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Steven Palmer Bio

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Trending 2014

Posted by Steven Palmer on February 1, 2014

“It is not the strongest of the species that survive, nor the most intelligent, but the ones most responsive to change.”        –Charles Darwin

 

  When you look at “trending”, to see what the public is looking for, your mind should open to many new ideas.

  Our websites have to keep up with what the families set up other on websites or Facebook pages on their own. I try to be proactive and tell them “I have it covered, give me what you need and we will centralize all contacts.” (Why do you want competition for your website?)

  These thoughts and more led me to a conversation with Dan Isard, founder and president of Foresight Companies, about the direction of the future of funeral service. Dan has watched trends since 1974 and is not afraid to prognosticate on some of the inclinations I put forward.

 

S.P.: SCI (Service Corporation International) purchasing Stewart Enterprises (and any other competition they can). Their need for grouping doesn’t allow much competition in these markets.

D.I.: Steve, the other side of the SCI/Stewart thing is it is actually good for competition. Tell me the markets where SCI grows market share against an indy? I can only think of 1, and that is because the Indy thinks he should control the market and SCI is employing the former owner who likes the big bonuses he is getting. Frankly, in most markets SCI or Stewart would buy a 300 call firm, against a few 150 and 100 call firms and within 5 years SCI is down to 200 and the others are now on equal footing. Your observation I agree with but the conclusion I disagree with. The only area where this is a problem is where there is a combo, and then whoever is the combo operator they will control the market.

 

S.P.: Messenger buys Deaton-Kennedy (shrinking market and rising costs means consolidation).

D.I.: Yep. Agree.

 

S.P.: Small funeral homes (independent owned, 75 calls or under) selling or closing.

D.I.: Small funeral homes are going to have problems surviving. In the 1980’s with 98% casketing, it was near impossible for a 50 to 75 call business not to make a profit, however small. In the 2014’s and beyond that same business with 50% cremation or more, and maybe 60% casketing, is going to be very tough to be profitable and remain in business. If any of your readers have lived anywhere near I-95 north of Baltimore, they know what the “Greek Diner” means. These are places with fabulous menus, amazing desserts prominently displayed upon your entrance, and modest prices. These businesses are not really businesses, they are production lines to pay a mortgage. When the proprietor sells his business he is selling this for not much more than the real estate value. He worked his entire life to pay off a mortgage. His retirement is based upon the growth in the real estate values. This is what the funeral business was in general pre-1980. It is what the 50 to 75 call business will be in the very near future again. Those are really not businesses, they are people buying a job.

 

S.P.: Dodge outsourcing most of its manufacturing, lower demand and much higher government costs make it inevitable.

D.I.: I can’t speak to the government costs but any manufacturing, especially one of a carcinogen, is problematic; especially with a declining number of bodies being embalmed each year.

 

S.P.: The questionable future of Genesis Caskets (the big boys are suffering and the start ups are not faring well).

D.I.: This was not a questionable future, this was a stupid start-up. Like selling timeshares on the Titanic, after the bump in the night.

 

S.P.: In prearranging services, can a funeral director still offer a guarantee?

D.I.: As to the prearrangement guarantee, this is and has been a fool’s play forever. Whether interest rates were 10% (as in the 1980s) or 1% (as now) the funeral home has never been able to make this guarantee. Funeral home managers did this because they didn’t know what their costs were. Many still do not but intuition is taking over in a low interest rate environment. The guarantee is something promoted by those that are afraid of not getting a call, or those that think their competitors that offer it will get many if they don’t match it. Insurance company leaders have been breaking ranks with the guarantee for the past decade and now one company is offering an alternative funding solution to overfund, so as to protect against the guarantee. It is a matter of doing what is right.

  Funeral home owners can do away with the guarantee very simply. They can say to a consumer, “I have two ways to write up this preneed. Let me ask you one additional question. If there is an excess in the account, do you want that excess to go to your family or to my funeral home?” 95% of all consumers will be shocked by the question but reply, “To my family!” The arranger then says, “That’s fine. We can do that. Any excess will go to your family. If there is a shortfall, your kids can make up any difference or choose a lesser casket, or something else.” If the family replies, “But Tom, the FD down the street, guarantees his preneeds!” The arranger replies (with a smile on his face), “Yes, Tom wants the excess to go to his funeral home!”

  The guarantee is and was a loser. It is getting to be a bigger loser as the costs of operation grow at a rate greater than the interest earnings of the funding company.

 

S.P.: What other trends do you see?

D.I.: The Pinnacle of Values. Valuation is a mathematical formula. As Average Rev/Call flattens out (due to improper pricing of cremation services) and overhead (especially salaries and benefits) increases, that results on lower EBITDA [Earnings before interest, taxes, depreciation and amortization]. Lower EBITDA results on lower values; Valuation for many funeral businesses are going down.

  The labor force. We need to rebuild our labor force which is a holistic rebuilding starting with our licensure and that results in a change of our education. We cannot focus on embalming. We need to have event planners with their social skills come in and make funerals worth attending. We cannot tell these socially skilled people they have to go through mortuary school and embalm 25 bodies to make arrangements. We see some states such as Florida that are creating more relaxed “Funeral Associate” categories of employment, but others such as Arizona and Washington, are doing away with the long term almost licensed category.

 

S.P.: Thank you Dan and may you all have clear vision to face your own 2014.

 

  “We don’t predict the future, but we do know that the next five years will not look like the last five years. That just doesn’t happen. Markets change. And our results over the next three years will not replicate the last three. They never do.”          –John W. Henry


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