What do you think the pre-need business will look like in 10 years?

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In response to last week’s Commentary my friend Graham Cook shared the following comments. Fair warning!

I am often asked to comment on the future of the pre-need business, and my response is simply: “I could better answer if you can tell me what the funeral business will look like in 10 years.” In my view, any answer depends on how funeral service responds to four things:

  1. Ability to be relevant to changing public attitudes about funeral service
  2. Ability to capitalize on the aging population
  3. Ability to cope with the economics of cremation as a disposition choice
  4. Nimbleness to respond to possible disruptive forces from unforeseen events or new entrants

Pick up any funeral service publication and you’ll find essays painting scenarios from doomsday to euphoria on any of these points. Industry pundits have published their lists of “to do’s” and “not to do’s.” Private equity investors apparently see a rosy future i.e. Aurora and Forethought. Stock analysts seem pretty bullish about the future of the public consolidators.

SCI has been interesting to watch over the past year. Aside from their acquisition of Stewart, they are posting some enviable numbers. If you study their same-store sales for the first three quarters of 2013, the number of at-need services is relatively flat versus 2012. However, they have partially compensated for that with a 2% increase in the average sale. The real news is on the pre-need side. SCI appears to be putting the pedal down in 2013 to further build its backlog of higher value pre-need contracts.  Check out these numbers:

  1.  Their $5,833 pre-need average is 11% greater than their at-need average.
  2. Pre-need funeral sales are up 10% over 2012.
  3. SCI’s PN/AN ratio is now 40%, up 3 points over 2012.
  4. They plan to annually grow pre-need by “mid to high” single digits.
  5. Pre-need backlog is now $7.5 billion, which is 3 times their total revenue.

The good news is that there is plenty of opportunity. The numbers clearly indicate SCI is moving the pre-need needle to shape their future. This raises the question… What are you doing to shape yours?

Respectfully

Graham Cook

Comments first appeared in the January 2014 issue of myhomesteaders newsletter

Comments

  1. Just wondering because of the statement SCI has Their $5,833 pre-need average is 11% greater than their at-need average. Is this unusual? because my experience has been that at-need has had a higher average sale then pre-need. This is because I have had a higher rate of cremation on pre-need. Is this normal?

    • Alan Creedy says:

      jeff, the standard excuse for having a higher cremation rate on preneed is that you are selling into the future. Not True!!! I have found over 30 years experience that there are only 2 reasons this happens: the counselor isn’t well trained. this can be fixed or, worse, the counselor doesn’t believe in funerals and probably wants cremation themself. this can’t be fixed except by dismissal and hiring a new counselor.

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