The time to set your budgets for 2022 is fast approaching. To make your business turn into profits, and your work worthwhile, it is imperative that you realistically look at the services you provide and the mix of those services so that you can have an accurate idea of the revenue you are going to bring in during the next business year. It is also imperative that you look at the expenses that you are going to incur with some semblance of accuracy so that you can get some idea of projected profits in a simple Revenues minus Expenses mathematical equation.
One of the more difficult jobs in setting your 2022 budgets will be the task of getting a handle on where inflation will play a role. Over the past twenty or so years inflation, in a historical context, has been pretty tame at somewhere between 2 and 4 percent annually. However, going into 2022 a survey of the National Federation of Independent Business (NFIB) contends that inflation expectations for the next 1-3 years are elevated.
An indication of their probable correctness in that statement comes from this article from AARP which predicts that the Cost of Living Adjustment (COLA) increase for Social Security recipients in 2022 will be approximately 5.5 to 6%. . . . the highest COLA increase since 1983’s 7.4% COLA.
If this is true. . . expenses will rise. If you paid $20,000 to heat and cool your facility in 2021, you can expect that number to jump 5.5% to $21,100. . .a jump of $1,100. That’s a small dollar number, but where it will really hit home in the service laden death care industry is with payroll expenses, which include salary and benefit costs of employees.
The same NFIB survey sited above states that nearly half of those surveyed will be raising prices to combat this expected inflation. If you believe that your business will have these inflationary costs then you have to judiciously look at your revenue numbers and, potentially, adjust them to offset those inflationary expense increases. If not, you will make less money for providing the same number of services.
Now, raising prices cannot be done indiscriminately either. You have to be careful not to adjust your prices so that you price yourself out of some services or that you turn some full casketed services into direct cremation services because of price. The art of raising prices is just that. . .an art based somewhat on your “gut feel” of your clientele situations in relationship to the competitive world of business.
Again, I don’t have easy answers, but it would be a smart decision to investigate where you think some of your suppliers and expense items look to be with their pricing in the next year and continuously monitor your prices so as to not get caught behind the curve.
Related — Here is an inflation related article from Yahoo News. It lists, as of August 2021, year over year price increases for certain segments of the economy. Here are some of those inflationary price increases:
- Consumer Price Increase (CPI) all items – 5.3%
- Food – 3.7%
- Energy – 25.0%
- New Vehicle Prices – 7.8%
- Used Vehicle Prices – 31.9%
- Core Services – 2.7%
- Core Commodities – 7.7%
More news from the world of Death Care:
- Buffet becoming funeral home. Florida Weekly (FL)
- “Buried by the Bernards” funeral investigated amid allegations of remains “mix-up”. Memphis Commercial Appeal (TN)
- Louisiana family works to rebury grandmother after her casket floated away during Hurricane Ida. Video story and print article. CBS News.
- New Bethlehem Burial Service closes doors after more than 90 years. The Leader-Vindicator (PA)
- New owners at funeral home. Webster County Citizen (MO)
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