It’s November and it reminds me that for over 30 years this was the time that I put the plan together that led to growing profits in our funeral business.

I’ve often been amazed that in many businesses, including funeral service, profits sometimes just happened for certain firms because they just did a number of services that guaranteed that.  However, in depth planning can take those same services and greatly increase your annual profits and value of your business if you just take the time to do so.  While funeral homes have gotten better at this it also has amazed me that some funeral home owners operate their businesses, not as profit centers for themselves, but as non-profit community resources for their clientele.  It is my opinion that the risk you are taking in operating a business gives you the right to earn a profit on that risk – don’t sell yourself short.

Start your budgeting process with your revenues.  In a funeral business you should, at a minimum, break out items such as funeral service revenue, cremation service revenue, trade business revenue, caskets sold revenue, urn sales revenue, vault sales revenue, paper products revenue, mortuary transportation revenue, preneed insurance commission revenue, and possibly if you offer them for sale, monument sales revenue.

You then need to look at your current year’s historical averages to see what the average per case is in each category to get a starting point on the numbers.  You also have to look at your product mix – funerals vs. cremations – to know where to trend the next year’s numbers.  For instance, if you are on track for 100 cases and 60 will be funeral and 40 cremation, you have to have an educated guess on the trend of those numbers for next year.  Will it be 56 funerals and 44 cremations or are you trending the other way?  And/or are you trending for a market share increase (more calls) or a market share decrease (less calls).  You need to know where you are on this trend and not have your head in the sand.

Tom Anderson
Funeral Director Daily

Having a realistic look and thought process on this number is vital to getting your budget in the right ballpark.  My thought process, so that I never got caught upside down was to always overestimate the lowest priced (generally cremation) variable so that I kept my estimated revenues to the lowest possible number.  I always felt that an “upside” surprise would be great, but I never wanted a “downside” surprise.

Finally, once you know what these “service” numbers are, you need to think about your “price” for next year.  Can you raise prices and still do the number of calls that you are planning for?  Or, is direct cremation pricing becoming a competitive player in your market?  I generally raised prices 3% per year and was able to do that without any problem.  I did, however, look at the competition pricing and always wanted to stay below that.  My goal was always to offer what I thought was better service, better facilities, and better clientele resources at a price that was lower than our competition.  It was tough budgeting, tough expenditure decisions, and great staff that allowed us to do so.

Finally, one secret that I always did that helped lead to bigger profits was that I made my budget work at 90% of revenues.  Using the numbers above – a 100 call funeral home – I would “set” my revenues on only getting 90% of that number (or 90) calls instead of 100.  What that did, is once I set my expense budget (and I set that at 110% of my expected calls)  – and had a number that I considered to be a good profit – is only increase my profit if I did my 100% expected number of calls.  And, if it was one of those “off” years where I did not do 100% of my calls, I still made a profit.

On another day, I will explain my budgetary expense thoughts.

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