Finance 301: Chapter 16: The Importance of the Side Hustle
In the disco age, the “Side Hustle” was a dance move. For me, growing up in Philadelphia, the side hustle was something altogether different. Today, that phrase has been resurrected by “gig workers” and others looking to make a little extra cash.
Now, I’m not suggesting that funeral directors should try to generate extra money by dancing or otherwise. I’m just thinking about the future because the future for funeral service is vexing. I see costs for labor skyrocketing, assuming you can even find licensed people to hire. I see the number of price-focused consumers rising from the current 5% of at-need families to almost 20%. I see more pressure on the amount of revenue generated per call due to limitations on consumer spending, shortfalls on preneed crediting rates and the increasing preference for cremation. Unfortunately, any time businesses experience a limit on their revenue and an increasing overhead, the only factor with elasticity is profit.
On the positive side, calls will increase per funeral home in the future. At present, there are roughly 19,000 funeral home rooftops and about three million post-COVID-19 deaths forecast in the United States. That equates to about 158 calls, on average, per funeral home. In 1984, when I entered the funeral service industry, that average was only about 120 calls per funeral home.
I can also tell you that given our increasing population and a flat or even decreasing life expectancy, we should hit an average of 180 and 223 calls per funeral location by 2030 and 2040, respectively. Since the bulk of the overhead in funeral service is a fixed cost, those additional service calls will provide some relief to the profit margins of funeral homes.
Now, if you are able to add revenue to your top line, then everything except the direct cost of that revenue flows to the bottom line, offering even more relief to your profit margin. But how and what can you do to add revenue? That’s where the side hustle comes in!
There are many things you should consider doing to generate more revenue. Don’t be too proud or too aloof to consider the following ideas, which I break down into two categories: the normal hustle and the side hustle.
The Normal Hustle
The normal hustle comprises everything you are doing now but doing them better, including:
Set Your Prices Properly. I continue to believe funeral home owners do several things wrong when setting prices. Setting your fees correctly is not about adding a small percentage to last year’s prices. You also cannot allow your competition to influence your pricing – unless you let them also influence your overhead. Ideally, you should start from scratch with an analytical analysis to determine what your service fees should be.
I have written about this often, so if you want greater detail, please check out past issues of The Director or drop me a note and we can send you the articles.
Set Your Cremation Prices Properly. Cremation pricing should be comparable to burial pricing. I continue to implore business owners to understand that there are about 16 key tasks required to prepare a body for burial. Meanwhile, there are about 18 tasks necessary to prep a body for cremation.
If you look at that alone, you should realize that “more tasks” should equal “more fees.” But if I point out that for burial or cremation, 14 of those tasks are exactly the same – taking the same amount of time and utilizing the same people – then that should drive home the fact that your cremation pricing should be at least the same, if not greater, than your burial pricing.
Set Your Burial and Cremation Package Prices Properly. The Federal Trade Commission (FTC) requires funeral homes to list four minimal-services packages on their General Price Lists (GPL). During my career, I’ve reviewed more than 2,000 GPLs and have found that most firms set these FTC-required package prices incorrectly.
How do I determine this? By adding up a GPL’s itemized prices for the basic services fee, removal, simple care of the body, transfer to a crematory and the cremation fee, and then comparing the total to the package price for direct cremation (no container). In 90% of cases, the package price was not only lower but frequently hundreds of dollars less than the total cost of the itemized prices for the same service. That must change.
The Side Hustle
Sell Markers. If you already sell markers, vases, bases and headstones, then please skip to the next entry. If you don’t sell these items, why not? Don’t tell me you don’t want to hurt the companies that do that exclusively. And don’t tell me you have a deal with the cemetery. What you do have is a relationship with the family, and you can guide them and help them make good decisions in this area. This could add as much as $500 to $1,000 per interment or inurnment to your bottom line.
You do not need to be a specialist in this subject because many marker and headstone companies will give you books or software to help you help consumers make good decisions.
Sell Flowers. You might want to leave the world of flower sales to your local florist, but there are fewer and fewer of them because so many flowers today are produced in a central site and shipped overnight. The average funeral visitation involves flower sales of about $800 to $1,000, and these flower companies will pay you a commission to host their flower sales on your website. If that commission is 20%, that can add $160 to $200 per service to your bottom line. What could you do with that additional money?
Sell More Preneed. Many of you don’t like selling preneed as it is, and many of you are doing it wrong to begin with. But since every preneed service sold represents a call sometime in the future; and because each of those services represents a call that is paid in full with no chance of becoming bad debt; and because if a consumer chooses a casketed service today, then that call will be a casketed service in the future – please sell more preneed today!
Sell Repatriation Services With Each Preneed Service. Consumers want matters that are secured and guaranteed. Therefore, add a rider to all your preneed contracts stating that if the consumer dies away from his or her home, then your firm can get them home without the added cost. Anyone who is vibrant when they buy a preneed service can picture themselves dying in Greece while on a world tour, for instance. Offering repatriation is a powerful yet very inexpensive benefit to add. Moreover, you will receive a commission on each sale.
Manage Your Receivables. There are three types of consumers who make funeral arrangements: those who have money to pay the funeral bill at the time of arrangement, those who need to process an insurance policy to pay the bill and those who have no idea where the money will come from.
For the first group, ask for payment at the time of the arrangement. For the second, bring in an insurance-processing firm. I know you think you can do it, but it is expensive to dedicate someone at your firm to do this, and it still takes one or two months to collect the insurance proceeds. For the third group, if the law in your state allows, then start charging interest right away. If your state law limits your ability to charge interest, then work to change your state law.
Offer Receptions. If state law allows, investigate how to adapt your building so you can provide receptions, perhaps by creating a community room. A funeral brings people together and, in reality, once together, they prefer to stay together. This is an unsettling event for them to go through, and a well-handled reception is highly appreciated by all. Furthermore, it is profitable. A caterer will usually pay you a marketing fee for arranging this.
Own Your Own Crematory. Depending on certain factors, it typically takes some 90 cremations a year to pay a crematory’s cost. At a minimum, breaking even is a good investment, but owning your own crematory also allows you to market your firm by saying, “Your loved one never leaves our care.” That is a good differentiator. Moreover, any crematory breaking even today will achieve a positive cash flow within a few years because as the number of annual calls increases, the cremation numbers will also rise.
Side hustles not only bring in more revenue, but they also bring in more profit, which will grow over time. Most importantly, all the added profit from those side hustles will add value to your business. You are the ruler of your revenue – find additional side hustles to enhance your bottom line.