Dan Isard
on
Funeral home owners and managers typically do not plan well. They provide exceptional care for their families, except their immediate family. Now, today you need to immediately plan for 2017! December 2017 will be here soon enough and you can look back on the financial harvest or barren bank accounts based upon your work NOW!
In planning for next year, there are five areas to focus on:
- Staffing
- Pricing
- Merchandising
- Marketing
- Accounting
I will NOW explain each in greater detail.
Staffing
Even those of you who only perform 40 calls a year have staff. They might be part time or unlicensed staff, but you must plan around them.
How much will you pay them for 2017? A Cost Of Living raise is a good place to start. However, there might be employees that demonstrated performance worthy of a Merit Raise in addition to Cost Of Living.
How many employees do you need? Keep in mind that as your non-casketed calls increase, you probably need less staff. If you write down all the tasks in a service to a burial call, you might identify more than 50 tasks. Some of those can only be done by licensed staffing. Make that list and put a time value on each task. Next, add up the licensed staff hours needed to assist a burial family. It may be about 30 to 35 hours of labor. A non-burial case might average about 18 to 20 hours and a ship in or out may be 10 hours.
Therefore, if you serve 100 burial families, you have about 3,000 hours of time.
For example, if I work with a firm that is performing 100 burial calls (3,000 hours), 75 non-burial calls (1,500 hours) and 20 shipping cases (200 hours) I calculate 4,700 hours of services of licensed staffing. The question is, how many licensed staff do I need?
The average full time person works about 2080 hours in a year. However with time off for vacation and personal time as well as continuing education this might be 1800 hours. If I divide 4,700 hours (in this example) by 1,800 hours, I need about 2.5 licensed people. If you think finding full time licensed help is tough, try finding part time licensed help! I would round this up to three licensed help. If you as the owner/manager are licensed, you can be one of those three people.
I ask you to do this math because 20 years ago when almost all calls were burial calls, your needs were much greater. Licensed help for 200 calls years ago resulted in 6,000 or more hours. That equates to four licensed staffers.
This is also the time to review your staff’s performance. What is your overall satisfaction with each staffer and what growth do you want them to have in the next year? How will you get them that growth? With the new Department of Labor rules pertaining to White Collar employees, you want to make sure their job descriptions are in writing and in compliance with the DOL laws.
Pricing
I have written numerous articles and given seminars on setting prices. I won’t repeat myself here. If you can’t find any of those articles in the archives of American Funeral Director, then drop me a note and I will hook you up!
I ask that you to look at how families are using your funeral home and assess how that is changing. If you plan to raise prices by some percentage, do not raise prices on each of the key points of your GPL. For example, if facility utilization is gong down, why raise your price on that GPL component? What does a retail store do if something they own is not selling? They lower the price on it. If families are not using your facility for visitation as frequently as they have in the past, then lower that price. You can raise your Basic Non-Declinable amount by a bit more to make up the difference because every family should be using your Basic Non-Declinable! Increase your Removal fee, because that is used by all families.
As we look at the next year it is important for you to look at prices and overhead. Some items of overhead might be reduced and some points of Revenue should be raised at a greater rate than others.
Merchandising
I bet you are not selling the same quantity or price point of caskets today as you did a decade ago. If I am correct, then put more focus on service fees and less on merchandise. Make your mark-up less on merchandise add more to the service fee. Your merchandise and service fees are yoked decisions. I bet you don’t have many families that just buy a casket from you without employing your other professional services.
Do not negotiate with casket companies. Ask them for their pricing for the next year. If you must sign a contract, sign a 1 year contract. Do not get into the “Rebate Roulette” where you fight for every extra percentage of Rebate point. Just get the proper net cost of caskets. It is very clear to determine the price of a casket with a one year contract.
Do not have the casket company “give you the showroom”. They aren’t giving you anything. You are paying for it with your business.
Some casket companies are finding their funeral homes have impaired cash flow and they are offering to make loans for multi-year contracts. CAUTION!!!! This is not free money. You are paying for it in the price of the casket. If you need a bank, get a bank. Keep the relationship with your merchandiser simple.
Marketing
Starting a funeral home from scratch gives you an advantage over those who take over an existing business. You know how to get calls whereas most of the owner/managers who have taken over businesses do not know how to attract calls. The person who opens a new business gets the award for marketing because they are typically willing to try new things, and if it fails, they know how to recover those calls.
When planning your marketing strategy do a SWOT Analysis. SWOT stands for Strengths Weakness Opportunity and Threats. Do it on your own business and on any firm you compete with. You need to do this because this is what your families informally do within your funeral market all the time.
Write down your business’s Strengths and Weaknesses. Look at them. How do you protect your Strengths and reduce your Weakness? What are the Opportunities in your market and the looming Threats to your business?
I recently worked with a funeral home that was in a market where a cemetery was looking to add a funeral home. We met with the cemetery board members and confirmed this as a Threat. We then offered the cemetery low cost and low risk ways to come into the funeral home business with a joint venture with our client.
Understand why families come to you. It is not because, “you care more” or “you embalm better”. That is not to say you do not do either or both of these actions, but it is not a quantifiable action. Find those matters that are obvious to all and can be proven.
Accounting
What value does your accountant bring to your advisory team? If they are a local accountant the odds are they don’t know funeral service. If they do not work with you to translate your financial picture into an annual management of your business plan, all you have is a tax preparer.
We help our clients look at about 80 integrated metrics of operation. We do this on a quarterly basis. By doing this we see if a client is performing on budget, above budget or below budget! If they are off, we find the correction to take and don’t just say, “We will get them next year!” Your business is alive and more fluid than ever before and you need to have advisers that help you manage your business.
An example often overlooked is the relationship between Revenue and Gross Profit. Gross Profit is defined as Revenue less Cost of Goods Sold. While Revenue is the top line and the top dog of your financial objectives, Gross Profit is also important. If your Gross Profit is higher than budgeted that is a big point of relief. If Gross Profit increases then it is very likely bottom line Profit will increase as well. If Gross Profit is off, we must determine why is it off? Is it from Case Count, Case Mix, Revenue/Call, Cost of Goods Sold, improper setting of Service Fees or Package Pricing or is it something else. The first step is to realize you have a problem!.
Planning is better than not planning. Not planning leads to not succeeding. Take the time to plan and increase your probability of success.
Dan Isard, MSFS, is president of The Foresight Companies LLC, a Phoenix based business and management consulting firm specializing in mergers and acquisitions, valuations, accounting,financing and consumer surveys. He is author of several books and host of The Dan Isard Show at www.funeralradio.com. He can be reached at 800-426-0165 or danisard@f4sight.com. For copies of this article and other educational information, visit www.f4sight.com.
The financial and tax advice contained in this article is for informational purposes only and may or may not apply to your individual position. Readers are strongly encouraged to seek the counsel of qualified advisers before undertaking any action based on this information.