Are you keeping up with inflation??
Our article this morning dealt with inflation and possible deflation. In doing the research for the article I came across this inflation calculator which I thought funeral homes and cemeteries would enjoy using to compare how they are pricing. According to this calculator: “The dollar had an average inflation rate of 5.64% per year between 2020 and today, producing a cumulative price increase of 17.89%.”
We all know that there are marketing aspects to pricing also. For instance, in general, the lower your price the more potential clientele will look at your services. In contrast, too high of a price will scare some potential clientele away. It’s certainly not an exact science, but there is a “spot” where your “services provided” compared to the “cost of them” can give a “value proposition” to consumers. I think that is where most funeral homes look to be with their pricing.
You might have fun using this calculator to see how your prices stack up against inflation. On average and in theory, if you have not raised prices 17.89% since January 2020 and today, the calculation is that you are losing margin on your services. Couple that with higher interest rate payments on adjustable rate debt and you may find that your margins are being compressed in a big way.
On the other hand, raising prices too fast may cost clientele to competitors who have not raised prices.
Just for comparison sake, I took, as an example, a direct cremation provider who charged $1995 in January of 2020. Using the numbers generated from the linked calculator that provider should be charging $2,351 today just to be at the same margin levels.
Enjoy this calculator and have a great weekend!!!
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“A servant’s attitude guided by Christ leads to a significant life”
Sorry, but one more thing, circa 1984 and FTC entry into our world.
NFDA did not==in those days– hesitate to talk about Bottom Line, and they sponsored a
special program—was it on radio? Vanderlyn Pyne was the Price/Profit guru
and his lecture to all F.D.’s was about doing the right calculations, and NOT using
the “SWAG” method, which he described at the very end as “Scientific Wild-Ass
Guess.”
And, of course everyone now could no longer use the “Unit Pricing”, but now it
was Itemization. Earl Newcomer had been preaching ‘Bi-Unit’ forever!
“Keeping up with Inflation” is the smallest part of the problem.
The basic question (in my humble opinion) “How did you carefully analyze
all of YOUR costs (for the up-coming year), calculate required Profit Margin. and then
set the pricing of each individual service charge and each individual merchandise item,
all based upon a Five-Year Recency Weighted Average Case Volume.
And, last but not least, you are aware of all the “Other” GPL numbers in town, but
recognize they have no application as to the Revenues you actually collect and
receive.