By Thomas A. Parmalee
As the new year begins, it’s time to reflect on what we’ve seen in funeral service over the past 12 months as well as what funeral directors must do in the months and years ahead to set themselves for success.
To help move the profession forward, FuneralVision.com reached out to three funeral professionals who love what they do: Jake Johnson, president and CEO of Johnson Consulting Group; Matthew Bailey, a sixth-generation funeral director and the president of Connecticut Life Tributes; and Todd Angood, who was an executive at Lane Family Funeral Homes in Ohio for many years before it was recently bought by Heritage Family Funeral Services. Now, he’s a self-employed consultant advising select clients.
The Federal Trade Commission has decided to retain the Funeral Rule, which came up for review in 2020. It also published an Advance Notice of Proposed Rulemaking asking for comments about seven issues under consideration. What do you think about the rule and potential revisions?
Johnson: The biggest thing seems to be the online placement of pricing which is interesting to me. Transparency is good, however, comparing one funeral home to another based on price is not a good indicator of service level. All that we do is related to service. Why is posting our prices online is helpful? I’m not sure. If we were all selling the same product that you can touch and feel, I would get it. The fact is we all provide a service that can vary greatly based on training, staff levels, etc. If posting prices on merchandise is done, perhaps I could see that. The service side though … there are too many variables and differences.
Bailey: Based upon the statements of the commissioners, I would be surprised if they do not require funeral homes with websites to post pricing online. I believe states where it is already required, such as California, have experienced compliance issues with that. I think it will throw a large part of the profession into a brief, panicked tailspin before it just becomes part of the status quo.
Angood: When the rule came into effect in 1984, the year I graduated from mortuary school, I think funeral directors by and large were worried if they have to make their pricing public, they were going to lose calls and lose business – but it didn’t happen by and large.
It’s just my personal opinion, but I think any funeral home with a web presence would be foolish not to put their prices online. Look at the world we live in. But I would rather see funeral directors be proactive and do it on their own, so it is not a government mandate. We all know when the government overreaches, that overreach becomes a little bit more.
To a certain degree, I think funeral directors are uncomfortable having their pricing out there because a lot of them, when asked by anyone why they charge what they charge, they can’t really explain or justify their prices. It is a hard thing for them to wrap their head around. But as you well know, there are a lot of fixed costs that you can’t change in funeral service, which is a 24/7 business. As far as the rule goes, I have never had a problem working with what it required.
What predictions do you have for the year ahead?
Johnson: I thin we will see increases in wages and highly competitive searches for good talent. The wave of baby boomers dying will start/continue. Lastly, we will see the growth and consolidation of online, low-cost cremation businesses.
Bailey: In terms of the challenges that everyone talks about (staffing, changing consumer preferences, etc.), it is certainly not going to be any easier. I think that will lead to increased frustration and exhaustion among longer serving funeral directors and owners and we will see an increase in retirements. In some markets, I think that means we will see the recent increased activity among corporate and regional consolidators continue. In other areas, owners will find themselves without real transition options, and they are more likely to see their building become a law firm or pharmacy.
Angood: I’ve said for several years, the more things change … the more they change.
I remember back in the early days of my career when SCI and the Loewen Group were the major acquisition players and they were going around buying anything and everything – and it was easy for them to do it as while they may have had some cash outlay, they would throw in company stock into the deal. A lot of funeral home owners who went the company stock direction ended up getting crushed when the stock tanked – suddenly that $6 million you received was only worth $2.5 million. Later, consolidators became more selective in what they were buying.
Now, you have private equity firms that seem to have a limitless supply of cash come in and swoop things up and say, “Here is the cash outlay, and we can take over from here.” So, I do think that the private equity aspect will continue and make it very interesting the next couple of years. I mean, who would have thought a private equity firm would scoop up Batesville?
I also think there is a very depleted supply of licensed qualified funeral directors out in the marketplace to hire – and this is all over the country. Funeral home owners over the last 10 to 15 years with rising cremation rates have been forced to do more with less. Now, they are being forced to do even more on their own because not only is there less revenue but there are fewer employees who can help. As a result, I think we’ll see more owners reaching out and seeking specialized help, whether it be a consultant or maybe someone who has tremendous event planning skills who can work on a contractual basis.
Overall, funeral directors will be pushed to break away from the norms they have tried to hang on to, and as we all know, funeral directors are resistant to change.
How has this inflationary environment affected funeral homes in the past year and what do you expect in the year ahead? What can funeral homes do to optimize their financial health in this environment without placing undue burdens on consumers?
Johnson: Labor costs continue to go up. Customer service delivery is key! Otherwise it’s all about price. The choice is yours. Financial health comes with budgeting, strategic planning, incentive compensation plans and the packages and options you offer to families.
Bailey: It has definitely been a challenge. Costs have gone up and will go up. Many of the funeral directors I talk with absorbed the increases, but I don’t think they will much longer. Prices will have to increase. In terms of protecting margins and cost of goods, I think that it is worth the time to explore alternative options if you are able. Some areas have less options than others; however, the continuation of buying from the same fluid rep as your dad did may not be the best approach. I know we are a business that truly revolves around loyalty to professional relationships, but that loyalty does not always lead to competitive pricing.
Angood: The days of funeral homes being able to absorb inflationary pressures based on their call mix are over. They can no longer make a little tweak to offset an increase in casket prices or utility expenses. You need to take a good long hard look at your pricing. Unfortunately, there are still a lot of companies out there that simply jack up the prices of their caskets but guess what – everyone is selling fewer caskets.
Funeral directors goofed up the whole cremation thing 30 or 40 years ago, treating it as a cheap disposal thing and they didn’t price it accordingly because the burial side was making so much money. But if we did the same thing today, if a 200-call business ended up serving 199 cremation families, it would have to charge $1.4 million for that one burial.
Funeral directors are beginning to see that they can’t keep this going. The pricing has to start catching up with the service offering. If your administrative assistant answers the phone and takes a death call for a traditional funeral, there is a cost associated with that administrative assistant, the building, the telephone line, the insurance you pay on a daily basis, etc. And then when they take another phone call in the afternoon and take a cremation call, you are not paying them any less or any less for your utilities or insurance. The revenue has to start catching up with reality.
This is one of the reasons consolidators are looking at bigger firms, because they are buying a revenue stream and an economy of scale.
What lessons related to the pandemic must funeral homes apply moving forward?
Johnson: Funeral homes must be scalable with staff and processes — or else they will get overwhelmed quickly.
Bailey: Learn new things before you need them. We had a surplus of PPE from when we were preparing for an Ebola outbreak. We had everything needed to livestream services in place years before COVID. The last thing you want to have to do is scramble. Keep learning from within and outside the profession and remember the Scouts’ motto to “Be prepared.”
It certainly would not hurt to look at each component of your business operations and evaluate what changes were made as a result of COVID. Look at how you do preneed, making arrangements, welcoming guests at services, community outreach, aftercare – all of it. Figure out what changed and ask yourself if it was positive or negative. See if there are areas that you can return to for a higher customer service level. We see bad customer service everywhere after the pandemic began, and I’m sure in some areas, if we are honest with ourselves, funeral service is no different.
Angood: When the pandemic hit, everything was shut down, including funeral home gatherings. We created a DocuSign account and had Zoom meetings just like we are talking right now – and it was interesting from the standpoint that it made our staff more efficient. But the family members missed that face-to-face personal contact with the funeral director, and it was also difficult for funeral directors, who facilitate a gathering of people to say goodbye to the deceased – that is the whole purpose of our being: to create meaningful events and gatherings for friends and family. That went away, and it was very difficult for us to get used to.
Given that, we geared ourselves up to the idea that a lot of those families would come back to us in several months … and it did not happen.
I can understand this based on my personal experience. Right in the middle of the pandemic, I had to have emergency back surgery, and I was unable to travel back to Michigan, which was five hours away from where I was living in Ohio, to look in on my elderly parents. Then, my mother fell and broke her hip. And then two days later, after my mom got home from successful hip surgery, my dad’s Parkinson’s disease took a turn for the worse and he died. After my dad died, we couldn’t really have a public gathering. Later, when my mom and brother said they wanted nothing to do with having a funeral, I was almost relieved because I was so burned out from the two years prior of taking care of everything. We ended up placing my dad’s ashes around a lake where he went fishing and we had a private gathering – that was the extent of our service. I recognized in my mind that my dad is gone, and I miss him terribly, but I did not want to have a funeral at that point. So, I can relate to this personally because it happened to me and my family.
I also think we have to figure out the happy medium between the buying public wanting to engage with the funeral home where they are comfortable – and not necessarily meeting face to face to get initial arrangements made. The funeral director has to unlearn the notion that they must sit down around a table at the funeral home. Maybe you can make initial arrangements online and they go over to a family’s residence and still create something. That whole mindset goes against the mindset of a typical funeral director.
What was the most interesting new product or service you saw introduced into the profession over the last year – or what product or service do you think gained the most traction?
Johnson: The most interesting thing I have seen is how funeral homes have adopted Zoom, webcasting and other forms of technology.
Bailey: Apps allowing families to GPS mark where they scatter cremated remains was a good introduction, I think. While it is not permanent memorialization, at least it provides “a place” that people can reference or return to, or future generations can be aware of.
Angood: One of the more interesting products I’ve seen become available recently is PartingStone.
We signed on with them when I was with Lane, and I thought, “What a neat idea.” From my own standpoint, if it had been available at the time my dad died, I may have done that. I think it is very unique and attainable as opposed to having your ashes shot in a rocket into outer space or turned into carbon for a diamond ring. It is realistic, attainable and permanent, and the pricing is reasonable, which is not to minimize the jewelry.
When I was reviewing funeral contracts, PartingStone was becoming a more popular option from what I could see. I was beginning to see it cropping up more on sales contracts. It reached another niche of the market that maybe was looking for something not quite traditional.
What is the No. 1 thing that you think funeral homes are struggling with right now – and what would you suggest would help solve the problem?
Johnson: Labor! We must evaluate state laws, our compensation plans, etc.
I would also add that we are a 24/7 business. The only way to address opportunities and threats is to have time to think critically. Think about where your best time is spent. We all have the same amount of time in a day. Those who are successful know how to maximize it the best. Stop trying to think you can just do everything yourself.
Bailey: I was part of a panel discussion on recruiting and hiring at the NFDA convention in Baltimore. The room was pretty full. I hear people routinely worried about the applicant pool they have to work with. It’s hard to see it getting better unless we explore some changes. How do we train and educate? What tasks truly require licensure? Are there additional licenses that should be offered for different aspects of what we do? Does teaching to a test really help us in the end? I think we need some solid data on the increasing death rate, decreasing applicant pool and what that all will truly mean for those working in funeral service if we don’t think outside the way we have always done things.
Angood: I think the biggest thing they are struggling with revolves around a changing consuming public that wants less and less of what a funeral director has to offer, combined with all the business functions that need to be taken care of, which they are struggling with immensely. This leads me to think that funeral home owners probably need to start looking more toward specialized employees.
What do you expect to see in the mergers and acquisition area in the next year?
Johnson: I think consolidation will stay strong, however, as interest rates continue to rise, that could eventually put a strain on things. I think 2023 will still be strong, but we may see a slowdown near the end of the year. If case volume keeps staying strong or growing, I think buyers will remain bullish.
Bailey: There has been a lot of activity and I think there will continue to be. I think the usual companies – Park Lawn and Foundation Partners – that make a lot of news will continue to do so. The regional consolidators will likely continue to grow as well.
Angood: I think we will continue to see acquisitions increase over the next three or four years. Back in Youngstown, Ohio, during our heyday there was a population of over 600,000 and now it is down to 100,000, but there are still the same number of funeral homes. Lots of owners are 70- years old and they have had to close up shop or hope they can merge with someone.
The other reason I think you will see acquisition companies remain active is a lot of funeral home owners don’t have someone in the family to take over their company. The Lane business had been in the family for 162 years, but Joe didn’t’ have any family members interested in the business. I think we will see more of that. Successful acquisition companies will come in and buy clusters of funeral homes like Heritage did here.
Have you seen higher levels of burnout in the profession over the past year or two? How can funeral professionals revitalize their mental health while continuing to serve families? What can funeral home owners and managers do to help make this happen?
Johnson: Refine processes: Make them scalable and easy to understand and teach. Hire the best people you can and pay them well. There should be company gatherings that don’t involve business. Let people unwind. Perhaps investigate different scheduling during the week. Provide a regular cadence and offer kudos for good work. Review your customer surveys together and applaud your accomplishments. Take some time to unwind … it’s not just about the business, it’s about the work life, the employees and their families. Take care of your people and they will take care of your families — and that will take care of you.
Bailey: There certainly seems to be. Between burnout and younger generations having different expectations, it will be interesting to see how we operate 10 years from now. Funeral homes are going to need to explore systems and operations that allow greater efficiency. We also may move to a point where there is greater cooperation between colleagues and competitors to establish the ability to meet client demands and expectations.
Angood: Burnout is real – and we were beginning to see it come fast and furious even before COVID. The pandemic just accelerated it.
The person who can figure out how to make funeral service a 9 to 5 job will become a gazillionaire, but it is not going to happen.
I think the typical funeral director on-call schedule should be altered because that work-life balance can easily get out of whack. Maybe it is a situation where you are on call to answer the phones, but you engage a trade embalmer, so you don’t have to go out in the middle of the night – you only need to facilitate that with a trade embalmer. Or maybe it involves changing schedules around so employees can have a four-day weekend every other week. There are a lot of things that can help overcome that burnout, but it will take some innovative thinking from the younger people coming up through the ranks and attaining manager positions.
What do you think will happen to the cremation rate in the year ahead?
Johnson: It will continue to rise at a steady rate. People are used to the steady rise at this point and know what’s going on.
Bailey: It will go up and continue to go up each year. If there is a year it does not, it will be an anomaly that will be corrected in subsequent years.
Angood: I’m guessing it will inch up 5-6% over the next three to four years.
If you say you are at 50% cremation, my first question would be, “Of that 50%, what percentage is just a direct cremation?” And that is usually an alarming number. I figure if you have a 50% cremation rate, if 10-12% of that is direct cremation, you are probably OK. But I think for a lot of firms, 40% of their cremations are direct cremations. That is what is alarming in the profession. How do you monetize that for lack of a better phrase?
The low-cost providers out there … we have firms in this area who are offering direct cremation for $695. I don’t know why it is worth getting out of bed at night for $695 when at least half of that is going to fixed costs and you may be walking away with $150 in your pocket. Is that what you want to be doing?
Where do you see the biggest untapped opportunity for the profession and why?
Johnson: Online arrangements and life tribute centers rather than traditional funeral homes.
Bailey: Many funeral homes still do not have certified celebrants or a solution for the “religious nones.” This group makes up three out of 10 people in the United States – and many are not being offered a service option that speaks to them. We need to start doing better today before we train this group in a negative way as we did with the early cremation adopters.
Angood: I do think we will continue to see firms realize that it is OK to raise their price on direct cremation instead of having it artistically low. I think usually what happens is once one firm raises its prices, its competitors do as well. Whether we raise or lower our prices, we will still be dealing with discounters – those guys will always be out there. So, a contraction in your business to a certain degree is not a bad thing. Firms used to want to be vanilla and serve everyone, but I don’t think we can do that anymore. It is OK do fewer calls if you have a better revenue-generating segment of the population.
An example of that is I see companies that offer GoFundMe pages. I’m not disparaging folks who are in a bad financial situation where they can’t pay a bill, and we used to be approached about those pages. And we said, “No, we can’t do that.” If you have an $8,000 or $9,000 funeral with $1,700 in cash advances, I can’t afford to loan that type of money while I’m waiting for people to make $10 and $20 donations online.
Funeral homes must realize that it is OK if they are not doing as many calls as their competitors, so long as their receivables are under control and they are generating the revenue they need, they will be just fine. I think the profession is moving toward that. Saying you did 20 more calls than your competitor doesn’t pay your bills. Generating revenue from people you serve well is what keeps your doors open.
How can the profession encourage more people to enter its ranks?
Johnson: Pay more and lower barriers to enter the profession.
Bailey: We need to start talking up the profession. I was speaking to a class of mortuary science students and one of them told me that I was the first positive voice they had heard from a funeral director. Everyone else told them not to do it. When you encounter a friendly high school student at the drive through or in the coffee shop, a simple, “You’d make a good funeral director!” may go a lot further than you would ever think.
Angood: Finding qualified people in any profession is hard – and the folks coming into our profession have changed. Their demands, requirements and what they will tolerate are way different than the previous generation. I think what may help is getting past the idea that we need traditional licensed funeral directors – maybe some of what we do can be provided through full-time non-licensed assistants.
Some of it goes back to the fact that when I was in mortuary school 40 years ago, I had a class of 110 people, and probably 70% of those people came from a funeral home. It was the family business, and I was kind of an outlier being a first-generation funeral director. But I think it is the opposite now. By and large, a lot of the people studying to be funeral directors have no family members in the business. So, moving forward, I think funeral homes will need to look at more specialized employees.
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