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Leading Indicators is a CFO Brew series on important or interesting KPIs. Is there a unique KPI in your industry you’d like us to know about? Get in touch with us at [email protected].
Harry Drew is the senior vice president and CFO of Legacy Funeral Group, a collection of funeral homes across the southern US.
CFO Brew recently spoke to Drew about planning for growth in an unpredictable industry, how he forecasts, and why surveys are good for a company.
What is it like being the CFO of a funeral company?
From an accounting standpoint, it’s kind of the same stuff you’d have in any other company. I would say that some of the biggest quirks or things that are a little different on the accounting side of the business is that we do deal a lot with deferred revenue, and we have trust funds we have to account for.
But on the other side of the business, part of what to me has always been interesting with this industry is, our primary growth is through acquisition. We do have some same-store growth at our funeral homes, and we also own 10 cemeteries. So that’s where “the organic growth” comes from. There’s few large players in our industry, and so sometimes you’re competing with them for those acquisitions.
I would say the one thing that’s different in this industry, from some of the other industries I’ve been in is we’re all very competitive. We compete with each other, and we fight for all the market share and business we can get.
When a tragedy strikes, or even if another funeral home has a problem and they need help, in this industry, competitors come together and help each other. Probably to me, that’s the big thing that is different than other industries.
Are there any interesting KPIs or leading indicators you keep track of?
One of the KPIs that we monitor, which other people monitor as well, we monitor our market share. One thing we monitor is death rate. If business is up 5% this year, you’ve got to figure out, what the death rate is? Is [business] up because more people are passing away, or is it we’re taking business from somebody else?
We also look at the forecast of the death rate. Where it’s going to be two, three, 10 years from now. Because when we’re doing acquisitions, one of the things we look at is population growth or decline in certain communities. Where it’s a little different is we look at not only if there’s population growth, but what is the average. We look at that stratification of the age bands that the population is growing in…There’s a lot of communities around the country that are growing, but if the growth is all in young families, 35 to 45, now is not the time to build a funeral home. Because you’re not going to see any uptake in business for another 25 years or 30 years.
How did the Covid-19 pandemic affect your business?
One of the positives is it pulled this industry, kicking and screaming, into the 21st century. The use of DocuSign for signing contracts because some families weren’t comfortable coming in. The use of Zoom to be able to talk with families…The big thing, in our industry, is live streaming of the funeral. We were starting to do a little bit of it. But, overnight, we flipped the switch. We actually worked with three different technology companies to bring live streaming to every one of our funeral homes, and it’s basically a standard offering now.
What are some of the ways you evaluate the success of the business?
There’s all the normal financial metrics: your profit, your sales, etc. As I said, we use market share as a kind of an indicator of, are we doing better than our competitors? But we also use customer surveys to get feedback on how we’re doing. And I’ll be honest, I’ve actually been very surprised. Over the last couple years, our people at our funeral homes have done a great job of explaining to the family members who are making the arrangements, “Hey, probably about a week, two weeks after the funeral, you’re going to get a survey, and we really want your honest opinion so we can make, we can make things better for everybody in the future.” We’re getting 30%, 35% response rate, which is phenomenal on customer surveys.
If there’s one that’s a problem or brings up a problem, one of the things we try to do is reach out to that family to say, “Okay, well, you know, you had this issue. What can we do to make this right?” To me, that survey is a great view of what’s going on from a health of a business standpoint.
One of the things we try to make sure and reiterate to all of our associates across the company is that surveys are a learning experience. If we did make a mistake, the big thing we’ve got to do is make sure not to do it again. And that’s what makes it better.