I wrote a story yesterday on the timing of advertising telling consumers about the benefits of pre-planning one’s own funeral or cremation services.  When I did that article I did not envision a follow-up or series of pre-need articles, but a day later here is another angle I have thought about often concerning pre-need and how it fits in with your funeral home’s service to consumers and/or your funeral homes profitability or compensation.

I will admit that serving my entire funeral service career on the front lines in Minnesota may bias my opinion as to this article, but I also think my opinion as to how I look at pre-need is valid.  I mention doing my work in Minnesota as a possible bias because when thinking of pre-need funeral planning and the commissions that might go with such to the bottom line of the funeral home, you have to understand that for my first almost 20 years in the profession, those of us who did pre-need planning in Minnesota were not allowed by state statute to receive a commission or fee for writing a policy on any individual who pre-planned and pre-financed.  That statute has colored my opinion somewhat as to how to approach pre-need.

In essence, we were in a 100% trusting state.  I am glancing at my insurance license as I type this and it states that it was issued to me in 2001 and I received my mortuary license in 1980, so I went about 21 years writing  bank trust based pre-arrangements without receiving any compensation.

With that preamble, it should not surprise you that I look at pre-arrangements through my funeral home not as a way to receive extra compensation or using the commissions to buoy the bottom line today but as a service to our clientele and as a way to generate future revenue,  market share, and profits.  From that standpoint, we always used revenues obtained from our “At Need” business to fund the “Pre-Need” portion of our operation.  Looking from that standpoint, “You are giving up profits from today (those at-need profits you plow into the pre-need business) in the hope those resources will build even bigger profits tomorrow.”

We were fortunate in that our system paid off.  Patience and persistence and re-investing at-need profits into the pre-need business paid off in all of those data points — eventually creating more revenues, market share, and profits.

Tom Anderson
Funeral Director Daily

And, once we were able by law to use insurance commissions as compensation, we were able to hire people who do nothing but build our pre-arrangement volume.  Using these people, with the pre-need operation still funded by at-need profits, continued to keep the cycle going. . . more pre-need led to more at-need services which led to more market share and more profits.

This system is what worked for us and as I mentioned earlier was built out of a necessity in a state that would not allow us to be paid commissions on pre-arrangement sales.  I’m well aware of other funeral home operators who have kept all at-need profits in house and funded the pre-arrangement business by only using the commissions that it generated.  They have proved that can work also.

That proves that there is more than one way to do this and build the operation and value of your funeral home business.  What matters more than if you fund the pre-arrangement side only by the revenues it provides or by using at-need profits to assist that funding, is that you have a plan to do something.  Make sure that you have a plan on how you will build your pre-need volume so that it will lead to greater at-need revenues, market share, and profits down the road.  You can bet that your competitors are working on that plan.

My next article on pre-arrangement will delve into what I looked for and why we choose the insurance companies we did to be our insurance partner for our pre-need business.

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