Cost of Living? CFOs Count the Cost of Dying

The business of death is well and truly alive. With Baby Boomers nearing the end of their lives, academics have predicted a surge in the number of deaths in what academics have labelled “peak death”. This means busy times ahead for Australia’s funeral industry, which is finding itself in a state of flux.

Australia’s funeral industry is worth $2.2 billion with revenue is expected to rise by 1.9 per cent in the next five years, according to research firm IBISWorld.

One of the last holdouts to tech and competitor disruption, the industry is now moving on from its more traditional roots. Many family-owned businesses are being acquired by larger corporates and new operators are providing more online options to bereaved families.  

Amid it all is the cost of living crisis, which has seen prices of everything from coffins to flowers increase in the past 18 months. As such, for some families, such high costs at such a hard time translates not to a cost of living, but rather a cost of dying issue. 

CFO Magazine A/NZ’s Kate Jones spoke with three funeral industry leaders about how they are managing the changing landscape >

Lilli Gladstone, CFO | Propel Funeral Partners

Following the recent privatisation of InvoCare, Propel Funeral Partners is the only ASX-listed funeral company in Australia. It launched in 2012 when it acquired its first funeral home on the Gold Coast and today it owns approximately 200 funeral homes across Australia and New Zealand.

Many of the 50 acquisitions made in that time have been from family-run businesses, said Lilli Gladstone, Propel’s CFO.

“Like many industries, succession becomes topical and often vendors are third or fourth generation funeral directors and their children are now off doing different things,” she said. “They might be at university or just decide that they don’t want to work as hard as mum and dad did because they can see in a family business, particularly in an industry like ours, it’s kind of 24/7 in terms of when you’re called out.

“We’re providing a succession solution for family businesses who, for whatever reason, need a staged transition to exit, whether there are no children in the business or there’s four children and you’ve got two in the business and two not, I see we’re providing that ownership solution for them.”

Finance has played a leading role in the transformation of the funeral homes Propel has acquired. Gladstone and her team have introduced the homes’ existing employees, who are kept in the business, to automated systems for faster and more reliable data retrieval and collection.

“They’ve typically historically relied largely on paper, so in a very short transition period we’re able to implement systems and processes, which lead to more timely and accurate information flow,” she said.

“This all sounds very simple, but obviously when you’re used to relying on a lot of paper, it can be quite a game-changer for our funeral directors. Some examples are things like our funeral arranging software streamlines the death registration process with the relevant state-based birth, death, and marriage agencies, and that’s done through a portal. Our funeral arranging software pushes invoices from the arrangement process directly into our accounting system.

“The management dashboards that we use are largely automated and they’re reviewed business by business each month. So that enables us to make more timely and granular assessments of each business’s performance.”

Propel’s growth is expected to continue as it eyes off more acquisitions in the future. ‘Peak death’ will also see the company become busier in coming years.

“If we can capture data more efficiently, I think we can leverage off the existing staff that we have. I think we’ve been able to demonstrate that and in the early years, every time we added two or three businesses, we would effectively be adding finance staff,” Gladstone said.

“We’re not doing that now because we’ve got better systems in place to be able to leverage off.”

Mal Pittendrigh, National Director, Salvos Funerals | The Salvation Army Australia

Known for its second-hand clothes stores and charity work, the Salvos decided to branch out to funerals seven years ago. Pittendrigh suggested the idea in a boardroom meeting and was initially laughed at. 

“Then they thought, hang on, that’s not a bad idea – we’ve got capital and we’ve got clergy, so we could be funeral directors,” he said.

While it’s not one of the bigger players in the market, Salvos Funerals helps with 650 funerals throughout Victoria, New South Wales and the ACT, the company will soon expand into South East Queensland with a digital, low-cost cremations-only model. 

With a large retiree population in the region and the impending increase in deaths, Pittendrigh said the expansion is well timed.

“So we’re serving families every day, but yet we are looking to maximise our footprint so that we can serve more families, given that there will be more people passing away in the next 10, 15 years,” he said.

Thanks to integration with the Salvation Army’s finance and human resources teams, Salvos Funerals relies on just six full-time staff. It subcontracts services to other professional services including morticians and crematoriums, which helps to keep costs low when compared to a full-suite funeral operator.

Yet, Pittendrigh estimates costs have gone up with inflation and the average funeral price tag is now between $6000 and $6500. A low-cost funeral with a memorial without the coffin present followed by a cremation is approximately $4000 cheaper.

Today’s cost of living pressures has driven more people to the Salvos, he said.

“I think people are naturally steering away from the traditional funeral services at the moment,” he said.

“So we are seeing a push more towards that low cost piece anyway, which kind of works in our favour in a sense because people are coming to us because I think we get a fair go from a price point, but they can also trust us. Whereas there’s still a lot of cynicism in the industry about directors being a bit underhand and price gouging on coffins and huge markups.”

Cale Donovan, Co-Founder | Bare

Arriving on the scene in 2019, Bare is one of Australia’s newest funeral operators. As the name implies, it aims to provide a less complex end-of-life process. It also offers all digital paperwork and live updates so families can track the location and status of their loved ones. 

Donovan started the business with friend Sam McConkey after their own experiences of the funeral industry left them feeling nonplussed.

“We both experienced the traditional funeral process first hand and felt it was outdated, expensive, and rushed,” Donovan said.

“We wanted to offer a simpler, more affordable, and more compassionate alternative that makes a hard time much easier.”

The business expects to oversee 10,000 funerals this year. Such rapid growth in just five years has led the finance arm of Bare to innovate their systems. 

“As our business grows and becomes more complex and personalised for each family, we’ve had to build custom finance solutions that can help us to scale quickly,” Donovan explained.

“The funeral industry has the added complexity of customers being very vulnerable, and the expense is often significant – this means in all our communication, and particularly in relation to our finance team, we need to be led by empathy, whilst still being effective and efficient.”

However, AI is still not yet a major part of those innovations. Donovan said the company is taking a wait and see approach.

“Much of the automation we employ in our Finance team isn’t AI – it’s just robust systems and existing logic,” he said. 

“It doesn’t make a lot of sense to invest heavily, given a lot of AI technology will be ubiquitous in a short space of time.”