The case for raising full-service charges

In the last couple of issues of NFDA’s Memorial Business Journal, author and editor Edward Defort, has introduced us to funeral director, owner, and entrepreneur David Hernandez.  Hernandez has funeral service operations in New Jersey, West Virginia, and Pennsylvania.  And, he’s a man after my own heart because he understands that a successful funeral “business” is not about call volume or revenue per case but about, as he states, “It’s always about what’s left afterward.”

That’s the way that I ran my business. . . it was not about getting the highest revenue or doing the most calls. . . .Now, those things were important, but meant little if we could not either charge enough or operate efficiently enough to bring the cash home at the end of the year.  And, it is generally true that higher call volume and/or higher revenue per case would lead to higher profits, but the expense and operational, including pricing, side of the business was probably just as important to bringing home the higher profits.

I also learned a great lesson from a veteran banker early in my career.  He told me to “Take care of yourself first”.  He meant that I should make sure to pay myself so that I can keep my head above water at home and that included putting money into a retirement account on a regular basis also.  His philosophy was that if I was worrying about my home life it was bound to impact my work and leadership at the funeral home.

We’ve all read about the inflation in the United States (and Canada) at this time.  As much as we like to think we might know when it will end or where it will go, the simple answer at this time is that we don’t.  Yet, we have to bring in the cash to operate and if we just absorb the inflationary costs of heating, cooling, gasoline, potential adjustable-rate interest hikes, salaries, supplies and so forth, we will find ourselves in a situation where we do the same amount of work and yet, take home less.  And, more than likely hear something from our staff as their cost of living is increasing also.

The obvious answer at this time is to raise prices.  I don’t know why, probably because it is a growing segment of human disposition, but we seem to have “price wars” in the direct cremation segment.  If that is the case in your market, and you believe that there are a lot of price shoppers in your market, that is probably not the place to raise prices as the increase may cost you market share.  On the other hand, depending on your values, if you believe your prices for this service are low for your efforts, you may have room to increase.

The Cremation Association of America (CANA) tells us that in 2020 the United States cremated 56.1% of all deaths.  Now, that’s a lot of cremations, but it also tells us that about 44% of U.S. deaths generally follow a procedure of casketed funeral and earth burial.  In my opinion, at this place and time I would look to that 44% of services to raise my prices.

Tom Anderson
Funeral Director Daily

For what it is worth, unless you operate in one of the cities with a “low-price” advertiser like Newcomer Funeral Services, I don’t tend to see “price wars” in this traditional funeral market.  I also don’t tend to see the “discount oriented” shoppers in this market segment as much as in the cremation markets.  I believe that many consumers choosing the traditional funeral market value “reliability, competence, and service” over simple low-price options.  Consumers in this segment also have the ability to see your “Service” in action as they will be present during the visitation and services.  Again, in my opinion, an increase to consumers with this mind-set will fare better than an increase to consumers in a “price-shopper” mindset.

In addition, a modest percentage increase in the price of non-declinable professional services for a traditional service will bring in more, in dollar amounts, than the corresponding increase in cremation because of the larger base to work with.  For instance, a 5% increase on a $6,000 traditional funeral will bring in $300 whereas the same 5% on a cremation with a $3,000 base will bring in only $150 in increased revenue.

In inflationary periods you also have the choice of cutting expenses, but that leads to its own set of problems.  Many of your expenses are there for long-range customer acquisition (like your advertising) or for support to families you serve (aftercare).  Taking the foot off the gas of these items will save money and provide for today. . . but, more than likely you will suffer in the long run if you do so.

You have a lot of options on what you may want to do.  According to this article, the United States saw a 7% increase in prices during 2021 with that number still seemingly going up in 2022.  So, if you choose to do nothing and do the same amount of revenue as 2021 for the year 2022, you can expect to bring home somewhere near 7% less income for the same work.

Finally, all funeral homes operate in local markets so it is important for you to know the options and then do what you feel best for your market and operations.  My opinions are meant to be thought provoking in nature and certainly not a panacea for every funeral home.

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