Funeral Industry leaders discussed the Funeral Home numbers

Recently some funeral industry folks were featured in  a panel. They were A.J. Daoud, President of Daoud Holdings, Dan Isard, President and Founder of Foresight Analysts, and Thomas A. Parmalee, Executive Editor of Funeral Service Insider,

Summary:Wall Street Transcript

Dan Isard – Average Funeral Home does 116 calls a year-(it is actually 100)

Thomas Parmalee-Biggest expense is Funeral Home Staff, then Cars-(correct) Average Funeral home owner makes 100,000 to $150,000 (correct)

Dan Iasrd -Average Funeral Home profit is above 5.5%(maybe but the 5.5% number is close).

A.J. Daoud- Corporate funeral homes and indepedent funeral homes have different problems-(no they have the same problems)

From: Wall Street Transcript

TWST: Would you start by painting a portrait of today’s typical funeral home in the United States?

Mr. Isard: The average funeral home services about 116 families a year. A service in funeral industry is referred to as a call, dating back to when the phone would ring, it was a call to service. So when you hear someone say a funeral home does 116 calls, that means they serve 116 families in a typical year. The average funeral home is one location. It typically employs four people. The owner-manager is oftentimes the licensed responsible party. They may have one other licensed person, then they’ll have an administrative person and then there will be a bunch of part-time help.Typically we see two licensed or arranger responsible people for the first 125 services or calls, and then they tend to add one full-time person for every 60 to 100 calls thereafter, depending upon the complexity of the call.

TWST: What are the biggest expenditures for the average funeral home?

Mr. Parmalee: Obviously, staffing is a big expense for funeral homes. Benefits is also a big one, especially depending on what sort of benefits they provide. Medical insurance is going up. Cars are a big expense, but you’re seeing a lot of funeral homes reducing their car fleets now because of the increase in cremation and they don’t need as many. Our newsletter just completed a compensation survey. The average salary for the typical owner is in the range of $100,000 to $150,000.

TWST: What’s the average profit margin nowadays?

Mr. Isard: In 1998, it was just under 9% and in 1982, it was almost 14%. So the profit margin as Federated recognizes it has continued to fall. It’s rebounded over the last two years, but it did get as low as 5.5% in 2005. It’s a problematic issue.There are a few reasons why profit margins have changed. I think that we can focus on overhead, which is certainly an issue.

We can focus on the fact that consumers are spending more, 5% more. To me, the problem is the owner-operator is very unsophisticated analytically and, therefore, they’re not setting their prices intellectually. Anytime you have increasing consumer spending and you don’t get it to match your increasing overhead, that’s more the operator’s problem than it is a consumer rebellion.

TWST: Do you find that same problem applies to corporate-owned funeral homes?

Mr. Daoud: ….. Tom is correct in that there is a big emphasis on cost cutting and cost management. What I have seen on the corporate side is basically a real efficient, business-like acumen, where you are focused on not only business expense, but also on how to generate your maximum revenue. There’s a big effort in collections and making sure your dollars come in, and running it like a business. Where they lack in the communities is sometimes they lose the public relation factor; they lose the contact with the community and the customer, as well as the ability to maintain good service. It may be related to a cutback in personnel, or maybe there’s no money in their budget for advertising, but that’s what you run into under the corporate model funeral homes.

The independents are the other way around. They emphasize service and spending a lot of money on advertising. Sometimes it’s wasted, sometimes it’s good.

TWST: Looking ahead five years or so, what do you see for funeral services, both for funeral homes on an individual level, as well as for the public funeral service companies?

Mr. Isard: I’d say that from the public companies, the investors, first and foremost, have to change their perspective. People have for years been saying, “When the Baby Boomers start dying, the public death care-oriented stocks are going to be great investments.” They’re not. The reality is they are more akin to a utility than they are an operating growth-oriented business. It’s a service business that’s going through changes on how to provide services, what services they’re providing and what the profitability is on those

services. The independent is sitting at a very serious crossroads where, going from 40 years ago when people bought funeral homes so that they’d have a job for life. Today people are recognizing that these are businesses, and they have to operate them as businesses. If you don’t have the entrepreneurial mentality, maybe you’re best off working for someone else than trying to buy your own place.

Funeral industry|Funeral blog by Your Funeral Guy

Source: Wall Street Transcript via Yahoo! Finance

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