Experienced acquirers know that terms move more value than price.
The patterns that show up in funeral home deals, and in local service business deals:
Cash at close is the most important variable. A higher headline number with 50 percent at close and 50 percent over a four-year earn-out is worth significantly less than a lower headline with 80 percent at close.
Earn-out structures concentrate post-sale risk on you, the seller. If you’re tied to specific revenue or EBITDA targets for three years after close, your post-sale life is constrained, and your ability to enforce the targets depends on the buyer running the business well.
Employment requirements lock you in. A deal that requires the owner to stay three years post-close is a different deal than one with no employment requirement, even at the same headline number.
Non-competes vary widely. Some buyers want broad geographic and industry-wide non-competes. Others are willing to be specific. The scope of the non-compete is negotiable and worth fighting for.
Broker fees in the funeral profession run 4 to 6 percent. In local service business M&A, the range is similar. The broker’s job is to package the business, source multiple bidders, and run a real bid process. Going to market without a broker, against an experienced acquirer, is a one-sided negotiation that systematically undervalues the seller.
The two ways this goes
There are two ways the next 10 years go for the typical local service business owner.
Path one: you keep operating until you’re tired, then you take whatever offer comes in, which is anchored to the EBITDA your unclean books and owner-dependent operation report. You retire on roughly half of what the business was worth. You sign a multi-year earn-out that ties you to the buyer’s operating decisions. You wonder for the rest of your life whether you got a fair deal.
Path two: you start now. You spend 18 to 36 months getting the books clean, building the management layer, building recurring revenue, and testing the two-week and one-month operator-absence tests. You run a real bid process with a real broker. You negotiate terms, not just price. You walk away with two to three times what path one would have produced, on terms that let you retire on day one.
The difference is preparation. The work isn’t glamorous, but the spread is the spread.
Where to go next
If you operate a funeral home, the right starting point is Cody’s valuation calculator at funeralhomeexit.com and a conversation with him directly. He’s not a broker. He’s an operator who exited and is now sharing what he learned.
Cody’s own reflections from the day we recorded together cover the personal side of the conversation, including why he stopped working funerals two years before the sale. Dennis Yu’s own post-interview write-up breaks down the operator-to-operator lessons he’s carrying into other founder conversations. And the BlitzMetrics team published a deeper breakdown of the valuation and exit-readiness mechanics that move the multiple.
If you operate a local service business outside of funeral services, the same playbook applies. Start the conversation now, not when you’re tired.