Finance Column Collection

June 26, 2022

Finance 301: Chapter 6: The Truth About Compensation

The single largest cost of running a funeral home comprises salaries, benefits and employment taxes. Together, they make up employee compensation. In the 1980s, when some casket companies spent $250,000 on their NFDA booth build-out and another million dollars on an extravagant cocktail party during the convention, the cost of goods was about 20% to 25% of revenue while compensation typically ranged from 26% to 40%. Yep, you could eat and drink for free in those days thanks to the casket companies, but the people paid to run the businesses were getting the bulk of the revenue! As noted above, compensation consists of three key components: Salaries This includes those you employ, full and part time, licensed or non-licensed, as well as any third parties you pay to supplement your staff for removals and body prep. It also includes the […]
May 29, 2022

Finance 301: Chapter 5: Estate Planning and Business Succession

I got my start in the financial services world by selling life insurance across the kitchen table to young families. Once, as I met with a 20-something couple, the husband told me it was ironic we were meeting because they had just found out the day before that his wife was pregnant. Sensing an opportunity, I immediately started to explain a family life insurance policy that offered coverage on the husband, the wife and any and all children once they were born. The premium was $25/month, however, which was a lot of money for a young couple in 1980. The husband said, “We will probably wait on this until the baby is born.” In hindsight, I now understand why my reply caused them to evict me from their home: “Why wait? Do you want to see if you like the […]
April 28, 2022

Finance 301: Chapter 4: Pricing Considerations

As I attempt to transfer the knowledge I’ve learned over five decades in funeral service, I find I must ask questions as often as I answer them. Q1: Why is it important to set prices accurately? That sounds like a childlike question, but the way this profession sets prices would be an insult to most fifth graders. In 1985, the Federal Trade Commission (FTC) forced funeral homes to change from a “package pricing model” (the family buys the merchandise and everything else is thrown in) to an “itemized service fee and merchandise-pricing model.” This caused owners to start by guessing how to allocate their fees on the 16 Funeral Rule-required itemized goods and services to account for the loss in revenue caused by dropping the markup on merchandise from about five times to roughly two times. To make matters worse, […]
March 29, 2022

Finance 301: Chapter 3: A Preneed Game Plan

In last month’s column, I outlined the questions you must address for preneed to serve as a positive part of your business and planning. As noted at the end of that article, I intend to answer those many questions in this month’s article, so please, read on. Today, between 20% and 30% of the average funeral home’s annual calls originate from preneed. Now, if you thought that one person in your community would account for 20% to 30% of all your calls in a given year, would you be cavalier about the financial status of this person? Of course not. You would want to know their net worth, their ability to pay in the future, etc. The concept of preneed involves getting consumers to make advance directives, thereby informing their loved ones and the funeral home of the services and […]
February 24, 2022

Finance 301: Chapter 2: A Preneed Overview

My Knowledge Transfer Plan Chapter 2: A Preneed Overview The first large-scale speech I gave at an NFDA convention was in Orlando in the 1980s. In the room next to me was an industry “expert” whose presentation denounced the use of funeral directors as salespeople and asserted that preneed was an inferior way of promoting funeral home services. From then until 2019, preneed sales rose in almost every category you can look at it. Overall number of contracts sold by the profession increased at least 300% during that 40-year period. The annual number of preneed contracts served increased almost 500%, and the backlog of preneed contracts as “inventory” for future service by any funeral home also increased by at least 100%. In other words, the presenter in the room next door had been wrong. Despite the onset of the pandemic, […]
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