Pricing is always a hot topic. When it comes to vendors setting pricing for items such as caskets, do you have to accept their price structure, or can you make changes as you see fit? Gabe Ngo provides his insights on this important topic.
Question: Do I have to accept the prices the casket vendor set?
Gabe Ngo: The short answer is no, you do not have to accept the casket vendor’s pricing they set. There are so very many angles in answering this question, but I will keep it grounded and simple. Often times historically, owner-operators have not always made pricing changes to reflect the “October 1st” pricing changes that have typically come from Batesville or Matthews annually. However, over the past fifteen to eighteen months or so, funeral home owner-operators have seen a variety of “temporary surcharges” (which aren’t all that temporary if they are still in effect) as well as more interim year price changes from casket and vault suppliers as well.
Please realize though that suppliers are passing on their elevated cost of doing business to you each and every time there is an additional surcharge or price change that takes effect—and that means these pricing changes cut into your gross profit margin and EBITDA (earnings before interest, taxes, depreciation, and amortization) by elevating your cost of goods sold (COGS) and expenses in general if you decide not to “accept” these newly set prices by not adjusting your own pricing—whether these are adjustments to the pricing of your services and/or merchandise. In the short term (and possibly even the longer term), you are hurting your own business by not adjusting your own prices—by not “accepting” the pricing changes, you are choosing to “eat” or absorb the higher costs charged to you from suppliers and essentially making less money—both in revenue/income and in profit—every time you serve your families.
As caregivers, I know often times there is some guilt associated with raising your prices. However, I urge you to think of it in this manner: if you believe that you are the best or one of the best funeral providers in your community, you cannot continue to be the best at what you do if inflation and rapidly rising costs continue to eat away and degrade the revenue and profitability dollars that fuel your business’ ability to continue providing the excellent service and noble work you do in serving your communities. One of the best things that Foresight does to serve our clients is providing empirical analysis on how to properly price your services and merchandise so that there is data supporting your price changes with very little risk of having an adverse effect on your calls.
The other possible way of not “accepting” pricing changes set by your casket supplier is to reject your supplier entirely and change your casket supplier relationship. However, that involves reading the fine print on the contract with your current casket supplier in order to understand exactly what contractual obligations you might have to them and they to you when breaking the contract. You will also need to thoroughly read and understand exactly what the new contract entails from your new casket supplier. And this non-acceptance option can potentially get deep into contract law and legal ramifications which is too long-winded to get into here!
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