My friend, Cody Jones, of Callaway – Jones Funeral Home is offering a guide for his customers to prepare for arrangement conferences, sign documents and make choices. He has given permission to share it. click on the link below. And while you are there explore his website. It’s one of the best I have seen.
A Scarcity Mentality is the zero-sum paradigm of life.
People with a Scarcity Mentality have a very difficult time sharing recognition and credit, power or profit – even with those who help in the production. They also have a a very hard time being genuinely happy for the success of other people. Yet it is a scarcity mentality that prevails in funeral service and gives rise to so much of the infighting that holds us all back.
One of the primary responsibilities of a leader is to develop people by empowering them. But this doesn’t mean just giving people the keys to the vault and hoping for the best. It is hard and complicated work.
Almost 40 years ago an article appeared that has since become a classic. Entitled: “Who’s Got the Monkey?” it used a charming metaphorical style to illustrate how we often voluntarily become subordinates to our subordinates. Characterizing problems as monkeys we learn that by assuming every problem is a joint problem we actually unwittingly cooperate in this game of transferring monkeys.
Over time, it becomes harder and harder to tell who is working for whom!
The essence of staff development is teaching people to manage their own monkeys
This makes sense and the article goes on to describe a very precise method for transferring monkeys back to their rightful owners. Also included is an equally precise outline for the care and feeding of monkeys:
How A Scarcity Mentality Hinders Your Ability To Manage Monkeys and Develop People
25 years after the original publication of “Who’s Got the Monkey?” Steven Covey published a followup article entitled: “Making Time For Gorillas” In which he very accurately observed that we had made little progress in the development of leadership styles beyond the “Command And Control” style that prevailed at the time of the original publication. “Command and Control” is one of the two dominant leadership styles in funeral service.
Covey’s insight included the observation that for leaders to successfully manage monkeys they must first invest in developing their people. “Command and Control” types are reluctant to do that. Worse,
They are actually eager to take on their subordinate’s monkeys.
“…many managers may subconsciously fear that a subordinate taking the initiative will make them appear less strong and a little more vulnerable.” Says Covey
Covey also tells us that surveys report that executives feel half or more of their time is spent on matters that are urgent but not important. They are trapped in an endless cycle of dealing with other people’s monkeys...reluctant to help those people take their own initiative.
If I were a “Command and Control” type here is what I would do:
CLICK ON THE IMAGE TO READ THE ORIGINAL ARTICLE
Most people speak of those they work with as a team. But, in my experience, people rarely understand what a team really is.
In funeral service what typically represents a team is really a group of people who are very nice but work towards their own ends independently. If the firm has clear standards and systems then things tend to work smoothly. If not, then hidden beneath the surface is a collection of resentments, hurts and misunderstandings that simply fester. This is called “Artificial Harmony.”
Artificial Harmony is evident in most of the firms I have worked with over my career. In fact, the louder the claims of “we’re like family” and “we function as a team” the more confident I become that I will find that Artificial Harmony is really what is going on.
In reality most business teams, whether in funeral service or some other career area, are really work groups. Few function as true teams. Study after study reveals that true team work environments are more productive, create higher customer satisfaction and generate greater profits.
The difference between a team and a workgroup is simple. A golf team is a workgroup. A group of individuals working independently whose scores are toted up to determine where they stand. The metaphor for a team is a basketball team. Each member is INTERDEPENDENT on the others. No single person can win games as effectively or consistently. It’s not about whether or not they like each other (although I am sure many of them do). It is about a shared vision of reality, common goals and leveraging each others strengths and (most of all) have trust and confidence in your teammates.
Members of teams hold each other accountable to the team for their performance. It does no good to “bear” the underperformance of another with a smile because you “hate confrontation.” To do so means the team loses. No, instead, true team members recognize their responsibility to carry their respective weight and fulfill their responsibility to the whole.
Years ago I saw a needlepoint in a client’s office. I went home and printed it on a regular size piece of paper, framed it and now it hangs on my wall:
“A man (or woman) can do anything in a business,
as long as the holy spirit is in control,
and no one cares who gets the credit”
Equalize Price Points to Crystallize Personal Relevance.
This is the first recession to show a measurable impact on DeathCare. Most surprising have been the many reports from rural and “rustbelt” funeral directors that cremation has recently spiked, not because people in their markets want cremation but BECAUSE THEY CAN’T AFFORD BURIAL. YIKES!!!!
A recent article in Harvard Business Review entitled “How To Get Your Customers to Stop Fixating on Price” outlined 4 strategies. I found the most appealing strategy to be: Equalize Price Points to Crystallize Personal Relevance. The article’s authors pointed out that in :
“most mature markets customers have become unresponsive to marginal changes in value. They have lost interest in how each product option might serve them… [so] they default to price minimization. In fact, (and this was interesting) a list of options at different prices doesn’t make [consumers] examine the relative merits of those options, it activates their predisposition to pare the price.” [emphasis mine]
Not a week after reading the article I found myself experiencing the very strategy I liked the most and it was exciting.
I encountered a funeral director who had courageously narrowed his casket price offerings from a low of $1,100 to a high of less than $3,000. As I stood looking down a row of caskets I actually found myself saying (as if I were a consumer): “Wow, I can pretty much have anything I want.” Having been in so many selection rooms over my career, at first I was shocked. Then I found, to my amazement, a feeling of relief. Here is a picture:
1. Solid Mahogany Urn shaped, Velvet Interior $2,650 2. Brushed Copper, Velvet Interior $2,995 3. Solid Cherry, Urn shaped, Velvet Interior $2,550 4. 18 Ga round end brushed, Velvet $1,740. 5. Oak Veneer, Velvet Interior $1,845 6. 18 Ga two tone blue, square corner, Crepe interior $1,495 7. Stainless brushed velvet interior $2,150 8. L 98 Mandarin $1,150 9. 18 Ga Blue round end, crepe interior $1,575 10. Solid Cherry, Velvet Interior, $2,600.
As I surveyed the selection room above I found myself moving from thinking about what I could afford to which casket I liked best and which would be a good fit for me (just like the research said I would). And, as if I were an actual customer, I felt relief. Some years ago I picked a Pembroke Cherry for my prearrangements. At the time it sold for under $4,000. I watched it creep up above $5,000 but just figured that was inflation. When it went over $6,000 I made a mental note to find something cheaper.
Once a consumer realizes they can get pretty much whatever they want for just about the same price they move from thinking about what they can afford to what they want. The research found that this allowed sellers to price above their normal average.
The implication is this: Let’s say that your average casket and service sale is running about $7,500 and the range of caskets you are currently offering to reach that average is from $2,500 to $15,000. The concept of equalizing your price points would suggest that as you narrow your price range you could accomplish two things:
First, you would change the playing field for handling price shoppers and likely increase volume.
Second, you would (as the research found) be able to realize a higher over-all average casket and service sale on what you are currently serving (say from $7,500 to $8,000 for traditional burial).
Of course, this implies that you have exercised some aggressive tactics to control the wholesale cost of your caskets.
This post first appeared in The Creedy Commentary on June 22, 2010
I have to admit I tense up whenever someone begins using the Ritz Carlton as an example Funeral Service should use to fashion its own customer service profile. Not that we can’t learn some things from the Ritz. We most certainly can! But it is a dangerous recommendation when we fail to “Go Deep” on the pain and effort it took for the Ritz to get to that level of service. Another example of mistaking form for substance.
I have now lived in North Carolina for almost 28 years. Within a year or so of arriving I noticed that the state motto is “Esse Quam Videri” which is latin for:
“To Be Rather Than To Seem”
I can’t find anyone who knows the genesis of that motto but I like it and have adopted it for my own. It’s a good standard and it’s good to have a standard. Especially when you fail to meet it. And that is really the story of the Ritz Carlton.
All too often we see something that works somewhere and we adopt what we see without really understanding the substance behind it. For the past 20 years I have witnessed many main line denominational churches send committees out to study the exploding megachurch movement. All come back with the outer cosmetic trappings. They change the music and often the ambiance but they never get to the deeper essence of what is really causing those churches to grow the way they do.
In the mid 1980’s, on behalf of my clients, I made a case study of the Ritz Carlton. They were then, as they are now, extremely gracious. It was entirely open book. I was introduced to the whole story of blood, sweat and tears or rather the herculean 10 year single-minded effort of Horst Schulz and his merry band of executives as they set about changing the culture of the Ritz. No small effort.
And that is really my point. Adopting “country club manners” was only the visible part. The focus and intentionality of achieving their vision was, by far, the most impressive. You see, it is not enough at the Ritz Carlton to ACT like a lady or a gentleman. You must actually BE a lady or a gentleman. And that is the key to any successful organizational change.
Your DNA must change
My wife and I have become addicts of Masterpiece theater’s “Downton Abbey“. In the presence of the Lords and Ladies the “help” puts on their best face. But downstairs in the servant’s work area they are as dysfunctional as any funeral home staff I have ever met. At the Ritz that would not be tolerated. The turnover rate at the average hotel (luxury or otherwise) is startling high. The Ritz turnover is a fraction of the industry average but it is still about 25%. That is partly because at the Ritz if you can’t BE a lady or gentleman…you simply can’t stay.
Click here for a copy of the Ritz Carlton Values Card
Click here for a copy of the Ritz Carlton Baldridge Award Application
Why is bigger better when it comes to creating memorable experiences?
Look at any successful service business, whether it’s a hospital, a hotel, a restaurant or even a funeral home, and you’re bound to come away with one undeniable message: the experience you create for your customers and guests is crucial to the future of your business. It’s what they remember and talk about, long after they’ve forgotten the price or the products. The next time they’re in a position to buy your service, what they remember is what guides their choice.
It’s why you see the leaders in all kinds of service industries making big investments in designing a better customer experience. They’re also making big investments in facilities, technology and training to ensure that the key elements of the experience are delivered consistently – every element, every customer, every time.
Making Memories
For example: Walt Disney World realized that happy family memories were one of the most important “deliverables” that Disney could provide. In response, the company invested in rethinking on-site photography to literally make happy memories a saleable product.
Digital photos have long been an amusement park staple – think of those automatic cameras at the top of the roller coaster that capture full-grown adults screaming in zero-g like little girls. Disney took that opportunity to a whole new level, staffing the park with roving photographers who carry top-notch equipment. They’re stationed near every scenic point in the park and trained to reliably take beautiful, memorable family photos, without that awkward moment where you hand your camera or phone to a total stranger and hope for the best.
An important ingredient in Disney’s program is a wireless system where families carry a bar-coded “PhotoPass” that can be scanned by any photographer throughout the vast resort network. That system tags every photo as it’s taken and automatically uploads it to a website where it’s available for purchase by the family, even weeks after they’ve gone back home. A short vacation can produce dozens or even hundreds of high-quality photos, and an average add-on sale of nearly $100 per family.
Funeral Service Opportunities
In funeral service the situation is even more critical, because most people actually host or arrange funerals just once or twice in their lives. Like any other event business, marketing in funeral service depends on the impression you make on the guests. When they attend services (at your firm and at your competition), they’re unconsciously comparison-shopping. As funeral guests they’re getting a free sample of your service that will guide them when it’s their turn to be funeral hosts.
The unhappy reality for most funeral providers is that the free sample isn’t very inspiring.
Having spent a lifetime attending traditional funerals, about 40% of the country has opted out of traditional burial services, choosing cremation instead. In market research, when consumers explain why they choose cremation they often complain about outdated traditions, outdated facilities and outdated content in traditional funeral homes. Since most consumers have never actually purchased or arranged a funeral before, their complaints must be based on your free sample – their experiences as guests.
Why Are We Still Talking About This?
The formula for success in the experience economy isn’t a secret – some magical mystery that only the select few may know. It’s a straightforward matter of investing, first in designing an experience that sets you apart, and then in the People, Place and Process to deliver it consistently. Businesses around the world have mastered it to create a competitive advantage they can count on to help them grow.
Overdependence On An Unreliable Partner
If the answer is that simple, then why are funeral businesses so slow to embrace it? Of course, tradition is part of the answer. Funeral homes have a long tradition of out-sourcing the job of creating event “content” to one of the least predicable partners – the clergy. Driven by the rules of their own denominations and their unique styles as individual ministers, the clergy keep funeral directors guessing about the quality and content of every service right up to the end. Some funeral directors have begun to take over the content-creation themselves, but this usually requires an investment in people and technology. They need celebrants, digital media wizards and audio-visual hardware to build a better service.
Another obstacle to change is the fact that funeral and memorial services are a once-in-a-lifetime event. For each family, this is a never-to-be-repeated, last-ever chance to say good-bye to someone they love. For funeral homes there are no do-overs – just one (and only one) chance to get everything right. There are dozens of details to be managed, and just a day or two to pull everything together. Since most funeral directors work from handwritten notes on the back of the case folder, consistency and reliability are always issues. The fear of getting something wrong can make funeral directors even more conservative and undercut creativity before it starts. The quality of the experience is usually what suffers.
Information systems have real promise as a way to make execution more consistent and reliable in funeral homes. By coupling automatic task lists with mobile web access via smartphones and tablets, we can do a lot to make execution idiot proof. Staff can be reminded wherever they go, and managers can keep tabs on everything that is due (or overdue). Systems are beginning to emerge with these kinds of capabilities, but funeral homes have been slow to adopt them.
The Real Issue & A Better Solution
The biggest reason that funeral homes haven’t joined the Experience Economy is also the simplest – economics. Most funeral homes are just too small to afford the tools they need – better facilities, better technology and better people – to consistently create a better experience and grow the business. A business doing 150 funerals a year can only use its tools about 3 times a week. It’s not going to throw off enough cash to self-finance the improvements that it takes to stay competitive.
Fortunately, better access to working capital can help overcome those limitations. A $200,000 SBA loan at 5% can have payments as low as $1,100 per month. This opens the door to a couple of interesting possibilities.
First and simplest is to invest in those facility and technology improvements now, while they can still create a competitive advantage instead of just helping you catch up with your competitors. Using the industry average funeral of $6,560 and a 20% dynamic profit margin on new cases, it would take just one or two new families per month to fund that investment. To look at it another way, if your New and Improved experience lets you generate a 4% average upsell on your services, you would fund the investment with room to spare.
A final opportunity is the tried and true approach – buying out one of your less capable competitors. Assuming you can negotiate a realistic purchase price (always a big ‘if’ with funeral directors) the economic advantages can be huge. You grow your market share immediately and have more case volume to absorb (and profit from) that New and Improved Funeral Experience you worked so hard to create. The savings from consolidating back-office functions like accounting, transportation and the prep-room will often fund the financing cost and leave profit to spare.
The Common Ingredients
All these strategies have two common ingredients: Vision and Leverage. As a business owner you have a vision of what you want your business to be – a powerful vision of a compelling experience for customers that will give you a lasting competitive advantage. At Live Oak Bank, it’s our job to help provide the final ingredient – the leverage you need to grow your business and make your vision a reality now.
About the Authors
Doug Gober is a Senior Loan Officer with Live Oak Bank. A CPA by training, Doug joined Live Oak after working with some of the leading companies in the funeral industry for more than 30 years, including Batesville, York Casket, Matthews International and Carriage Services.
Paul Seyler is President of Competitive Resources, Inc., a New Orleans-based firm providing research, strategy and execution support to companies both inside and outside the funeral industry.
Here is an excerpt of an interrogation of a witness in a Massachusetts trial court:
Lawyer: Doctor, before you performed the autopsy, did you check for a pulse?
Doctor: no.
Lawyer: did you check for blood pressure?
Doctor: no.
Lawyer: so, it’s possible the patient was alive when you began the autopsy?
Doctor: no
Lawyer: how can you be so sure, Doctor?
Doctor: because his brain was sitting on my desk in a jar.
Lawyer: even so, couldn’t the patient still have been alive?
Doctor: well, I guess it’s possible he could have been alive and practicing law somewhere!
Some things are just blindingly obvious!
Alan Creedy asked me to read and comment on an article published by the Harvard Business Review from the standpoint of applying its logic to the funeral service industry.
The name of the piece is Integrating Around the Job to Be Done. The central theme focuses on market segmentation – with market segmentations being defined as the subdivision of markets by “category of product,” or “price point.” And of course, once a market has been segmented, potential customers for the segmented products may be identified and the various competitors listed (as the enemy).
Until about 1975 or so, the markets for the services of funeral homes was identified as basically everyone who might die – and the competition was identified as the funeral home down the street. For our relevant history, price was an unimportant competitive determinant.
But then, the cremation societies began to emerge in areas of the country characterized by general family mobility, financial affluence and higher levels of education – and the market for death care services segmented. Thereafter, funeral homes were no longer the exclusive ‘one size fits all’ providers of death care services. And of course the markets fractured along the lines of product segmentation [traditional funerals –vs- cremations] and price [the cremation societies advertised their prices whereas it was considered unethical for funeral homes to advertise or to speak about theirs]. By definition, classic market segmentation occurred.
What has happened since then is that the cremation societies became aggressive marketers while most funeral homes remained traditionally passive, aloof. Today, that segment of customers seeking simplicity and affordability when a life ends increasingly does not hire a funeral home – they hire what has become billed as an affordable specialist. In practice, as well as by definition, classic market segmentation occurred in the funeral industry.
Can there ever be a return to ‘one size fits all’ market segmentation in the funeral home industry? I speculate that ‘probably not.’ However, I believe that if traditional funeral homes are to stop the momentum of the cremation societies, and roll-back the profound impact of market segmentation, lots of painful changes will be incorporated into how they think, act, and deliver.
Summarizing my thoughts, here is an imaginary interview with a funeral director by the Harvard Business Review:
HBR: What do funeral homes do?
Funeral Director: Funeral homes, through their staffs and facilities, care for the dead while attending to the living.
HBR: How do they do that?
Funeral Director: when someone dies, funeral homes arrange observances that generally involve putting the body in a box, gathering friends and family, asking a preacher to recount the benefits of living an upright life that lead to the kingdom of heaven, placing the box the ground, and erecting a memory stone on the place.
HBR: How long has it been done that way?
Funeral Director: As long as anyone can remember.
HBR: Is anything different today?
Funeral Director: Yes, almost everything is different.
HBR: How are things different today?
Funeral Director: when someone dies, people increasingly don’t want boxes anymore, friends and family don’t generally live in same town anymore, people don’t trust preachers or believe in heaven anymore, people don’t want burial in the ground, and they don’t want memory stones. They also want much lower prices.
HBR: What have funeral homes done to adapt – to deflect the negative effects of product and price-based market segmentation?
Funeral Director: I can’t think of anything.
HBR: Huh?
Some things are just blindingly obvious!
Alan Creedy Comments: If you are looking for a new way of thinking about your market the article referred to by Rick “Integrating Around the Job to Be Done” written by Clay Christensen, the author of “The Innovator’s Dilemma” is a MUST read. You can purchase a copy for $6.95 by clicking here. 
I read a lot and sometimes I preorder new books. This Winter I preordered “THE REINVENTORS, How Extraordinary Companies Pursue Radical Continuous Change“ By Jason Jennings. I started reading it last week and when I turned to page 60 lo and behold what did I see? My friend Bill McQueen as one of the case study examples of how to reinvent even a moribund industry.
Bill makes up a healthy part of chapter 3 “Picking the Destination” which begins with the statement:
“The main job of the leader is to be a destination expert, to let everyone know where the company is going and make certain that everyone understands and is willing to embrace constant change in order to get there.”
Some excerpts from Bill’s interview are insightful
“This is a business that was and is ripe for reinvention…the real reason things had to change was because we had to be able to offer the quality of life that talented people wanted and that we wanted to provide them”
“We were wrong in concluding that everyone wanting cremation was a price shopper…price shoppers only want one thing…the absolutely lowest price in town.”
“The breakthrough came when we studied cremations in other societies.”
“The success of the first tribute center led McQueen to the realization that they weren’t really in the business of handling bodies but were, instead, in the business of educating and helping people understand the value of ceremony, ritual and the telling of one’s life story. ‘We weren’t going to be in a business that was about caskets, hearses, and cemeteries anymore but, instead, about helping people transition through loss and come out the other side in a state of peace.’ Once they selected a destination the radical reinvention became easy.
I haven’t finished reading it yet but if you want a copy for yourself click on the picture below:
P.S. ICCFA is hosting author Jason Jennings at its Fall Management Conference.
Earlier this year Rick Baldwin used a comment by famed hockey player, Wayne Gretzky, in his post: “How To Be Exceptional In The New Normal”. Here Bruce Buchanan, CEO of The Buchanan Group adds his perspective to Rick’s.
As funeral professionals we are torn by two forces when we take on a client. One, we are asked to care for the body. In some cases, make it look realistic for grieving purposes. And two, we are asked to create a celebration of a life lived. These are clearly two different skill sets. And because they are so different we have a public that is sometimes confused by the “one size fits all” nature of the funeral home business model. Oh, did I forget to mention the religious component?
I assume you used the Wayne Gretsky quote because it illustrated his willingness to take risks. I would add another reason why he and other world-class athletes and businesses are successful. Nimble. The ability to change when conditions call for it. In the business world IBM is a good example of being nimble. It transformed itself from a maker of computer hardware into a consulting business. Isn’t the funeral business simply transitioning from a ritual based into an individualized service model?
This nimbleness applies to every aspect of our business. There was a popular phrase used a lot over the past decade – WOW. If we WOW our clients we will know what we did right. To do this we need to start with a blank slate with every family we serve.
I believe that funeral businesses will start to diversify to meet the expectations of the distinct consumer groups that exist. The “lowest-cost” consumer will look for cremation and burial packages through businesses that embrace them. Yes, existing strong brands in a community will have their loyal following, though that number will deteriorate. The opportunity is the other 80% of the market that will seek a funeral experience that matches the value they see in it. The current challenge is to capture the aspects of the funeral service that is currently going to other providers, like caterers.
So, in the spirit of a current beer commercial –“stay nimble my friend.”
Bruce Buchanan is CEO of The Buchanan Group Indianapolis, In.
I serve on the Board of Directors of a community bank based in Orlando, Florida. In that capacity I receive frequent educational correspondence and one I received this week highlighted the striking similarities between what we do and banking.
The author says:
“There is a familiar refrain among the people who handle branding campaigns and advertising for a living — banks just don’t get it. They are a commodity and they all sell pretty much the same things. They sound the same. They look the same. They just don’t realize it. Or, they just don’t care.”
I couldn’t help but notice that most all those qualities apply to the operation of funeral homes as well as banks! It made me think: maybe we just don’t get it either, or we don’t care either.
Here are some other important statements made by the author that I think also apply to us:
As with bankers, our funeral brands are what people think they are, not just what we say they are. Thankfully though, we all have the opportunity to influence and change what our brands stand for, each and every day!
Rick Baldwin is currently CEO of Celebris Memorial Services of Montreal (29 funeral homes / five cemeteries / five crematories / brands are Urgel Bourgie and Lepine Cloutier) and owner of Baldwin Brothers Cremation Society in Florida / Director and shareholder of BankFIRST of Orlando / Board of Directors of ICCFA / Director of UCF Foundation. Earlier in his career he founded Baldwin-Fairchild Cemeteries and Funeral Homes in Orlando, Fl which he later sold to Stewart Enterprises where he enjoyed a successful career until his retirement in December 1999. He served as President of Stewart’s Eastern Division and, later, as President of Corporate Development. He is past President of CANA and the Florida Funeral Director’s Association.
A few years ago we came to the realization that there was a real necessity to review our system. Not all calls are equal in service type, in merchandise and in revenue. The old system indicated that direct cremation had the same market share value as a traditional burial. In a sense that is true. Every individual death accounts for a decision made by a family on the choice of a funeral provider. In the strictest sense calculating market share would be accurate.
However, we devised a system to track a broader range of information, and in a fairly easy and cost-effective way, to clarify what was occurring in our market. In so doing, we still track market share but we added the component of revenue and service type share to the study.
To initiate the process we identified the various service types that we were interested in tracking for both the traditional burial and cremation services. These included the following service types: chapel service, church service, graveside service, cremation with visitation and memorial service, cremation with memorial service, cremation only, ship-in/ship-out and miscellaneous services.
We then itemized the charges for each service type from our own General Price List. When funeral merchandise was included we used our average casket, outer burial container and memorial package in our computations.
The next step was to obtain our competitors General Price Lists and build the same packages for each competitor. In these computations, we selected merchandise as close as possible to the merchandise we included in our own packages for comparative purposes.
After sending all of this information to our resident Excel expert to build an appropriate tracking spreadsheet, we began tracking information from the local obituaries daily and then auditing our results at the end of the month with the competitors’ websites. For the most part, traditional services are simple to track and input into the correct service type. Traditional burials in the chapel, church or graveside service categories are easy to detect from the obituary. Determining cremation services has been more of a challenge. The question is raised particularly often when the memorial service is held at a church following cremation. It is difficult to discern if the funeral home is involved in these services or not. Do we book the case as a “cremation with memorial service” or “cremation only”?
When reviewing the information now, we are not only able to see the true market share of which percentage of deaths went to which funeral home in our area, we can now see the percentage of the revenue expended those same funeral services among our competitors.
For example, in a given time period of a month, our firm may have accounted for 41% of the market share. But based upon the call mix for that period, our revenue share may account for 47% of the dollars expended on funeral service.
Although we understand these are not exact figures, because we are comparing averages in regards to merchandise selected, we feel confident that this study gives us added insight to what is occurring in our community.
From the data we enter we can look at traditional burial separately from cremation, and look at each service type alone to see what families are choosing from all of the funeral providers in the area. It becomes a clearer way to see trends developing in service types and the funeral homes families are choosing to provide them.
Two additional bits of data we are collecting are age of the deceased and if the memorial gifts published in the obituary call for donations to the funeral home to help pay expenses. This information gives us more anecdotal results. With the first we can calculate the average age of the deceased for each of our competitors. The second gives us an indication as to the ability for families to pay for the services they select.
For example, if a competitor shows 21% market share and 18% revenue share with a high mix of cremation and a large percent of the families asking for donations to help offset funeral costs we can extrapolate that that competitor may have an accounts receivable issue which may be affecting their business model.
Much of this is unscientific and speculative to an extent, but it does clarify our community and what is happening with the dollars expended in our industry.
Scott Meierhoffer is currently Chief Executive Officer of Meierhoffer Funeral Home & Crematory in St. Joseph, Missouri and its affiliates which include: Pettijohn & Crawford Family Funeral Service, Mound City, Missouri; Bailey & Cox Family Funeral Service, Plattsburg, Lathrop and Polo, Missouri; Family Service Group, Horizon Cremation Center, Family PALS pet Crematory, St. Joseph Memorial Park, Mount Auburn Cemetery and Ashland Mausoleum, all of St. Joseph, Missouri. Operations at these facilities include traditional funeral, cremation and cemetery services as well as pre-arranged funeral planning, pet cremation, reception and catering services and floral and gift shop. A licensed funeral director in the State of Missouri since 1994, Meierhoffer is a member of Selected Independent Funeral Homes.
Remember that bill congress needed to pass to see what was in it? Well, surprise!! The Medicare Tax has been expanded to include almost ALL income (active and passive) over $200k for singles and $250k for couples. This even includes the gain on the sale of a personal residence over the exclusion amount.
If the Democrats win it is likely the capital gains rate will also increase to 20% and some are saying it could go to the pre-1996 level of 28%. Here is an example of how it will work:
Let’s say you are married and your annual income from your business is $125,000. Your spouse works elsewhere and earns an income of $50,000 for a combined income, or AGI, of $175,000. (NOTE: for most of us the trigger will be our Adjusted Gross Income, NOT our Net Taxable Income). If you realized a $1,000,000 taxable gain on the sale of your business this year (2012) your taxes on that sale would be 15% or $150,000 leaving you $850,000. If you sell the business under the same circumstances in 2013 your capital gains tax is likely to be $200,000 (20%) and some think it may be $280,000 (28%). Then comes the Medicare tax of 38% on the amount over $250,000. In your case this would be AN ADDITIONAL $35,150 on top of the capital gains tax!!!
Of course with any tax change there are nuances and it is not my purpose to practice taxation (or, for that matter to influence your vote). If you are at the point where you are thinking about the possibility of selling the business (whether to an acquisition firm or to a family member) better to do it this year than next. If you are enjoying what you are doing and want to stay in the game then it is likely (at least in many instances) that the appreciation in value over time will partially offset this loss in value.
See your tax planner for specific information.