Funeral Director and Osiris Software CFO, Kara Ludlum, explains.

Kara Ludlum Osiris Software, CFO

In the 1970s, my childhood was spent in an apartment above my parents’ funeral home. Because my parents drove the ambulance and operated the funeral home, we were the go-to in any emergency. This was a pretty typical experience for many funeral directors during this time. I fell in love with being needed and being the source of comfort for our small town. The ability to be there for those in need is what attracted me and countless others to the funeral profession.

Another staple of my childhood was the ability of our small, locally owned funeral home to have the financial working capital we needed to successfully operate our business. I believe that these two situations go hand in hand: being relevant in our communities and being financially stable. I grew up, became a CPA and a licensed funeral director and embalmer. I was our CFO, an active funeral director, and owner of our funeral home.

Since 1991, I have also been providing accounting services to funeral homes and cemeteries across the United States. In the last 10 years, I have witnessed several clients who are beginning to have serious financial struggles. Why would a profession that is vital to their communities be struggling? The answer is very complex. We need to examine each of our points of service as well as our pricing for those services.

The Preneed Appointment

I have met with many families to make preneed arrangements. My goal was to end up with the sale of a funding product to earn a commission. When I then later met with the survivors at the time of death, they were always so comforted to know their loved one had spared them the stress of selecting these items and to find out that everything was paid in advance. But we can make preneed so much more than that. We can make it the beginning of a more meaningful life.

Imagine if you visited with the family in their home and asked them to select 10 pictures that mean a lot to them in preparation for your appointment. You could also ask them to think about why those pictures mean so much and suggest they be ready to talk to you about this. When you arrive for the appointment, you could start with the pictures and ask if you can record a video with your phone of them telling you why these photos are so special.

Maybe one of the pictures is from their first date over 60 years ago, and they may laugh and tell you they had no idea what they were getting started that night and how it had changed their lives forever. They might show you a picture of two smiling young people that was taken in front of a dilapidated old farmhouse. It was the first home they had together as a married couple, and they put many years of hard work into making it their family home.

Imagine keeping these memories until the time of need and being able to use the photos and stories in their memorial service. You would have added an hour to your appointment time, but your funeral home would become the keeper of something much more important than a copy of the insurance policy.

Your prefunding and preplanning would then follow the pattern you would have established through their stories, but the emotional tie between the family and the funeral professional would strengthen.

The First Call

Many times, having the appropriate information when attending the first call is invaluable in establishing a connection with the survivors. This is the time when the family will be most uncertain and in shock. You want to establish your role and your relevance to them. Do you have your best people on the first call in which they encounter family members? I believe adequate training and availability of vital information at the time of the first call are two items that are essential to serving the family in the best way possible.

Ask yourself these questions:

1. What procedures and phrases do our staff or removal service use with a family?

2. Do we have a checklist of vital steps for every first call?

3. Do we have information available on prearrangements on file or recent interactions with a family to use during the first call?

4. Do we provide adequate information on the next steps? Do we adequately fill the gap between the first call and the first meeting with our funeral home?

The Arrangement Conference

The arrangement conference is your opportunity to be of most help to the family. Training your staff is the best way to make successful arrangements. Employing checklists and communicating different ways you can provide lasting healing over the coming days, weeks, or months is essential. This critical time can make or break the relevance of your services.

Ask yourself these questions:

1. Do we adequately train and periodically review arrangement staff for the best ways to conduct an arrangement conference?

2. Do we focus on personalized services and non-traditional gatherings if these would be most helpful to the family in beginning their healing process?

3. Are we flexible to the varied needs of families, and are we proficient in having fresh ideas regarding different ways survivors can express their grief?

The Service

“Every human being who exists on this planet deserves a service or gathering to recognize their death.”

I have met with some people over the years who disagree with this statement. They will say things like, “Old Tom, he was the town drunk. He had no family and basically lived his life in the bottle. He doesn’t need a service.” This may be true about “Old Tom,” but I can promise you he had parents. At some time, he probably had friends, relatives, or some interactions with someone.

Sadly, many people have no one in their daily lives. In these cases, we as fellow human beings should honor that his life meant something even though we don’t know his story. For funeral professionals, there is no greater need for your services than in the case of people who struggled so much in this life that, in the end, there is no one to recognize they are gone.

Therefore, when survivors say things like … “He did not want a service,” our answer should be that even though the service will recognize his life, the service is not for him. Now that we have established that everyone needs a service, who is better to provide that than a funeral professional? Our focus needs to be on creating services that best start the healing process for the survivors. Is that your focus? It is the main essential key to the relevance of your funeral home in your community.

Aftercare

I believe that providing guidance once the service is over and the family has returned to their lives is the most important chance we as a profession have to generate goodwill, significance, and relevance. I also believe that in our own funeral home and in many funeral homes across this nation, we fail to provide much in the way of services for “aftercare.”

The lack of working capital and adequate staffing is directly related to the reasons we don’t do a better job of providing care for the family after the service is completed. I believe we are missing a big opportunity to help the family. I also believe that we are the best source for providing aftercare services. Our staff has a relationship with the survivors and is in a wonderful position to continue our care after the funeral or memorial. We need to design and implement aftercare services just like we do cemetery, crematory, transportation, or other services we coordinate. We need to find a way to create training and grief services and find a way to fund these extra services.

Pricing of our Services

We need to get creative. Every day, I see funeral home financials from across the country, and I am reminded of two critical challenges:

1. Funeral home pricing has not kept up with inflation. Because we don’t adequately raise revenues, our costs are pushing our net income into the negative.

2. Once the Federal Trade Commission funeral rule came into effect in 1983, we decided as an industry that the cost of providing funerals was much higher than the cost of providing cremation.

Let’s examine each of these in detail:

Inflation. Funeral home pricing has not kept up with inflation. My paternal grandfather died in 1966. Reviewing our funeral home Red Book for 1966, I noticed the median funeral revenue per case was $1,250. When I apply that average to the average inflation rate according to the U.S. historical Inflation rates for each year since, the average funeral today should be $12,081. However, according to the National Funeral Directors Association, the median price for a funeral with viewing and burial in 2023 was $7,848. This means that we are losing against inflation approximately $4,233 per case. That is $423,300 lost for each 100 cases. We should price our services in a way that allows us to serve our communities.

Pricing cremation services. According to the NFDA, the median price for cremation services is $877 less than the median for traditional burial revenue in the United States. From the funeral home revenues I see, many funeral homes are experiencing a much larger gap between the average revenue from burial and cremation.

Most funeral homes have very large, fixed costs. Therefore, every case you handle should be assigned a portion of that fixed cost. If you pay $10,000 per month in interest on your mortgage payment, taxes on the real estate and business property insurance, and you do 20 calls per month, then each call (burial or cremation) should be assigned their fair share of that mortgage cost, or $500 each.

You should do the same with all expenses: electricity, advertising, insurance, employees, employee benefits, property taxes, building maintenance, and auto expenses. These expenses are the same whether you have a burial or cremation.

We have some work to do on our pricing, for sure. As a profession, we need to be sure that we understand the costs of each type of service we provide. Appropriate pricing is the key to having the financial working capital to meet the needs of our communities.

What to Do Next?

The funeral profession needs a reset. This topic is a concern at many national meetings I have attended recently. How do we reset in a way that is most beneficial for our employees, investors, and customers?

I believe it is in the following ways:

1. Revamp our price lists and price our services according to their costs, not in accordance with those of our competitors.

2. Put the right training, technology, and processes in place to ensure that our services meet the needs of grieving families. Focus on healing and recovery and less on the products we sell.

3. Review each of the points of contact with our customers. Use creative ways to achieve and continue a high level of relevance, significance, and financial stability.

There are few professions that have as long a history of providing vital services to people in need.

We need to take stock of our vast resources and employ our talents to continue providing these vital services long into the future.

Kara Gray Ludlum is a certified public accountant and a licensed Oklahoma funeral director. Her parents were also funeral directors, so she grew up in the funeral profession. She has been providing accounting services for funeral homes and cemeteries since 1991, and is one of the founders of Osiris Software.

This article can also be found in the July 2024 publication of American Funeral Director >>>

Since our inception, Osiris Software has been helping funeral homes, cemetery and crematory businesses prosper through innovative solutions and world class customer service.