We all have heard the explanations as to why those families we serve are turning to less expensive alternatives upon the death of a loved one. Mentioned a number of times are such excuses as a mobile society or relaxed religious mores. Really? Perhaps not. Maybe someone has to say the truth. The real reason families are turning to less expensive alternatives is because of financial considerations. In other words, it’s about the money. There, now it’s been said.
Let’s look at and understand why this is indeed the most significant reason why heretofore traditional patterns are changing. Consider the startling revelation that nearly 70% of our population does not have even $1,000.00 set aside for any type of a crisis. In fact, 60% of our population does not have $500.00 available for an emergency auto repair. With this reality, you can see why the experts are predicting a major financial crisis in the future.
Also, we are not suggesting 70% of our population is living below the poverty line. These people are our friends, neighbors, colleagues, and members of the service clubs we belong to, essentially everyone around us. So how do these people survive? The answer is simple: by credit. Have you ever been in the drive thru lane at a fast food restaurant and noticed the car in front of you buying their burgers with a credit card? Sure you have. Credit is all around us. However, there is one exception: the funeral industry.
Let’s consider the Federal Reserve’s most recent G.19 report that shows credit issued domestically as of this writing is $3,787.9 billion dollars. (That is with 000,000,000 (nine) zeros folks!) Now, we are in an industry which, depending on the source of data, is between 12.6 and 20 billion dollars annually. Yet there is no appreciable evidence of available financing. Are you starting to see a major problem with our industry? If not, you certainly should.
Please note that we are not even remotely suggesting you start offering credit to the families you serve. As funeral professionals, we are not equipped with the prerequisite knowledge to successfully achieve success in this area. Also, from a cash flow and profitability perspective, this would prove disastrous for most firms.
So why consider financing for your families at all? For the express reason that the expense of a funeral or memorial service poses a real challenge to many families. They may lack readily available funds as noted previously or the sudden expense may require a disruption in the family’s financial investments. By removing what is often an insurmountable financial barrier, the family will be free to focus on the life of their loved one and be able to celebrate that person’s life in a dignified and meaningful manner.
Aligning your funeral home with an ethical lender would be most beneficial from a cash flow and profitability perspective. Average transaction values may increase appreciably with such a collaboration as well. Unfortunately, many lenders would not be good candidates nor be interested in such a relationship as they are unwilling to forgo the collateral element that they would feel necessary for transactions such as these.
There are, however, some lenders who are more willing to engage in these types of credit transactions. The trick is finding and working with one who is ethical in their dealings. Ethical would be the opposite of what is referred to in the consumer finance industry as “predatory lending.” Predatory lenders are those lenders or finance companies that charge exorbitant fees and interest. It is most unfortunate that many lenders or finance companies fall into this category, so much so that there are some states such as New York or Connecticut that have usury laws on the books that prevent unscrupulous lenders from practicing in their states.
Remember, by developing a financing plan for your families utilizing ethical lenders, you will achieve outstanding benefits both to your firm and the families you serve. However, working with or referring your families to the wrong lender could have very negative effects on what typically is multi-generational good will you have strived to develop over a lifetime of good works.
In our next article, we will discuss how lenders and finance companies are not created equal and how to identify and choose the most ethical and appropriate lending partner for your firm. FBA
Bruce A. Moore is a licensed funeral director in the State of Connecticut and has enjoyed a very successful entrepreneurial career in the consumer finance industry. Bruce is the principal of MemorialFunding.org, presented by Director Resources, a cash flow / profitability management firm working exclusively with funeral professionals nationwide. He may be reached by email at [email protected] or by calling Bruce at 860-882-0288.