Author: Alan Creedy

There is a lot of misunderstanding and just plain myth about how much preneed a preneed counselor would sell if a preneed counselor would sell preneed.   In my 25 year experience operating one of the largest third party marketers I have found ways to discern between performers and underperformers

Annual Contracts

This math is pretty simple.  Assuming that they have good lead generation support, an average counselor should be able to sell 2 contracts a week.  Let’s say their average sale is around $7,000. Reducing the 52 week year by 3 weeks for vacation and holidays, that translates to $686,000 in Gross Sales yielding an estimated $620,000 in Net Sales (after lapses, deaths and cancellations).  Here is the math: 49 weeks X 2 contracts X $7,000.  That is a total of 98 contracts annually.

Much is said about preneed to atneed sales ratios.  Counting only contracts, you can easily see that a 1:1 ratio for smaller funeral homes (between 100 and 125) is almost a minimum.  For larger funeral homes (above 200 calls) that ratio becomes more difficult to maintain. More on that in a week or so.

While we are on the topic of annual contracts it is important to point out that, while there is a minimum, there is also a ceiling.  There are clear physical limits to performance.  Even working 50 hours a week it is physically impossible to sustain an activity rate that yields more than 200-250 contracts a year without burning out.  We have a few that do this, however, and they all have one thing in common: they are very focused and efficient with their time.  They prefer not to be drawn into meetings or anything else that will distract them from their mission.   My favorite is a man that sells between $1,250,000 and $1,500,000 consistently year after year.  He is a devoted family man who spends his personal time coaching his children’s sports teams.  HE WORKS AN AVERAGE OF 40 HOURS A WEEK!!!  But he is working all 40 hours.  He does not waste time hanging around the back room chatting with funeral directors during slow times.  He is adept at all the things he needs to do to generate appointments.

I am often asked how many counselors larger funeral homes should have.  Most people don’t realize it but this is really a political question.  The number of counselors is really a function of what you are willing to do to generate leads and what you are willing to put up with.  But, a general rule of thumb is 1 per 200 calls.  Again, more on this in a few weeks.

Quality of Business:

A second parameter for discerning who true performers are is the quality of business they produce.  I generally look for average ages below 72 and the ratio of single pay to modal pay in the neighborhood of 50% (preferably higher in the modal pay).  Chargebacks due to lapses, cancellations and early deaths should be less than 20%.  If they increase above 20% I begin to pay  closer attention to what they are doing to generate business and if it goes above 30% I consider letting them go.  There are exceptions, but high chargeback rates generally indicate something funny going on that I will have to pay for after the counselor suddenly disappears.

Average Sale:

I look for a minimum average sale equal to the funeral home at need average.  It is important to make this calculation from actual contracts as opposed to averages gleaned from insurance reports.  Counselors (with the support of owners) often include cash advances in their prepaid contracts and this significantly inflates their average.  Most of our counselor averages are above the at need average on an “apples to apples” basis.

A few factors contribute to averages below the at need average.  The first and less common is that they really don’t believe in the value of funerals.  There is no cure for this…they need to go.  The second, and far more common, is that they are not properly trained to present.   This can be remedied quickly by a competent sales trainer.

One final factor that you should be tracking is the percentage of cremation as compared to your current at need percentage.  When the counselor percentage is higher than the at need percentage we have found that this is not a market issue but a training issue.  Have your sales manager go on calls with that counselor and you will see what I mean.

And while I have touched on the topic of sales managers here is a few clues for them.  They need at least 5 counselors to be a full time manager.  They need to be in the field with their people at least 75% of their time.  Desk Jockeys are not good managers.  They need to be encouragers not tyrants…just my opinion.

Well, it’s summer time and I am on vacation.  So, I thought I would resurrect some of my most popular articles

The first is a series I wrote last summer entitled:  “How To Get Customers To Stop Fixating On Price”

Part 1: “Equalize Price Points to Crystallize Personal Relevance” 

Part 2: “Using Price to Clarify Your Advantage”  

Part 3: “Willfully Overpricing to Stimulate Curiosity”

Part 4: “Partition Prices to Highlight Overlooked Benefits”

One of the ways I spot trends is to look for frequency of mentions in publications.  This last week The Motley Fool seems to be spending a lot of space on DeathCare.  Specifically, SCI, Stonemor, Stewart and Hillenbrand.  As an analyst I find some of their insights and methods to be interesting

Is Service Corp a Cash King? 

 The Magic Formula for Service Corp

How Does Service Corp Really Boost Its Returns

These are good tips.

I know many of my readers have autoplay music or “walk-ons” so you need to know I agree with point number 4!

How to avoid the 7 Deadly Mistakes Websites Miss

This may seem like a “Yawner” topic but it’s important and I am going to make it short.

Let’s pretend that you walk into a bank or trust company with, say, 15 contracts totaling a $100,000 in prearrangement value. You say to your banker that you want him to track each contract separately, invest in “no-risk” investments and not tax anyone on the growth when it is paid out.

Your banker responds as follows: “Mr. Funeral Director, here is what we will do for you:”

• I am going to credit your account on the first day for $110,000 on your $100,000 deposit
• Going forward we are going to pay a fair interest on the bumped up amount.
• I am going to cut you a check for 10% of the $110,000 we credited your account for and will continue to pay you cash for each new deposit on the same terms
• For those installment payments I am going to keep track of collections and process the payments AND credit your account in full for more than the prearrangement amount from day one.  So if they die before they make all their payments you get the whole amount…our loss, your gain.

If you can imagine a bank or trust company doing that for you it must be connected with Bernie Madoff.   But that is exactly the difference in using insurance over trust.

Because I have a financial background and more than 25 years negotiating with insurance companies a number of funeral homes have asked me to analyze AND compare their insurance product.  I do this using methods similar to what they use for their internal purposes.

A lot is said about growth and shortfalls.  Trusts offer a higher growth factor…or so everyone thinks.  With bumpup and commissions all in the reality is the true economic value of most insurance products far outperforms trusts.  Funeral directors lock in on the individual shortfall and completely ignore the front end benefit they have already received (this is called stepping over dollars to pick up nickels).  It turns out that when I compare insurance products I frequently find first year growth in excess of 20%.

Did you know that simple growth can be converted to compound growth?  I compare all products based on the actual Compound Annual Growth (CAGR).  The early years are higher than later years but often show double digit rates.

More next week

It has been the vision of many DeathCare firms to become the death resource for their community.  All too often this leads to a focus on post death issues as well as funeral planning.  But for Boomers there is also a need for learning to cope with predeath issues…especially what it is like to watch someone you love die.

I had the great and sacred privilege of being with both my parents as they died.  My involvement in DeathCare prepared me for what I should expect.  But this is not always the case and Boomers want to know.

This article on the website Caring.com is just the kind that the public wants to talk about.

http://www.caring.com/articles/witness-passing-away?

Recommendation

Link to this article on your website

If you blog you should write an introduction like this one and post a link to it.

If you are going to be a resource then be a resource and talk about the hard issues as well as the touchy feely ones.

We know a few things:

• There are 48,000,000 people who are active adult caregivers in the U.S.
• Many Boomers are currently active caregivers or anticipate soon becoming one.
• If the surviving spouse is still living at the time of the funeral someone you are talking to is already a caregiver or soon will be.

If you have ever been a caregiver you know that your level of involvement is progressive as the person cared for moves along the needs continuum.  At some point many will need “In-Home” care either part or full time.

Among the best services available is a franchise company named Home Instead Senior Care.  This Company has locations in every state, all the provinces of Canada and many other countries.

The Senior Emergency Kit

Home Instead has recently published an excellent support kit for Caregivers which details the many things Caregivers need to organize and know about.  Even when Hospice is called in, the family caregiver is still involved at a personal level and Home Instead recognized the need to help them pull together the information they will need in one place.

Recognizing that many of the families you serve have at least one person who is or soon will be a caregiver, making this kit available in your funeral home is not only an excellent service but a great way for you to get involved in an influential group through your local Home Instead Franchisee.

Reccomendation:

Contact your local Home Instead Franchisee. Meet with them in your funeral home and give them a tour.  Offer to provide the Senior Emergency Kit to your families in return for the franchisee’s reccomendation.

Wow! I really have it on for social networking…or maybe some experts are starting to agree with me.  Either way it feels good.  The link below is a lengthy blog but worth reading for all you DeathCare practitioners who are continually looking for the “Next Best Things” and the “Pied Pipers” who prey on them.   It’s called “Pixie Dust and the Mountain of Mediocrity” I call it “looking for answers in all the wrong places instead of simply getting back to work.”

Pixie Dust and The Mountain of Mediocrity

As you may have gleaned from other writings I believe DeathCare is at The Threshold of The Single Greatest Opportunity in 150 Years! Here are ten reasons I believe this:

Reason 10: From this point forward 10,000 “Baby Boomers” will turn 65 EVERY DAY for at least the next 20 years

Reason 9: We are beginning to serve more younger seniors who still have active social networks and less very ancient seniors whose social networks are small to non-existent

Reason 8: Younger practitioners are becoming more assertive in separating from traditional constraints of our past so they can embrace the opportunities of our future.

Reason 7: A few forward thinking practitioners are experiencing success freeing themselves from the strategic dominance of “Casket-Centric” thinking.

Reason 6: More women are having a positive influence.

Reason 5: New strategies are springing up that hold the first promise of replacing the margin lost on the average cremation sale.

Reason 4: After almost 50 years of public drubbing by muckrakers like Jessica Mitford and Lisa Carlson, a few centers of influence are beginning to recognize the nobility of the profession.  The negative self talk we have become used to is being challenged as we focus on the positive contribution our profession makes to society and the people in our communities.

Reason 3: More than 55% of today’s licensees are over 55 meaning that as they age into retirement the profession will be forced to develop alternative models and there will be fewer owners serving more families.

Reason 2: By the end of this decade we will see annual growth rates of 3 -4% nationally.  This is unprecedented in our history. While we are not prepared for the implications of such growth we will adapt to it.

Reason 1: Boomers will have a significant positive impact:  They are already sending strong signals that they not only want a funeral…they expect a funeral.  They are sending equally strong signals about the form of service they expect and the role they will play in those services personally.  (Note I said funeral not burial.  Cremation will continue to grow but, for an increasing share of the market, will finally be just another form of disposition)

It began when I read this on the wall of a doctor’s office:

“When you expect things to happen, Strangely enough, they will happen. Your expectations energize your goals And give them momentum. Your life will always respond to your Outlook.  So, set your goals high. You must first expect to succeed if You want to succeed.  And you can’t Expect to succeed beyond your wildest Expectations unless you begin with Some pretty wild expectations. When you believe something good Can happen, it does.  The dreams You choose to believe in will come To be. Expect success and it is yours!”

Had I read this homily earlier in my life I would have said, with some cynicism, “yeah, right.” But things have happened to change my mind.

Soon after reading this statement of philosophy I discovered a piece of paper in my files I have absolutely no recollection of ever writing.  It was a typewritten (typewriters came before word processors) list of goals I had written ten years before.  Imagine my surprise when I realized that in those intervening years I had achieved almost all of my goals (some of those goals were not small). This event made me face the fact that all my fretting and worrying had been a pointless drain on time and energy.  Despite many setbacks I had succeeded anyway.

Writing out my goals must have established some kind of unconscious expectation.  And while I was crawling along under the weight of my conscious imagination, my unconscious mind was slowly making progress I never gave myself credit for.

What you expect is a habit more than it is a thought process.  That’s why I like to refer to myself as “recovering.”  My natural disposition is to think the worst.  So, I have consciously trained myself to recognize when my thinking starts stinking and to stop it every time it rears its head.   At first I had to be very deliberate and conscious about it.  But as time wore on I have gotten used to it and I find that remembering past victories helps a lot.

What often keeps me going is the fact that I have discovered a corollary principle to the statement: “Expect Success and it is yours.”… “Expect Failure and it is yours as well.”

So, what does this have to do with deathcare?  As a group, our thinking stinks.  We have been through a rough decade.  We have been the subject of media criticism for more than 50 years.  We have come to collectively expect that things will only get worse…and as long as we expect that outcome then we will get it.

As for me?  I think this decade and the next have every potential to be the best in the history of deathcare.  If you have been following my lectures and writing you know that I am backing that opinion up with facts and examples.

Tune in next week for: “The Case For Optimism in DeathCare”

I couldn’t bring myself to say God Bless but, still, in a piece of irony that deserves comment The Klan may have a chance to do something our government wouldn’t.

Classic Story of “Thug Meets Thug!”

see this link.  Klan faces Off Against Westboro Church

I am sure that those of you who practice the art of embalming are annoyed when you see other practitioners making the same mistake over and over again.  I have a similar reaction when I see other DeathCare advisors in trade journals making the same errors over and over again.  A particular pet peeve is what constitutes “comparing apples with oranges.”  And one of these keeps popping up.  I don’t blame the editors.  You really can’t expect them to check the numbers on everything they publish.  But I do blame Batesville who continues to promulgate one error in their cremation division.  It’s not their error either they borrowed it from an industry advisor.  But, either they haven’t checked the math or it serves their purpose to make the issue bigger than it really is.  You decide…and if you want to forward this to them that’s fine, maybe it will encourage all of us to “count responsibly.”

Recently, Federated Funeral Directors of America published their annual industry stats.  They didn’t make the error either so don’t blame them.  In fact, we need to thank FFDA for their consistent analysis and benchmarking.  Such information doesn’t exist on the cemetery side…at least that I have been able to find.

Because Funeral Service is a high fixed cost business it should “manage to the average margin” instead of to the average sale.  Of course, no one does but, still, the average margin in our profession is much more important than the average sale. And that’s  why this annoys me so much.  Comparing the impact of burial and cremation on the basis of retail price obscures the reality of what is really happening.

In a recent article it was reported that a study had found that the average casket and service sale was $6,700 (Vs. FFDA’s $6,451 average casket & service) while the average cremation (no merchandise) was $2,917.  The article concluded that cremation contributed only 43 cents compared to every dollar of casket and service sales ($2917/$6,700).  Ignored is the cost of merchandise directly related to the casket sale.  So while the revenue from the cremation IS both the margin (an apple) and revenue (an orange); the revenue on Casket and Service is only an orange.   We still have to calculate the apple.

Traditionally, the cost of sales in funeral service is between 17% and 20%.  I would argue it is higher but let’s leave that to next week.  So the cost of sale on our $6,700 would be approximately $1,340 (20% of $6,700) and the margin (the apple) is $5,360.   An apple to apple comparison would be cremation $2,917 and burial $5,360.  So, instead of cremation contributing 43 cents to every burial dollar the real number is closer to 55 cents.  Still a gap but using their specious method of comparing percents that’s a 28% difference!

Yes, I am picking nits and being petty.  But, for the past several years I have been doing independent comparisons of preneed products for my consulting clients.  What I have learned is that this is exactly the kind of math many preneed insurance companies use to distract customers from what they are really doing.  By taking an actual block of business (no averages please) and comparing them across a common denominator it is amazing how seemingly great growth isn’t that good after all.   Did you know, for instance, that simple interest can often grow more rapidly than compound interest.  Counterintuitive, but true.  Many casket companies do the same with casket discount programs hoping that people will brag about the percentage discount they are getting and forget to actually compare the net dollars they are paying.  I could give other examples but you get the point without my beating you over the head.

Please count responsibly!