The $599K Cemetery Deal That Could Last 100 Years

15:03Jason Scharf:You know, they are saying seller financing available. I can't think of any other way to finance something like this, you know.

15:09James D. W. R.:You know, it's so hard if you say they've done 1 ,100 plots and, you know, this is actually, the teaser does say since 1968. So let's just say, okay, in the last 50 years, they've done 1 ,100 burials. I mean, you're talking about a very de minimis amount, which again, I don't think it's priced all that poorly, you know, based on, like you look at it and go$10 million worth of revenue potential. It may take you 30 years to get there or more, right? At this rate, it's probably going to take you 100 years to use your capacity. But there is a present value calculation you could put on that and you could put a risk premium on it.

15:50Jason Scharf:You do have to run a business here, too. I guess that's the other side. Like we could figure out how much gross revenue you're going to have by selling plots. But it sounds like there's an office building. There was, you know, there's the people who dig the graves, who cover the, you know, all of, there's workers here. And this is a remote place. So, you know, you've also got the headaches of keeping this thing staffed.

16:14James D. W. R.:Yeah. So, I mean, just on the math that they've given us, you know, let's just say there have been 1100, you know, plots in the last 50 years that have happened. That's like 22 a year. And so let's just assume you could sell 22 a year going forward. And maybe it's gotten better, you know, more recently or something like that. at an average revenue of$5 ,000 per, assuming there's some other fees and things that you can do, you would have$110 ,000 of revenue. That includes the vaults. So the vaults might be$1 ,000 or something like that. I mean, you're going to have a cost structure. Like you said, you're going to have employees.

16:51James D. W. R.:You've got maintenance, all those kind of things. That's what you're doing. Yeah. Hey, everyone. It's Bill. And I want to talk to you about Quiet Light Brokerage. I was so psyched when Quiet Light agreed to sponsor the podcast because I am a customer. I have used Quiet Light to sell three businesses. And if I were selling an e-commerce or a SaaS business, I really would not consider anyone else. Like I said, I went back to them three times. I work with three different brokers at Quiet Light. Had a great experience all three times. Even on one occasion, they found a buyer for a business that I just didn't know it was even going to be possible to sell.

17:27James D. W. R.:So they have pulled rabbits out of their hats several times for me. Just they've been in the e-commerce and SaaS business brokering game a very, very long time. They really know what they're doing. They have great reach with both buyers and sellers. And the other thing I really love about Quietlight is all the brokers there are former operators. So you can't just show up and go, hey, I'm a lifetime business broker. I want to work at Quietlight. You have to be a former operator. So they all know what it's like to be in the operator chair. So if you go to Quietlight.com, they have free business valuation calls, which they'll do with you.

17:57James D. W. R.:No obligation. just tell you what they think about your business, what they think it would be worth, and then what you might need to do to kind of get it ready for market. Those guys over there are great, great SOPs, great systems. I just felt like I was in really good hands all three times with Quiet Light. So if you're interested in selling your business, especially in e-commerce or SaaS, hop on over to quietlight.com, fill out their onboarding form for a free valuation call, and you can tell them, Bill or Acquisitions Anonymous sent you. But I mean, maybe let's just say it's best case scenario.

18:28James D. W. R.:It's a, you know, 40-ish,$40 ,000 a year net, you know, number. As a real estate play, it's not a bad, you know, cap rate, but you do have an operating business. Yeah.

19:10James D. W. R.:And there's still the ability for somebody to have enough money to like cut the grass and maintain. Yeah. Not necessarily adding new, you know, plots and continuing to bury people, but there's enough money set aside that this thing could continue to operate. And I think it's the kind of thing where it's almost like a little, you know, trust vehicle where you can't just go rate it and say, oh, we have we have 50 years worth of, you know, maintenance in there. Let's just go scrape$100 ,000 out and like recap it. My understanding of it in the past is that it's very it's very locked down. Yeah.

19:49Jason Scharf:So you're buying some cash in that fund, but to your point, you're not getting, that's not cash that you can make decisions with. Yeah, right. It literally just going to sit in a trust fund in a bank somewhere and you can only use it under the rules of whatever the trust is set up.

20:05James D. W. R.:Maybe best case scenario, you could lever it like an asset and use it as collateral. But I don't think this is, this deal doesn't require a ton of sophistication.

20:18Jason Scharf:Something interesting about banking, if you have customer deposits or something like that, this perpetual fund, there's regulations with the banks of what kind of account you're supposed to keep that in.

20:29James D. W. R.:Yeah.

20:30Jason Scharf:And they vary from state to state. So I learned all of this working in the short doing some deals in short term rentals because they have a lot of advanced customer deposits. And it was really interesting, you know, some banks and different in different states allow them to put in any account they want. Other banks, it absolutely has to be in a trust account and it's regulated. So it'll be interesting to know what the story is with this fund and, you know, how regulated it is and what kind of account it sits in. If you put it in a true trust account, there's also regulations you can't earn interest on it.

21:04Jason Scharf:You know, because it's not your money kind of thing. Or maybe it can accrue. Who knows? But that would be interesting to kind of figure out what's happening with this fund and how much is in it. But it feels like the cash flow after staffing, I'd be afraid, would be pretty scary. I also feel like you probably have to pay commissions to somebody to sell the plots. It could be. Somebody's got to sit down as a salesperson and do the sale.

21:31James D. W. R.:But the shocking thing to me is that most cemeteries are owned by the local funeral home.

21:38Jason Scharf:Yeah.

21:39James D. W. R.:Because the shared economics, I mean, they have to have a place to bury people. And they're not always that way, but it is very common that a funeral home, because funeral homes are in the practice of, hey, if my grandmother passes away in Columbia, but she's from North Carolina and she wants to be buried there, You still call the local funeral home and they do these kind of transfers where, you know, they receive some fees, but maybe the funeral home here is going to embalm her. But the one up there is actually going to do the funeral service and the burial. Like there's a lot of different things that happen.

22:17James D. W. R.:The funeral homes themselves are kind of more forward facing, client facing, like when my dad passed away or when other people I've been involved with. you know, you kind of deal with one and then they hand you off to the other. And so there could be a commission or a fee arrangement between maybe multiple funeral homes. And this is a network. Yeah.

22:41Jason Scharf:Yeah. And this is one to your point, like, it would be nice if you own both because you're controlling both sides. But this one, you're just going to own the cemetery. You're not, you know, this is they're not mentioning anything about a funeral home as part of this package. Or they're not even mentioning the funeral home in town that, you know, is probably your main business relationship. So I guess you need to find that out, too. How many funeral homes are there in this area? There might only be one.

23:11James D. W. R.:Yeah, your customer concentration in terms of referral could be like 100%.

23:15Jason Scharf:Yeah, whatever the deal that they have together, you're going to inherit that and be kind of stuck with it, whether it's a good deal or a bad deal. So that would be something to learn pretty quickly.

23:26James D. W. R.:You brought up a really good point earlier that I hadn't really thought about, but deposits. So in addition to the perpetual care, when my dad passed away, my mom went ahead and bought a funeral plot right next to him that is, in this case, not in available inventory, but still has some revenue potential because they're going to perform a burial at some point on that plot that has already been paid for.

23:55Jason Scharf:You prepaid, you pre-purchased it, right?

23:58James D. W. R.:Yep. Yep, exactly. And you actually, you get, I think like there's actually a deed to funeral plots. I mean, you own, you own the land, so to speak, and you can transfer them. So like there's, you know, in some ways like a secondary market, which is like fascinating. And then like the other element of this that they don't say anything about is monuments and headstones. Usually there's kind of, you know, a person or a couple different people in an area like this. I can't think it's that many, but some people do very ornate things. Some people do, you know, very just kind of plain. And I don't know, they don't say anything about that.

24:38James D. W. R.:So my guess is that they use somebody else and that's a totally different asset intensive, you know, thing.

24:43Jason Scharf:Yes, I have looked at someone, one of our clients looked at buying a monument business, and there is a whole import part of it, too, because depending on what kind of stone and what color, a lot of those are not domestic. They're imported, and there's quite a bit of fabrication, basically, to that. But you can't ship them very far, so there has to be some kind of local supplier for that. So, yes, you have to understand how that works. But thinking of the pre-sold plots, you know, people who bought them are, I remember growing up hearing the older people talk about, you know, owning their plots in different places.

25:22Jason Scharf:I remember thinking it was pretty morbid, the conversations. But now that you say that, yes, a lot of people buy them many years in advance. And so where's that money? In other, you know, the businesses that we typically look at, you would have to book that as deferred revenue. Yeah. You know, like maybe there's a little bit that you can bring into income right away when you sell it, but technically wouldn't that be deferred revenue and you don't actually book that into revenue until you bury the person and perform the service? I don't know.

25:52James D. W. R.:It would depend on how sophisticated their books are, but you have this scenario you could imagine where the cash has already been collected. The majority of the cash has now left the business potentially, you know, where the owner's like, look, there's all this excess cash. I'm going to take it. That's their prerogative. Um, but then you have a disproportionate share of the cost, you know, in terms of the opening and closings and the margin that you would normally, um, you know, expect. So there's some interesting elements to this, but I'm really, really curious about it. Um, to, I think the financials would tell you a lot in a very short amount of time.

26:30James D. W. R.:Um, you know, like on their balance sheet is the perpetual care. Is it like a separate entity? Is it on their balance sheet? Like, how does all that work? Do you have deferred revenue or kind of are there assets on the balance sheet that are kind of like sequestered or kind of cordoned off? It also, I mean, there's a house.

26:51Jason Scharf:If I was ever buying a plot, I would need to see their financial statement.

26:55James D. W. R.:Yeah, yeah, exactly. I want to make sure I'm getting my money and you're going to be there when I get back. Yeah. There's also a house here. So it makes me think, right, that the, my assumption is that the seller probably lives there or did at some time. Yeah. I don't, I don't necessarily want to live in a cemetery in very, very rural mountain, West Virginia. It sounds kind of creepy, you know, maybe there's like an Airbnb spin to that, you know, property or something that would be like a destination. that just makes me think this was kind of very owner operator. Um, and probably like a very, very part-time job.

27:34James D. W. R.:You're talking about like a burial potentially every other weekend. Um, so I, I'm kind of, I'm going to, I think I'm going to reach out to this guy cause I'm, I'm really fascinated by this, um, to just see like what, you know, the fact that the price has been reduced is a good sign. The price, the fact that they are, uh, acknowledging seller financing. I would have to go to Twitter and find somebody in the area, you know, who would be able to help kind of manage from a closer proximity. I looked, it's a six hour drive from Columbia. But it does look like David, let's see, his phone number is a 585 area code.

28:20James D. W. R.:Which is interesting. Rochester, New York. in the surrounding counties. So he's not local.

28:29Jason Scharf:No. I wonder if he's a cemetery guy. Like he's got a specialty.

28:34James D. W. R.:It doesn't look like it. Like his businesses for sale is like Niagara Falls Liquor and Wine Store for$650 ,000. High volume Fairport Village Bar and Restaurant in Rochester for$350 ,000. A coffee shop in Rochester for$125 ,000. A sub shop in Rochester for$225 ,000.

28:53Jason Scharf:and somehow this out here in West Virginia yeah

28:58James D. W. R.:subway franchise almost everything's in Rochester but he does have a lot of listings like four pages on Biz Buy waste dumpster disposal company it's all Rochester yeah now now I want to call him just to be like you know how did you get this listing and it may be like it's a relative or something like that you know and he just I like this Yeah, you do? You want to? Yeah. No. But, you know, I wonder, like, I'm thinking best case scenario, the seller has like a, you know, a trusted employee, maybe a longtime employee who could be there. And I don't think that this is a full time, you know, requirement.

29:43Yeah.

29:43James D. W. R.:I think that there's probably somebody locally, just like people do on short-term rentals and destinations, you know, they have a local person who's going to do the cleanings and things like that or respond to maintenance requests. So I don't know. I mean, I'm still really hung up and intrigued by the$10 million of total revenue potential because there is a price, you know, you could, you could get, you could do some present value and discounted cash flow to say, what, what is that? At what price is it worth it for that?

30:14Jason Scharf:Yeah, I mean, yeah, I would say that AI could help you in probably an hour. You could probably come up with a pretty good estimate of what the net cash flow is and then back into your price from there. Yeah, interesting.

30:26James D. W. R.:I'm curious about it. I think that the skeptic in me says the local funeral home, and maybe there's not even a local one, but the next closest funeral home has passed on this for a reason. And they're probably their biggest referral source. So like what, what's going on there? Sure. Yeah.

30:44Jason Scharf:We're dying to know.

30:45James D. W. R.:Yeah. Yeah. This is, this is a fun one and an interesting one. I'll report back next week. Cause I'm, when we get off, I'm going to call this guy and just see if he answers. I can't wait to hear. I won't put him on the spot and do it on the recording and then like have to disclose, Hey David, you know, this conversation is being recorded for quality control. That would be funny. Well, thanks everybody. I hope you enjoyed the episode. I have fun. Heather, I don't know if you did, but I have not, I've not looked at a cemetery in a long time.

31:15Jason Scharf:So I've never done so.

31:17James D. W. R.:Yeah. Well, if you enjoyed the episode, please give us a review and you can check out our website, acquanon.com, where we have now, we believe over 500 episodes, or maybe we're like right at that cusp, but everything that you could dream of. And if we, if you come across something that we haven't recorded, we really want to know. Send us, our best deals come from listeners and send us something and we'll do an episode on it. But thanks again for tuning in and we'll see you next time.