Tag: funeral strategy

How To Stop Customers From Fixating On Price

Written by Alan Creedy on December 2, 2013. Posted in The Creedy Commentary, Money: Getting it and Keeping it. 11 Comments on How To Stop Customers From Fixating On Price

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

“If You Find You Are Riding A Dead Horse The Best Strategy is…

Written by Alan Creedy on March 19, 2013. Posted in The Creedy Commentary. 9 Comments on “If You Find You Are Riding A Dead Horse The Best Strategy is…

to dismount.”

Archimedes once said, “Give me a lever long enough and I will move the world”

For the last 30 years we have been pushing harder and harder on one and only one lever with diminishing results and it’s time we stopped.

Many of you, dear readers, know that I have been a bible student most of my adult life. The parallel between our behavior and this one lever has always struck me as akin to idol worship. 30 years ago it was amusing. Today it is tragic.

Having said that and before I continue let me be clear: I am NOT pointing a finger of blame. In the context of the times the behavior is fully understandable. Further, both sides to the resulting co-dependent relationship are equally complicit AND should now forge a new and different relationship because they still need each other. (emphasis on different)

Historically, until 1984 and the passage of the infamous FTC rule, society pretty much dictated what you did when someone you loved died. As a result, customers only had two decisions to make: 1. which funeral home; and 2. what merchandise. Everything was SIMPLE. Then everything changed. Not just because of the FTC. That was only a facilitative event. Because society lost its ability to cause conformity. Seemingly people could make alternative choices (including nothing at all) with no apparent ill effects. We began to experience our now increasing decline in relevancy.

Because customers only had one decision to make once they had selected a funeral home there was only one financial lever available with which to impact revenue. This:

Of course you can also increase volume. But that can take years because the public continues to stubbornly refuse to die at our convenience.

From this single lever grew a “co-dependent” relationship that is also understandable. Tacitly, manufacturers agreed to make practitioners their sole source of distribution and practitioners developed an over reliance (dependence) on the manufacturer for strategic direction. That was great when their challenges and goals were aligned. Unfortunately, that is no longer true. So, for 30 years now we have responded to a market turning away from traditional burial by pushing harder and harder on the one lever. This may be what has caused the cremation rate to spike by 250% in 2008. Who knows?

This is where the idol parallel strikes me. Families today don’t know what they want or need! To meet this challenge requires people skills. Skills like listening, guiding, teaching, relationship and trust building. To paraphrase god, “your idols cannot speak, they cannot listen, they cannot guide.” In fact, if they have any influence at all it is mostly negative.

Should the casket companies close up and go home? Should we stop selling caskets? Emphatically NO! But the question is begged:

“How is pushing so hard on that lever working for you?”

Instead a new alliance should be formed. Caskets need to take their rightful place as merchandise we sell…not “what we are.” We need, as a profession, to realize that we offer something valuable to society. For all of history mankind has demonstrated consistent needs when dealing with loss. Our current society is ignoring those needs but that doesn’t make them any less real. Replacing our real value to society with a piece of furniture only encourages that irrelevance. I think that for those who want burial we can do both. For those who want cremation we have a moral obligation to help them understand their needs. That means that instead of investing in a new selection room you need to invest in training.

I know both the funeral director side and the vendor side. The casket obsession has impaired the ability to adapt on both sides. U.S. vendors are severely hampered by their inability to become efficient both in distribution and in manufacturing by simple things that wouldn’t exist outside a co-dependent relationship. For instance, they have all realized that they would be dramatically better off by limiting the number of SKU’s they carry. At a recent supplier sales meeting I assured them there was not a funeral director in the country that wouldn’t support a reduction if it would hold down wholesale costs “AS LONG AS THEY CONTINUED TO SUPPLY THEIR FAVORITES.”

We are both (vendors and practitioners) in the same boat. It’s sinking. We should talk.

But maybe I am wrong. Maybe a box can replace a caring ear, an experienced word of wisdom.

Expert Opinion: Some Things Are Obvious

Written by Alan Creedy on June 18, 2012. Posted in The Creedy Commentary. 2 Comments on Expert Opinion: Some Things Are Obvious

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.

Funerals As Counter Culture

Written by Alan Creedy on June 4, 2012. Posted in The Creedy Commentary, General Topics. 7 Comments on Funerals As Counter Culture

Are we rapidly moving toward a “Post-Funeral”culture?

I don’t think so.

After 50 years of steady decline in public attitudes towards funerals the pendulum is swinging back our way. Like Croci in the spring, the signs are poking through the frost if you will just look and this week’s post is one excellent example.

30 years ago a handful of brave pastors ignored the then-prevailing cultural surface signals and the revival we have come to know as the “mega-church” movement began. The common belief at the time was that people just weren’t religious any more. The actual reality was that many people had a deep need to grow in their faith, they just weren’t getting that need met by the traditional church. Those churches that reinvented their form to meet the need for a deeper relationship with god experienced both dramatic growth and equally dramatic cultural impact. If you are close to that movement you know that the founders changed the form while making the substance even stronger. They demanded things of their constituents who willingly responded that no mainline denomination pastor would dare ask.

I believe we have that same opportunity now as the anti funeral movement begins to lose its voice.

My friend Grant Mckenzie of Sarnia, Ontario shared an amazing article with me last week that illustrates my point well.

In response to the decision of a beloved elder to forgo a funeral, Pastor Edwin Searcy of University Hill United Church of Canada decided to conduct a study group on death in his church in Vancouver, BC. The results will surprise you. With his permission it is reproduced in PDF format in its entirety at the bottom of this page.

As a Christian Believer I found this a profoundly insightful article and a personal challenge to examine my own response to funerals in my church. It both strengthens my faith and challenges me to support my fellow believers in their time of need. Even if when I don’t know them or their family personally. Here are some excerpts from Rev. Searcy’s experience with his study group I think you will find interesting:

“They spoke of how empty it feels when there is no opportunity to gather to grieve…”

“Speaking about death in this way was a new experience in the congregation.”

“What really captured the interest of the gathered group were questions of how we as a congregation will deal with death when it occurs. It was as if we recognized intuitively that in the marking of death we are confronted with powers that seek to erase the church’s memory and entice it to abandon its daring witness.”

“If it is no great loss when someone dies, if it is possible to die and make no noticeable impact on the fabric of the church and the community, then the claims made at baptism are false. It is critical to the church that every death of one of its number be grieved.”

“A voice in the group questioned the way in which we decide whose funeral to attend…Death is not a private matter that affects only those who are friends and family. It is a public event that affects the whole church and calls the whole congregation together to grieve and to witness to the good news of god in the face of death.”

“Caring for the dying and for the dead is a practice that disciplines the church to wash the feet of the poorest of the poor.”

“Our elders need to unlearn their fear of becoming a burden, so that the whole congregation has the opportunity to respond to the call to serve and to carry our cross.”

“We noticed that by ignoring and silencing conversations about death we had unwittingly simply absorbed the assumptions of the culture we inhabit.”

“Our study group discovered we have simply adopted the ways in which our culture figures death out.”

There is a nascent global movement afoot to “bring death out of the closet”. As the last taboo subject “Boomers” the world over are determined to make death a healthy topic of conversation. Rev. Searcy’s study group is an excellent example of this movement.

So, here is what I would do:

I would print out copies of Rev. Searcy’s article and give copies to each staff member and leave copies in my lobby for the public.
I would make an appointment with every Christian clergy in town and share this article with them and offer to facilitate a discussion group with their church. (You can see a copy of the outline for the first session by clicking here)
I would stop looking down on those funeral practitioners that view their job as a form of ministry because it appears that it really is.

I believe the public wants to talk. They will find an outlet. If not you then who?

Reverend Searcy publishes a blog called The Holy Scribbler I encourage you to subscribe.

Click the red lettering below to download the PDF file of Dr. Searcy’s comments.

Funerals as Counter Cultural~Edwin Searcy

Expert Opinion: Game Changers

Written by Alan Creedy on April 17, 2012. Posted in The Creedy Commentary. 4 Comments on Expert Opinion: Game Changers

Game-changers are those events that intervene in our lives, on athletic fields, and in our businesses that forever change everything.

In our personal lives we identify marriages, deaths, and moving to a new city as the easiest examples of game-changers. In baseball, a homerun changes everything. In business, innovation is the most thought-of example. Look at Sony [and digital photography] or Apple [and their iPads and iPhones]. And speaking of digital photography, that innovation was certainly a game-changer for Kodak, too.

Sometimes, however, an unmet wish that customers have about the current status quo will change the game. This is especially true in fundamental businesses like ours. Starbucks changed the way coffee is served, even though coffee has been served the same way for years. SouthWest changed the airline industry, even though airplanes and airports are the same. Since the 1920s, every house in America has had a bathtub because Sears sold cleanliness.

And what about funeral homes and cemeteries, where we are accustomed to things staying the same for generations, or when they do change, having the changes carried on the backs of snails? Are we, too, being slapped with some express game-changers?

Reflecting on this point, I believe as an industry [lumping together funeral providers and sepulcher suppliers] we are in the mid-innings of a game-changer right now. Here’s my evidence:

Over-capacity: Look around. Most funeral homes could easily perform twice as many funerals as they do now. The hearse runs two hours per week. Cemeteries still measure their undeveloped lands in acres [that are mostly a big non-producing asset], when those vacant corners near the front gate are the most valuable of all. And all those anchors add layers of unavoidable cost.
Mature consolidation: The big funeral guys already own most of the major brands in the country’s metro and growth areas, and don’t have any good prospects to buy more. Yesterday’s flagships are struggling with margins, their historic names long ago milked of their original brand values, and most of those formerly esteemed community stalwarts are now losing market share. The new ones they can acquire, scattered here and there, are generally small and don’t add much value.
Profitability challenges: I sold my shares in Stewart Enterprises for $6.10 per share in 2001. Friday, those same shares traded at $6.26 [more than 10 years later!]. And STEI is not suffering alone. The other publicly traded funeral companies have found it difficult to grow their share prices. I speculate that their trading prices have stagnated due to narrow capacity to cut their costs, to increase retail prices, or to acquire large and agile operators.
Limited opportunity for personnel: Industry owners must find fresh ways to align shareholder and employee welfares. Corporate directors cannot expect employees to work against their own best interests. Board rooms must engage local management and pay them to build shareholder value, and then pay them a bonus when it materializes. A message similar to that sent by the ‘Arab Spring’ will need to be heard in the big chairs.
Most industry participants haven’t noticed: Interestingly, all over the country, business owners are acting as if nothing has changed. Their commercial models are the same ones employed by their grandfathers. At the same time, the memorial preferences of their customers bear little resemblance to those of their grandfathers’ customers.
New eyes are looking for opportunities, building on the back of the old and failing model: As over-capacity lingers, consolidators struggle with shareholder value, margins compress, employees struggle with employer loyalty, and board rooms ignore marketplace realities, new eyes are seeing opportunity. Be on the lookout for emerging industry names that you’ve never heard of before – ones that don’t carry the old baggage.

Yep, this writer thinks we are seeing the acknowledgment of a number of powerful game-changers that are likely to create unparalleled opportunity during the next ten years, as the innovative replaces the obsolete.

Let me know your thoughts on changing the game in our town. Write to me at rbaldwin@urgelborugie.com.

Sincerely yours,

Funeral Apologetics 101A: Eight Principles of Successful Optimism

Written by Alan Creedy on March 22, 2012. Posted in The Creedy Commentary, Leadership. 8 Comments on Funeral Apologetics 101A: Eight Principles of Successful Optimism

How interesting! As I step out to encourage this profession to not give in but take a stand and fight for itself I find more than I expected joining the cause.

Apropos of everything my friend, Bruce Buchanan, brought an article to my attention published via The Wall Street Journal that succinctly expresses many of the points I am attempting to make in my most recent series of posts. Here are a few excerpts to underscore the relevance of the comments in this important article. I recommend you print it out and tape it above your desk, or wherever you sit the most, to remind yourself.

“You may have heard the world has a few problems…It’s easy to accept the standard story of the future: it’s all going to be rubbish…Luckily there are enough human beings that don’t accept this narrative, who believe things can change for the better and, crucially do something about it…Pragmatic Optimists, who admit the scale and nature of challenges ahead of us but still resolve to do something anyway should have more of our support.”

Click here to read the Eight Core principles of Successful Optimists

What Do Social Media Users and Cavemen Have In Common?

Written by Alan Creedy on February 15, 2011. Posted in The Creedy Commentary. 4 Comments on What Do Social Media Users and Cavemen Have In Common?

Olson / Zaltman is an internationally recognized market research firm spawned out of Harvard and Penn State Universities. They developed and patented the groundbreaking research methodology (ZMET) that opens the subconscious metaphors consumers use to make buying decisions. Now widely used by the world’s largest institutions and businesses to develop marketing strategies, they are turning their attention to Social Media. In their most recent newsletter they draw a parallel between how people view social media today and the way mankind has created personal relevance throughout history. Hopefully, it will create insights for you. Pay close attention to the skunks.

What Social Media Users and Cavemen Have In Common:

DeepDives_Feb2011

Great Advice on Turning Your Business Around

Written by Alan Creedy on January 18, 2011. Posted in The Creedy Commentary. 1 Comment on Great Advice on Turning Your Business Around

I started my career in business turnarounds in the 1970’s when I worked for a company whose business it was to buy and “refurbish” distressed businesses and resell them. DeathCare is in need of a turn around. There are different types of turnaround strategies and turnaround strategists. Many are simply liquidators who cut costs so drastically that the already wounded patient has no choice but to be sold for parts. But the truth is most businesses can be saved if you are willing to do the work.

I became aware of Jack Stack and his Game of Business in the late ’80’s. He is a savior not a liquidator. Saviors save jobs and businesses and investments. I found early on by luck and prayer that the fastest way to rebuild your business is to engage your employees. They know where the waste is, they know what customers really want and, if they really trust you, they will tell you where you might be going wrong. That is not to say that you should abdicate your role as leader and expect staff to run the place. It’s not that easy. Rather, it means engaging them to give you feedback and input and weighing that input with other information to decide what is the best thing for the firm at this moment.

Watch this 6 minute video, it will encourage you. But one last note of warning: if your financial reports aren’t in order or you don’t understand them or they aren’t timely don’t even start.

Is Your Company Coherent?

Written by Alan Creedy on November 30, 2010. Posted in The Creedy Commentary. 2 Comments on Is Your Company Coherent?

Booz & Company, one of the foremost consulting leaders in innovation, has discovered a link between performance and strategy called “Coherence.” For a company to be described as coherent, it must be resolutely focused on the interrelationship among three critical elements: its market position (its chosen “way to play” against competitors); its most distinctive capabilities, which work together as a system; and its product and service portfolio.

They have devised a Coherence Profiler which should be of use to all Deathcare Practitioners. This 5 minute survey provides a “real-time” diagnostic for the coherence in any company. Coherence delivers a premium to companies by increasing effectiveness, efficiency, use of critical resources and overall alignment.

I recommend taking the profile by clicking on the highlighted link above. You can also read the full article by going to the Strategy + Business website directly (click here)

Social Media: How To Get The Phone To Ring

Written by Alan Creedy on November 9, 2010. Posted in The Creedy Commentary. 2 Comments on Social Media: How To Get The Phone To Ring

I consider Frank Dawson of Dawson Funeral Homes in E. Liverpool, Oh. to be the “Grand Master” of social media. With it he has not only built his business but created a veritable competitive “fortress.” He has done this by applying a simple axiomatic human principle.

Watch this video to learn more about that principle and a simple fun low-tech way to build great relationships through social media the old fashioned way.

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To learn more complete the form below:

[contact-form to=”alan@alancreedy.org”]

Want More Calls? Get Up Off Your…

Written by Alan Creedy on October 26, 2010. Posted in The Creedy Commentary. 2 Comments on Want More Calls? Get Up Off Your…

Two key social media levers that have nothing to do with technology

With all the recent buzz about social media, I think it is important to remember that social media is not new. In fact, there are a few practitioners who mastered social media decades ago and built veritable “competitive fortresses” on the concept. There are two key levers for optimizing social media and neither one has anything to do with technology although the appropriate application of technology can significantly enhance your “social media” strategy (emphasis on social).

The first is a piece of wisdom from Mary Kay Ash, the founder of Mary Kay Cosmetics. When asked the secret of her success her reply was elegantly simple: “I remind myself every day that every person wants to feel important.” The second is my all time favorite: “People buy from people they like.” Combine those two and you have a failsafe strategy. Simple concepts that require no purchase or learning curve. So, ask yourself each day: “Who have I made feel important today? and what am I doing to help people like me?” Next week I will introduce you to a funeral director who has successfully controlled his competitive environment by asking those two questions.

Funeral directors are often likable people, what is needed is not a personality change but mechanisms that enable them to meet more people. Enter Low Tech social media…a social media mechanism.

Many years ago I was consulting with a funeral director who was concerned that he wasn’t getting support from the local clergy. Knowing that he was a member of NSM (now SIFH), I suggested he get a supply of their “Clergy Preference Forms” and contact the local clergy to get them completed. A few months later I was working with him again and I asked how the forms had worked. “Oh, they didn’t,” he said, “I only got one back.” “What do you mean you only got one back?” I asked. “Well, I mailed them all out and only one pastor returned it.” was the reply.

There are times when the vocabulary of tact, diplomacy and discretion simply fails us. I couldn’t bring myself to say: “you stupid, lazy…” so, I was rendered speechless.

Not long ago I did a “Skype” interview with Matt Shannon of Holman Howe Funeral Home in Southern, MO. for the “Best Practice Ideas” section of my website www.alancreedy.org Matt had accepted Event By Wire’s invitation to use their equipment to webcast family holiday greetings to active military and missionaries serving overseas.

As I shared Matt’s story, like the clergy preference forms, people told me, “we tried that and we only had one or two people show up. It was a real bust.” They missed the whole point: It isn’t about how many people showed up; it’s about how many people you told your story to.

What I wanted to show with Matt was that it was HOW he implemented the idea that made the difference. Matt saw the concept as much more than a great PR idea (which it is). He realized it was a MECHANISM (an “excuse” if you will) that gave him an opportunity to get in front of key influencers in his community. The main point of the effort was to create and enhance RELATIONSHIPS. He didn’t just put ads in newspapers and send out postcards. He got up off his… and went to see local clergy, the people at the VFW, the local NBC affiliate and others. I bet he even took a few people to lunch. I think only a few families actually came in. But to Matt it was a great success. Not only had he made new friends among the clergy, VFW and Media (all influencers) he had actually created some collaborative opportunities to work with their constituents (thus creating an environment where they could get to know and like him personally) The webcasts to missionaries, in my opinion, is genius.

So, dear reader, I don’t know your circumstances so if I use the tactless words stupid and lazy I know you won’t take it personally. People buy from people they like and everyone wants to feel important are two life axioms that are key social levers with almost limitless power. Social networking should be about meeting people, finding common interests and giving them reason to like you. I bet some of the people Matt met with had never met a funeral director before. Who do you think is going to be on top of their mind next time they have a need?

Unless, of course, you are not likable. And there is even a remedy for that. I have met a lot of successful funeral directors in 30 years. It seems to me that there is often a correlation between success as a funeral director and a personal experience with the greatest social networker in history: “Dale Carnegie”.

Funeral Home Valuation Part 3: How To Present Your Operating Results

Written by Alan Creedy on September 21, 2010. Posted in The Creedy Commentary. 1 Comment on Funeral Home Valuation Part 3: How To Present Your Operating Results

In order to properly determine EBITDA you first have to present your financial statements correctly.

If you are not using an accounting service that specializes in the funeral or cemetery industry then it is highly likely that your financial statements are not presented in a manner that makes ratio analysis meaningful.

For instance: the way non-industry accountants handle cash advances typically has a significant impact on your ratios. Let’s say that your Revenue before cash advances is $1,000,000, your cash advance revenue is $150,000 and your cost of sales is $210,000. The proper way to calculate your cost of sales ratio is to divide $210,000 by your net revenue of $1,000,000. The result is 21% which is too high (it should be between 15% and 18% in most areas). But, most non-industry accountants include cash advance revenue in total revenue and post the corresponding expense to either cost of goods sold or an expense account. This artificially inflates revenue which drives lower cost ratios. $210,000 divded by $1,150,000 yields a cost of sales ratio of 18.26% thus obscuring the fact that your cost of sales ratio is too high. (For an example of an industry accepted chart of accounts click here.) P&l statment

So, step one in “normalizing “your profit and loss statement is to determine your actual ratios. I would estimate that 8 out of 10 of my clients require analysis and reallocation of accounts to bring their financial statements in to conformity with accepted practice where proper comparisons can be made. I strongly recommend this be done by a professional. There are too many nuances for someone who doesn’t have experience. Typically, it takes me as much as 4 hours to complete this process on 3 years of statements. Once this reclassification is done then ratios can be calculated and the deviations from standard industry experience will draw attention to areas that deserve deeper analysis.

The most common places that can be adjusted are cost of labor (including owners compensation) and facilities (specifically rent to owners). But there are others including redirected income like preneed insurance commissions paid directly to owners instead of through the business that you should be alert to. Ultimately, the goal of normalizing or recasting financial statements is to show what the firm would look like if it were owned and operated by someone who emphasized reporting to investors over sheltering income from the IRS.

It is vitally important to remember that you can’t play games during this step and any professional analyst will refuse to do so.

For example: Let’s assume that your actual cost of labor is 42% of Net Revenue. The normal industry experience (including owners, taxes, benefits etc.) is in the range of 35%. You should only restate labor costs to 35% if you are confident that a buyer can achieve that level. Let’s say you are selling to your children, but you plan to stay on in a reduced role at your current salary and benefits it is not legitimate to recast as if you were going to no longer be paid. (I have seen it done).

For your information, the typical major ratios expressed as a percent of net revenue for normal firms are as follows:

Cost of sales: 15% – 18% (this is often a function of geographic location which impacts cremation rate)

Cost of labor: 30%-35% (with all labor related costs (taxes, benefits, etc)

Facilities: 10% -12% (including rent, mtge interest, leasehold improvements, depreciation, etc)

Disclaimer

While I have experience in business valuation, I am not a Certified Business Appraiser. The explanation and comments contained herein are my own.