Are you struggling to increase your funeral home’s bottom line profits? If so, you’re not alone. Most funeral home owners are operating on shrinking profits and their marketing doesn’t seem to help. In this lesson, I discuss how to maximize your bottom line by applying the 20/120 rule to your business.
AI-generated transcript of The Key to Maximizing Your Bottom Line
Rewrite the following content using proper sentence structure and paragraphs. Eliminate filler words. Use a grade 9 level of writing. Your role is a marketing consultant giving advice to funeral home owners.
Hi, this is John Callaghan, and this week we’re going to talk above the key to maximizing your bottom line, as in your business profits.
We’re not a charity, we’re a for-profit business, and I know some people in this industry still think of profit as being a dirty word, but it’s not because without profit, you don’t stay in business very long.
Last week I gave you a series of options for growing your business, and those options were to look at the low-cost traditional funeral market, the top rated funeral market offer, unique farewell services, and multicultural. The traditional market is declining in most of the country and with direct cremation you just don’t make a lot of money there.
The key to maximizing your business profit, your bottom line is something called the 20/120 rule. There’s a perception that all of the calls that you do are of equal value. They might be of equal emotional value, but they’re not of equal financial value.
You’re going to make a lot of money on some calls. You’re going to break even on some calls, and you’re going to lose money on some calls. That is how it works.
There’s an expectation that you’re going to make a profit on most of your calls. Actually, no, that’s not the way it works out. If you really look at your numbers, do a good cost accounting on every call, every family you serve, list them out.
If you do 200 services, list them out. What’s your revenue? What’s your true cost for serving that family?
What you’ll find, it looks more like the 20/120 rule that I’m about to explain. On 20% of those calls, they’re going to generate 120% of your profits. If you ended up with $200,000, you’ll have actually made $240,000 off of those 20% of calls.
You’re going to make more profit off of the 20% of those people than you’ll end up with at the end of the year.
On 60% of those calls, you’re just going to break even. You make no money off of those families. You’ve served the families and done a good job, but you didn’t really make any money.
Then on 20% of those calls, you actually lose the 20% that you made off of those first group of families.
You make money, you break even, and you lose money, and that’s how the math almost always works out. If you look at all the calls on your log, every family that you’ve served this year, 20%, you made money, 60%, you broke even, and 20% you lost money.
The key to maximizing your bottom line is for that 20% where you make a profit attract more of them, you need more of those families. Marketing’s job is to attract more of those families.
The 60% where you break even, you need to optimize those calls in the sense that you need to look at your cost structure.
What am I really spending there? What are my costs to serve that family? How can I make more money with that family?
Maybe it’s a matter of changing suppliers for things like your caskets or your urns. How can you make more money off of that group and how can I then offer them more?
Many of those families would buy more from you if you offered something more. Can I offer a reception? Can I offer different types of services to be of more value to them?
So that 60% group where you’re breaking even, optimize your cost structure and offer them more.
And then the 20% where you’re losing money, use your marketing to push them away, attract less of them.
Marketing’s job is to attract the ones you want and push away the ones you don’t, and that’s a good job of marketing is to balance that out for you.
That’s the key to optimizing your bottom line profits, the 20/120 rule.
I’ll be back next week with another training tip.
Bye for now.
ChatGPT Summary of The Key to Maximizing Your Bottom Line
Hello, I’m John Callaghan, and today we’ll discuss the critical strategy for enhancing your business profits. As owners of for-profit funeral homes, it’s essential to understand that profit isn’t a negative term. Profitability is the cornerstone of business longevity.
In a previous session, we explored various growth strategies, including catering to the low-cost traditional funeral market, offering premium funeral services, creating unique farewell experiences, and serving multicultural communities. Despite the appeal of traditional funerals, they’re in decline and provide minimal profit margins due to alternatives like direct cremation.
Now, let’s focus on a concept called the 20/120 rule, which clarifies that not all services provided hold equal financial value. They may hold equal emotional value, but their financial impact varies significantly. Essentially, you will encounter three types of calls: profitable, break-even, and loss-inducing.
Upon examining your service log and conducting thorough cost accounting for each family served, you will notice a pattern. About 20% of your calls will generate 120% of your annual profits. For instance, if your total profit is $200,000, $240,000 will have come from just 20% of the services. On the other hand, 60% of the services will merely break even, and the remaining 20% will result in losses, negating the profits gained from the first group.
The goal is to attract more families from the profitable 20%. This is where marketing plays a pivotal role.
For the 60% that only break even, you need to scrutinize your costs and identify ways to enhance profitability, such as changing suppliers or offering additional services like receptions that families may be interested in.
As for the 20% that lead to losses, your marketing should aim to deter those calls.
Effective marketing is about drawing in the profitable clients and steering away the less profitable ones. This balance is what defines successful marketing and is the essence of the 20/120 rule.
Join me next week for another tip to further optimize your profits.
Goodbye for now.
