The Business of Doing Business, According To The Funeral Commander

Article originally published on the FuneralOne Blog

This article is going to be different from the typical posts you will find here. I’m not going to discuss how to attract baby boomers, create a more meaningful funeral, why you should serve cucumber water at visitations, create memorial videos reminiscent of the Harry Potter series, or the trials and tribulations of the funeral director lifestyle. In my opinion, we talk way too much about that stuff, ignoring the very foundation of funeral homes; the business of doing business.

Contrary to popular belief and the touting of many, funeral homes are businesses. Funeral homes are in business to make a profit. I’m certain that some reading this article will take offense. However, those same people are also getting a paycheck simply because whatever funeral home they work for is generating revenue (making money).

We are in scary economic times with a growing segment of consumers that really struggle financially. According to the Social Security Administration, 71% of all working Americans earn less than $50,000 per year. Cremation is now the choice of over 50% of consumers for final disposition. I am aware of funeral directors being laid off and funeral homes near bankruptcy simply because of a failure to do the business of the business. These and other challenges to funeral home financial stability are not just a subject for owners to worry about; everyone should know “the skinny.”

I’m going to provide just a glimpse of a few failures rampant in funeral home ownership and management that are indicative of “not doing the business of business:”

1. Human Resources

How many “managers” work more than 40 hours a week, but cannot hire or fire an employee? In order to be an “exempt” employee (meaning not subject to a 40-hour work week or receiving overtime), the exempt manager must supervise at least 2 employees and have the ability to set wages (raises) – just two of the many guidelines provided by the Department of Labor (DOL).

Another HR nightmare is in the area of “on call status.” Conventional funeral home practices generally run contrary to DOL regulations which could cost a funeral home hundreds of thousands of dollars in back pay as well as fines. Funeral home owners failing to adhere to the DOL regulations, not employing a professional Human Resources professional or at least hiring outside HR management, put their business in a position of serious peril. Effectively managing your human resource is part of doing the business of the business.

2. Pricing

The majority of funeral home owners adjust pricing once a year. As recent as last year I witnessed a GPL with “prices effective 2009.” All businesses have ebbs and flows which fluctuate revenues. In our business, we must factor in death rate, cost of goods sold, variable expenses, competition, and so on. Setting prices annually means that, irrespective of the business climate, the pricing is in stone.

In many cases owners and managers do not conduct a full analysis of the costs associated with the business (fixed/variable expenses/cost of goods, etc.). They compare themselves to competition or make inane decisions such as “add another $XXX.XX this year to services.”

Merchandise markups are another pricing mystery, again, with no analysis of wholesale to retail charges. Frankly, this practice is nothing short of lazy and, once again, places the funeral home in fragile financial stability. Pricing evaluation and intelligent adjustment are an integral part ofthe business of doing business.

3. Monitoring/Adjusting

Monthly, or at least quarterly, financials should be compared to forecasts measuring success or need for adjustment. Wait… forecasts? Budget? Not setting a budget and forecast aligned with GPL prices and overheads is like baking a cake with a can of beans.

4. Accounts Receivable

If a funeral home has a payment policy and also accounts receivable, the payment policy is useless. This problem lays squarely on the owner/management of the funeral home. Why would you sign a contract or conduct a service without securing payment? The solution is simple; leadership, training, measuring. There is a saying that fits perfectly into this challenge: “The inmates are running the asylum,” meaning funeral home owners are not holding their employees accountable. Getting paid is essential to the business of doing business.

5. Succession Planning

“I’m going to leave all this to (whomever),” yet no legal documents are ever created leaving a legal mess upon untimely death. Recently I was made aware of the unexpected death of a funeral home owner (yeah, happens to us too). Kids from a first marriage, the “lead” guy, and a brother not in the business all were embroiled in a battle because “he said he was leaving it to me.” Gives “remembrance” a whole new (unpleasant) meaning. Additionally, what is the value of the funeral home if it was to be sold? It’s not what you think; it’s what a buyer and the bank knows. It’s called planning; the business of doing business.

The Importance of Doing Business

Let’s view these business bullet points holistically…a bad day in the life of a funeral home owner: The Department of Labor is on your doorstep because a former employee is suing for back overtime wages. The first half of the year has been “slow” and third quarter is historically worse, so you are going to “hold out” for a strong finish. However, you won’t make any pricing changes because the new competition, Schleppy’s Cremations & Funerals, down the street had a good first half (wonder why you are “down”?). Your accountant just gave you the six-month P&L statement, but doesn’t know the difference between a rough box and a cardboard container. You are owed money on the funerals you conducted last year and some already this year are behind in payment. You are thinking of retiring and selling to your nephew, and you believe the funeral home is worth at least two million… One bad day for one owner? We wish. So many of us are in business without doing business, and similar stories are far too prevalent.

Why is it that we as a profession howl so much about consumers gravitating to “low cost” or “non-professional” competition, yet we fail to hire or seek council from the very professionals that can keep our business financially and legally sound? Why do we fail to plan, the very thing that drives us crazy about families “waiting until the worst has occurred?” Why don’t we focus on the business of doing business more? Because it’s hard. And, perhaps, if someone really sees what the books look like and commensurately poor financial position of your well-respected firm, you may be embarrassed. So, you keep the books under the counter, the accountant at bay, the human resource professional nonexistent, and your reputation stellar…until all bets are off and your business has failed.

Think if #1 above was heart disease, #2 cancer, #3 Alzheimer’s onset, #4 diabetes, and #5 kidney disease. Would you seek help and a cure for your illness, or just wait to die? If you are not doing the business of doing the business in the funeral business, your business will meet the same fate of ignoring the symptoms of impending death.

About The Author

Jeff Harbeson is the Director of Marketing for The Foresight Companies in Phoenix, AZ, Founder of The Harbeson Group which is affiliated with Family Choice Funerals & Cremations, At Need Credit, Select Cremation, and G2 Funeral Group.  As the author of The Funeral Commander blog, Jeff is also a co-host of the new Funeral Nation TV web show. Follow Jeff www.twitter.com/thefuneralcmdr and like www.facebook.com/thefuneralcommander.