Question 10. How to Make a Funeral Business More Profitable
A Three-step Process for Increasing Revenues
Asking yourself “What can I do to increase revenue?” is part of running any business. Literally hundreds of concepts for new products and services have been proposed to the industry to be merchandised through funeral homes over the past twenty years. Today, funeral home owners and managers are more receptive to new products and services as consumers are less receptive to the traditional offerings; but how do we decide which ideas to pursue and which to reject? What is the yardstick for measuring the viability of a new product or service?
In reality, the decision making process is simple; it becomes complicated when we allow our prejudices to cloud the decisions we make. Too often we rationalize large investments in new business concepts simply because we want to do something different; other times we reject viable concepts because implementation seems too difficult.
Hundreds of funeral businesses have ventured into the cemetery business, pet loss business or built new funeral facilities without performing due diligence, and have lived to regret their decisions. When making a significant business decision it is critical to remember that wanting to be successful doesn't make it so. All of the hard work in the world can't make a bad decision work. Nevertheless, funeral home revenues are diminishing; making it absolutely necessary we consider new business opportunities.
Consider the following when making these decisions:
|
|
Pursue Superior Profits: Most of the business opportunities considered by small business owners have little opportunity to generate meaningful profits. There are many opportunities for generating marginal profits; any business broker can introduce you to hundreds of marginally successful businesses. A good example is the minimal cremation business; it's too crowded to actually create good income, labor and advertising costs are high, and they typically fail to build customer loyalty. Another example is cremation jewelry; certainly there is some demand for these products, and funeral homes should offer them. But realistically the additional revenues generated by these ancillary sales will be negligible at the end of the year. The greatest benefit from offering these products is that it communicates to the public your willingness to look for new ways to memorialize.
Too many funeral businesses entered preneed as a business venture as opposed to seeing it for what it is: a marketing concept for building at-need business. As with any marketing program, preneed costs the firm to maintain. When managed correctly, it can create additional volume and insurance commissions will offset much of the cost; but as an enterprise, preneed sales cannot sustain itself as a stand-alone business. |
|
2. |
Maintain Focus: Opportunities exist in death services to generate superior profits. Business consultants and academicians maintain a common theme on the topic of expansion; whether large enterprises or small, companies should focus their resources on their primary business. For example, many accountants familiar with the funeral business argue that funeral homes subsidize their cremation business with the profits generated from their burial business. This is not to say funeral homes should not compete for cremation business; funeral homes must compete for cremation. But compete for profitable cremation business.
Pet loss, aftercare, association work, even preneed can be diversions from a funeral home's primary business which is to serve at-need families profitably. When the manager or owner's attention is diverted, the discipline to maintain the firm's fundamentals begins to fail. The owner is not focusing on staff training when they are talking to veterinarians about pet cremation, and the reality is a funeral firm will realize much greater profit from a well-trained arranger than they will cremating pets. |
|
3. |
Limit Upfront Investment: When investing in new concepts or businesses, large corporations first start small so as to limit their risk, and incorporate the new venture as a separate entity to protect the core business from liability in the event the new venture fails. |
Being small business owners, even a relatively small upfront cost can have long term ramifications on a family's financial stability. Small business owners typically use their own cash or personal debt to make business investments; as such, it is impossible to insulate yourself from liability.
Using the following criteria, what new products and services can funeral homes profitably offer?
Two opportunities come immediately to mind: