Business, Cremation

The Revenue Drop

While I did not attend the recent National Funeral Director’s Association gathering in Salt Lake City, I recently visited with an attendee about the gathering.  One of the things that this veteran funeral director told me was that he cannot remember a time when so many traditional funeral home owners talked about revenue declines and the havoc they could lead to in the traditional industry.

We all know what is causing revenue declines — it is the continued growth of cremation as a method of disposition – and, in particular, the fast growth of “direct” cremation with no services.

In a simple economic world, as revenue declines at a business with high fixed overhead, it is imperative that the business grow in volume to absorb enough income to cover the overhead.  In my opinion, that has been done over the last decade and more by acquisition firms who cobble two to three properties together into one location to raise revenue for that single location.

The question now, however, being asked by traditional funeral home operators is, “How do I compete with the upstarts that are forming with very low overhead costs and seem to have a laser focus on acquiring the high number of direct cremation services?”  In essence, it is becoming more and more difficult to hold on to traditionally loyal heritage families if your prices are much higher than your low-priced competitors for direct cremation services.

Service is one way to compete, but price will always be a factor to many families.  Pre-arrangement is another way to compete.  In the National News Section of the Minneapolis Sunday paper I saw large ads for both the Neptune Society (owned by Service Corporation International) and the Cremation Society of Minnesota (owned by Foundation Partners) soliciting business.  Back in my day, nobody would have ever looked at those firms as not being price competitive but in Minneapolis there is now a lower cost direct cremation provider. . . Crescent Tide, that advertises “Simple Cremation” at $750 — and a 3% discount from that price if you pay with Bitcoin!!  Just a quick look at the Crescent Tide website (click here) will show an obituary list that appears that they are taking over 100 direct cremation calls per month from more traditional (a term that now includes established direct cremation) operators.

Across the pond, in England, you can read about the Heavenly Services funeral directors who have advertised “Affordable funerals within your budget” on billboards near hospitals and are expanding their business after only being in the business one year.  In an area where average services are $US 5,357, they are charging about $US 1,664.  You can read an article on Heavenly Services here.  The threat – of low cost direct cremation – appears so large in the UK that even public company, Dignity PLC, has made the national news by dropping their prices to be more affordable.

My final thought is that industries ebb and flow over time.  Funeral service was once a very high margin business.  It may not be anymore, but companies also have to profit.  It may be that some of these low price leaders are not profitable and that will wash itself out over time.  The best advice that I can give for truly traditional operators is to always be on the look out for what is happening and refine your services to be in the game.  There is opportunity in the market. . . sometimes it just takes time to find it.

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One Comment

  1. I always enjoy your articles, thank you.

    One suggestion is to have your links open in a separate window as opposed opening away from your article. For example I click on Crescent Tide link and browsed around for a bit, by the time I was ready to get back to your piece I had to back click about 10 times. If it had opened in a separate window I could have just closed out of Crescent Tide and gotten back to where I was. Just a suggestion!

    I feel sincerely bad about the FHs who are used to operating on more generous margins and now have to get it done with a leaner revenue, while at the same time trying to keep up with the new guys. It’s a tough thing. Thank you again for addressing it.

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