Funeral Words

Watch those preneed come-ons

We all do it. We all use rules of thumb and estimations to get by in this world. We couldn't get anything done if we had to calculate the length of every step in a marathon down to the quarter inch.

But be careful, sometimes estimations can lose you a lot of money.

Take for instance the proposal I received a few days back for the rebuilding of our active preneed program. The proposal used some recent insurance contracts to establish an average age of the policies we sell, which in our case was 75 years old which paid a particular rate of commission. The proposal then went on to say that if we lowered that average to 74 years, our commission rate would jump by almost 4%, an annual commission increase of $35,000 based upon the other estimates we had used.

Except, I knew averages didn't work that way and today I set out to model the numbers more accurately. Bottom line? It took moving the average preneed age by five years to get even half of the proposed increase and another three years to get close to the original 4% increase proposed. And hey, getting the average age of preneed contracts to drop by six to nine years is basically impossible, so the numbers were pure fiction.

In this case I don't think these numbers were presented maliciously. I think the salesperson involved understands no more about averages than the rest of us. In the end, it didn't really matter to the presenter of the information however. As long as the program got going they were happy. But what about my company? If I acted on the given information, and assumed my preneed program would cost so many thousands of dollars to run, I could be in for a rude surprise when I discover the program costing literally tens of thousands of dollars MORE!

Now I know a few of you out there are much better than I with crunching numbers, but for the rest of you who tend to trust your salespeople a bit too much and who tend to manage with rules of thumb and seat of the pants guess work, you might want to get your accountant to review some of these proposals before you sign off. Margins are still tight in this business and that means mistakes can turn very costly very quickly.

Remember, you're the one who wants to pass a sound business on to the next generation and you're the one who will have to face the music with your family and your community if things fall apart. Take the time to become fully informed. It's worth the time and energy.

[Note: I have a very basic Excel spreadsheet which will let you compare the financial impact of changes in contract average, average age, etc. It's nothing fancy but I would be glad to share a copy if make a request by email.]

The phrase of the day...WWW-MD

There’s a famous saying in Sunday School circles, “What would Jesus do?” abbreviated “WWJD”. People wear those initials on bracelets and charms as a reminder to think before they act, seeking better answers to life’s challenges in the teachings of Jesus. Well I think I’m going to adopt a new phrase for myself when dealing with salesmen, “What would Wal-Mart do?” or “WWW-MD”.

Recently a salesman presented me with a new register book concept in late prototype stage. [Note: I will not mention the company’s name because the product and pricing may well change before final release.] Full color, beautifully designed, organized so that families could add special “chapters” or theme pages designed to capture special attributes of the person remembered in the book (for instance, patriotic, special holidays, special vacations, marriage, 20 in all). Very comprehensive and again, very beautifully designed. However, the pricing is dramatically higher than what I pay today.

Here’s a portion of what the salesman wrote to me yesterday in response to my questions about pricing [Note: the numbers here are for illustration purposes only]:

“As for your mark up and what it costs a family?  Well that's relative.  You can buy a book for $20.00 and triple it and make $40.00 or you can buy a book for $40.00 and double it and still make $40.00.  The difference is about $20.00 to a family.  However, they get a much better value with the latter because they're getting dollar for dollar value for the additional $20.00 netting 50 cents in merchandise per $1.00 spent as opposed to 33 cents per dollar spent on the cheaper book.”

On the surface that sounds “reasonable”, but let’s turn this around and ask the “WWW-MD” question. Would Wal-Mart accept the idea that their costs would DOUBLE on a product and in the process they would make no additional money? No, they would not, so why in the world should I accept this form of cockeyed salesmanship? I shouldn’t and neither should you.

Doubling the company’s cost of register books (or any item for that matter) while seeing no improvement in profitability means your company has ended up losing money. At the very least you have to carry an inventory, so instead of tying up $2,500.00 in books you tie up $5,000.00 in books. This doesn’t sound like a lot but if you let that happen over and over again in a number of product areas, service prices have to go up in order to cover the cost of that money now “invested” in paper goods and lost to the operation of the business.

It is TOTALLY UNREASONABLE for vendors to come to our places of business and try to feed us this line of nonsense. Adding value means that EVERYONE—including the funeral home—gets to benefit. The family gets a better product, the funeral home adds profitability and the vendor gets to make money, a good old fashioned “win-win-win”. This other nonsense of the vendor makes more, the family gets more and the funeral home sees no benefit has got to stop. This only drives up service fees to cover the lost profitability and worst of all, that puts more and more financial pressure on those in our communities least able to afford funerals. That’s just bad business all the way around.

So start asking the “WWW-MD” question and see if that doesn’t change your perspective on how you care for your business, always remembering that a well run business has more, not less, to give to the families served.

My Casket Company Challenge (and anyone else who wants to tag along by the way)

Women DOMINATE retail. According to statistics compiled by Tom Peters on his website, women make the final buying decisions on 83% of all consumer purchases in America. Home furnishings?--94% Houses?--91% Do-it-yourself?--80% (yes that means Home Depot overwhelmingly sells to women!!!) Bank accounts?--89% Women DOMINATE retail.

So is it any surprise that on top of all the social change we struggle with in funeral service, that our male dominated, manufacturing oriented (think how much influence the casket companies have in this business) industry has a hard time helping us connect with our most important consumers??? It's no surprise to me whatsoever!

I have a challenge for the casket companies. Men, bring your wives into the selection rooms you have designed and ask these women if they would ever shop in these environments. Then LISTEN to what they have to say and begin to design accordingly.

Done honestly, I guarantee it will open your eyes to a whole new world of possibilities and profitability.

Peters puts it this way in his list of 100 ways to succeed. #36:

Males: TAKE PLEDGE2005!
I PLEDGE ... THAT I WILL NEVER ENGAGE IN ANY SORT OF DISCUSSION OF PRODUCTS-SERVICES-EXPERIENCES THAT INCLUDE WOMEN AS CUSTOMERS-CLIENTS, UNLESS ONE THIRD OR MORE OF THOSE PRESENT AND IN POSITIONS OF AUTHORITY ARE WOMEN. IN SUCH SETTINGS, I PLEDGE ... THAT I WILL WORK TIRELESSLY TO ENSURE THAT WOMEN'S VIEWS ARE HEARD FIRST & LAST AND ARE CLEARLY INCORPORATED IN A COMMANDING WAY IN ACTION PLANS. I PLEDGE ... THAT I WILL NOT SIGN OFF ON AN INITIATIVE AIMED PRIMARILY AT WOMEN UNLESS WOMEN ARE ALMOST UNANIMOUSLY IN AGREEMENT. I FURTHER PLEDGE ... THAT I WILL BECOME A "PIONEER" IN GETTING WOMEN-CENTRIC VIEWS CLEARLY INTO THE MAINSTREAM.
Any takers?

This is the kind of thinking we need to inject into our industry. Women DOMINATE household purchases. We ignore this at our collective peril.

Guys (Batesville, Aurora, York-Milso-Matthews, Wilbert, etc.), let me know which one of you takes the challenge seriously and does it first. I can't wait to tell my readers who you are and what you have learned.

Has Wibert Jumped the Shark???

Have you ever heard the term “jumped the shark”? Often it’s used to describe a television program which has chosen some outrageous plot line to try and win back audience.

The name derives from an infamous Happy Days episode which had the leather clad cool guy Fonzie, jumping a shark pen while waterskiing.

To viewers, “jumping the shark” spells the beginning of the end. It marks the time when writers and producers lose the spirit of the show and as a result lose the core audience as well.

Product and service companies can do the same. Pressures build and leaders decide on a “radical” course of action. Coca-Cola did it with “new” Coke, though they managed to survive. Others, like People’s Express Airlines or the long distance company MCI, just fade from the scene entirely.

My visit to the NFDA expo floor yesterday makes me wonder about the defacto leader in burial vaults, Wilbert. They left all their products home this year except for a copy-cat, all synthetic vault and a half dozen new urns. Otherwise, they wrapped themselves in a trendy booth, sporting high minded slogans, which looks better suited to a software company.

My initial reaction when seeing this swirl of stylized canvas? “They’ve given up.” Those words came immediately to mind as I walked by the booth.

In fact, I actually found myself angry that one of the strategic companies I have relied on all my life, had thrown away their identity. They now looked embarrassed of the product they produced.

How can I maintain my pride in them and in their product if they have become so disconnected from the important and meaningful work they are supposed to do for me and the families I serve?

Sadly, and for the first time in a couple of generations, my funeral home will start looking for a new strategic partner in burial vaults. We will find a company which remains committed and proud in the products made and the hard (and often dirty) work done to bring quality vaults and peace of mind to the families we serve each year.

The Omnibus Advertising Debate

I don't know how many of you keep track of Funeral Watch, the online message board managed by Kates-Boylston Publications, home of the American Funeral Director, Funeral Service Insider, etc. Kates-Boylston Lately the discussion has centered around Steven Lee's interview with Ken Camp, President of Batesville Casket. Once again the idea of having a broad advertising campaign, underwritten by the big suppliers and the associations, which would raise public awareness of the value of funerals etc. has appeard on the message board. Here's my version of a reply:

The "economy" of traditional American funeral service centers around the casket. Our buildings, our equipment, our automobiles, our staffs, our "secret recipies" (see below) passed from father to son to grandson, have all centered around the casket. The unique difficulties posed by a casketed adult have allowed so many funeral homes to operate so profitably with such small volumes for so many years.

The Great Death Depression

Economists define a depression as a period of time in which the GDP of a country declines by at least 10%. So what to make of the decline in total deaths we will soon experience in the United States as described in the work of Dr. Vanderlyn Pine?

I made reference earlier to an article posted on FuneralWire which describes some of his statistics. (FuneralWire--Death by the Numbers) In addition, Van Pine published a more exensive article in the January 2005 issue of the American Funeral Director magazine, which more thoroughly makes the case for a substantial decline in the volume of deaths in America over the next 15 to 20 years. The indicators he describes point to a decline approaching 20%!!! in total deaths, at least among demographic groups represented in the birth statistics of the 1920s and 1930s.

Yes that's a decline in total deaths in America which has just begun and which may fall to a level 20% below the numbers we saw in the 1990s (something close to 500,000 fewer deaths) with no recovery until at least the year 2025. YIKES!!! That's 18 years from now.

I'm not entirely sure why we as an industry have not come to grips with these numbers. I suppose first and foremost because a decline in deaths comes without any precedent in America. We have never had to follow demographic trends because the national death volume slowly but steadily rose for the past 100 years. We have also had the challenge of cremation which has kept us busy developing new approaches to what we do. Also, we have tended to rely on the big companies to point out the important trends and give us plenty of warning regarding coming changes to the marketplace. In this case, however, the big companies (particularly the publically traded ones) have no incentive to recognize the possibility of such a profound trend in the demographics. Such an acknowledgement would put tremendous pressure on stock prices and the like. They are much better off looking for ways to mitigate the coming trend (if they even know anything about it) and then recognize the demographic changes one year at a time. After all, why spook Wall Street when you might be able to work around the challenge in some other way.

Regardless, this trend could prove damaging to many funeral home operators across the country. We need to look very carefully at the assumptions that go into our business plans in the years ahead. A decline in deaths is a decline in deaths and when compounded with the rise in cremation will call for some profound changes to the entire economy of funeral service.

Of course, we also need to seek ways to independently validate the work of Dr. Van Pine, just as would happen with any journal article in science. He has chosen a particular methodology, which appears well reasoned and accurate to me. Nevertheless, we need to find several other demographics and statistical experts who can review his methods and results so as to confirm (or call into question) his conclusions. These numbers are dramatic (in a sense earth shattering) and therefore merit careful review so that we can make reasonable decisions about the future of our businesses.

We have much more work to do than we ever considered before and we have zero time left with which to plan. It appears the decline has already begun.

Is this a depression in the making? Very possibly, though as with many other ideas in this world, some hidden assumption might prove wrong. If Van Pine has described the circumstances with accuracy however, then we may very well see a change in funeral service that fits the depth and duration of something we come to call The Great Death Depression.

[Note: If I can get permission to reprint the American Funeral Director article in an electronic form, I will post it here. In the mean time, I recommend you give them a call and get a copy sent out so you can review Van Pine's work. The article carries the title of "The Demography of Death" and begins on page 20 of the January 2005 edition.]

---------------------------  Feb. 4 Update -----------------------------------

I now have a scanned version of the article organized in PDF format. I do not have permission to post it on the site directly, but if you send me an email I will forward the document to you. It is about 8 Mb, so make sure your email system will allow attachments that size (most will these days but not all). Send your request to: bt@hathawayfunerals.com 

But the Average Wedding Costs...

I have heard it bandied about many times that the average WEDDING costs about $35,000 and therefore with a little creativity we can figure out how to get people paying similar amounts of money for funerals and that leads to a vague hopefulness about financial rennaisance on the horizon for funeral homes. BUT, no one that I know of has actually pulled that number apart to figure out what gets lumped into that figure.

So far I've only done a little investigating and in reality, that $35k number doesn't really tell us anything about funerals. Here's how I stated it in an editorial letter to Chris Raymond, Editor of The Director magazine published by the NFDA.

Hi Chris,

I guess I’m now on a roll asking probing questions about the future of funeral service. One of those magical numbers which gets bandied about over and over again is the average cost of a wedding. $27,690 by this particular website [ http://www.costofwedding.com/ ] of course I have seen other “averages” on other sites ranging from $19,000 to $35,000. For now, let’s look quickly at the numbers listed by category on the same site (which add up to $30,354, but who’s counting) and see what they may really mean to funeral directors.

Wedding Attire  $2,606
Wedding Ceremony  $2,525
Wedding Favors & Gifts  $1,121
Wedding Flowers  $1,969
Wedding Jewelry  $2,066
Wedding Music  $953
Wedding Photography & Video  $3,688
Wedding Reception  $14,169
Wedding Stationery  $847
Wedding Transportation $410

Now, if you whittle those numbers down to something comparable to funerals (particularly in Massachusetts where we cannot have anything to do with food or flowers), you have to eliminate attire (don’t need to rent tuxes for a funeral), flowers (I can’t sell those around here and even so, families don’t spend that kind of money on funeral flowers), jewelry, photography, and reception. That brings the number down to $5,856. Gee, sounds a lot like the average cost of a funeral. Hmmm. Even at that, the prices are overstated because it’s a wedding. It’s a rare funeral that spends more than $200 on music around here for instance and besides, I don’t participate financially in any of that activity. Cash advance items with no margins allowed.

Why do we throw numbers around like the proverbial $35,000 “average” wedding (that much higher number must include the engagement ring, rehearsal dinner and honeymoon, none of which applies to funerals) and expect that to mean anything??? It’s a red herring if there ever was one.

We need better thinking than this for the average funeral director, for whom the NFDA is sworn to serve and uphold, or we will hasten, not delay our own demise.

Thanks for listening and have a fantastic week,

BT

I guess for a few funeral homes out there, event funerals may actually bring in some substantial additional revenues. There's always someone in the big city willing to pursue novelty at almost any cost. For the rest of us out serving regular folks in average communities, we need another sort of thinking. Funerals are not likely to blossom into profitable "events planning" business. It's time to look elsewhere for our inspiration.

Sailing Directions

I have recently moved to a new community, Fairhaven, MA, a place steeped in nautical history and it seems every other house has some sort of historical plaque or sign describing an important personage who either built the structure of lived there at some point. One of those signs, described the historical house owner as "Captain of the Flying Cloud", arguably the most famous clipper ship of her era. She sailed from New York to San Francisco in less than 90 days at a time when many sailing vessels required as much as 200 days to accomplish the same journey.

No question that Capt. Creesy had a fast ship. However, he also had a close partnership with his navigator wife (quite the progressives both of them for 1851) AND the benefit of a new text, 'Explanations and Sailing Directions to Accompany the Wind and Current Charts', published that very same year.

Preneed: What happens to "legacy" funerals?

I suppose this comment comes at least 10 years ahead of its time. Hopefully the archive of this site will last long enough for me to say, "See!! I wrote about this first!"

Anyway, I just finished reading a finely detailed article by Alan Creedy as published in the latest Director magazine (the monthly publication of the National Funeral Directors Association). Alan spells out "typical" scenarios for preneed and how much value a funeral home can retain by keeping an active preneed program going. [Do keep in mind however that he has zero incentive to tell you anything but the most rosy picture about preneed. He has no business and no financial future should funeral directors head in another direction. This also applies to the hundreds of companies large and small who provide some sort of preneed services to funeral directors. THEY get their money up front--did you EVER notice that? We have to figure out how to administer these files and contracts and run these funerals, not them.]

To the next generation of funeral directors, I would pose this question. What happens when we don't want to run "traditional" funerals any longer? Not run traditional funerals, impossible you might say to yourself. We have served families in a certain way for 3 or 4 or 6 generations. This will continue!!!

Perhaps for some of you it will continue long enough to retire another generation but for many, a time will come when we regret having all those traditional funerals on the books. Some state laws and regulations REQUIRE you to provide the funeral specified. What happens if you can't or won't because you've stopped keeping the staff and equipment (particularly livery) around to service those kinds of funerals?

We and our predecessors have made promises we may not want to keep five, ten, fifteen years down the road. Our businesses and our business models will need to change dramatically in the years ahead to keep pace with the transformation of our society and its real consumer needs. Preneed (particularly in highly regulated states) could easily become an albatross keeping us from moving forward, moving on to meet future consumer need.

Headed in Opposite Directions--Part 1

All market share chasing arguments aside for the moment, when’s the best time for a funeral home to finalize a pre-arrangement with an individual?

Perhaps you have never thought of this question before. Like most funeral directors you either take preneed as it comes knocking on your door or like some others you use a direct marketing campaign to book those preneeds as early as possible in order to keep those funerals out of the hands of others. Back to the question though, if you as the funeral director had the opportunity to chose when to set up a preneed with someone, when would YOU find it the most advantageous for your business?