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Funeral Costs Increase Five Percent In 2011, Says Citrin Cooperman Survey
An annual survey of funeral home owners and directors revealed that the average price for aftercare services rose five percent in 2011 as profitability remained a critical issue for most firms.
The price increase comes a year after Citrin Cooperman’s 2010 survey of funeral home executives indicated that prices remained flat. Survey participants this year reported an average increase of six percent for direct cremations and five percent bumps for immediate burials, two services that typically yielded funeral homes minimal profits.
“The price increase is positive news for an industry that has seen its profitability erode over the last decade,” said Ed Horton, partner in charge of the Funeral Industry Services practice at Citrin Cooperman. “A portion of funeral homes, however, still believe their pricing to be below market average. These are the homes whose survival is at risk.”
Citrin Cooperman annually surveys funeral home owners and directors and this year’s responses comprised information from more than 360 funeral homes primarily from New York, New Jersey, Pennsylvania and Connecticut.
Encouraging signs for the industry arising from this year’s survey are various indications that more funeral directors are embracing changes within the industry. For the first time in the history of Citrin Cooperman’s survey, which has been conducted for more than 12 years, “cremation”
According to the survey, there appears to be a growing consolidation trend within the industry. The percentage of survey participants owning two or more funeral homes increased again in 2011, and now accounts for 37 percent of those surveyed. A greater number of funeral home directors surveyed this year – 27 percent -- are considering expanding their homes or acquiring a funeral home, vs. 21 percent last year. Those considering selling also edged up – seven percent vs. five percent last year.
“These figures indicate the different types of owners within the funeral home industry,” said Horton. “There are those that are having trouble surviving and look to sell, while others see a buying opportunity in the marketplace.”
Other key findings from this year’s survey include the following:
• Average salaries for most funeral home employees stayed steady or declined slightly compared to 2010 figures. The notable exception is directors with more than 15 years experience for whom average compensation rose again this year.
• More than 60 percent of those surveyed say they know the value of their business, but less than 50 percent have a formal valuation. Fewer still have an exit strategy or a formal plan to transfer ownership.
• Web sites continue to generate business. More than 80 percent of funeral homes have web sites, and of these, about 75 percent have generated calls from families who viewed the site.
• More than two-thirds continue to guarantee or lock in pricing as a standard procedure, a practice that squeezes already reduced profit margins.
Pre-Need Funding and Arrangements
• The value of pre-need accounts rose significantly. On average, survey participants said these accounts were equal to 83 percent of their annual revenue, an increase over the 64 percent reported in 2010.
• Funeral directors are getting better at establishing policy for payments. In 2011, “only” 16 percent reported a lack of a policy, compared to 24 percent in 2010. Amazingly, more than 20 percent of homes require no advance payment of any kind.
Knowledge-Based Funeral Services
• The concept of knowledge-based services has stalled as few funeral directors have determined how to charge for these services. Instead, they give them away or charge for them indirectly.
“Funeral directors continue to wrestle with changes in the industry, with varying degrees of success,” said Horton. “We find that those best at adapting to changes inside and outside of the industry are the ones best positioned to not only survive, but to grow.”
About Citrin Cooperman
Citrin Cooperman is a full-service accounting firm, providing attest and assurance, tax, business advisory services and valuation and forensic services to clients in New York, New Jersey, Pennsylvania, Connecticut and the Cayman Islands. Citrin Cooperman has deep experience in a number of industries and areas including real estate, entertainment, staffing and executive search, medical and dental, professional services firms, restaurants, and funeral homes. The firm, founded in 1979, is an independent firm associated with Moore Stephens.
Citrin Cooperman also can be found on Facebook and on Twitter @citrincooperman.
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