A funeral home owner in the Triangle told me last spring that his preneed program "wasn't really making money." He pulled up a spreadsheet — commissions in, salary of his part-time counselor out, a little bit for printing and mileage. Net was a few thousand dollars for the year. He was seriously considering shutting the program down and just taking walk-ins when they came.
I asked him one question: how many of his at-need calls last year came from families that had a preneed on file, or from families connected to one? He didn't know. That's the problem. Almost every conversation I have with owners about preneed ROI starts and ends in the wrong place — with commission income — and misses the three or four line items that actually determine whether the program is a profit center or a slow bleed.
The commission trap
Commission income is the most visible number in a preneed program, so it becomes the number owners fixate on. It's also the least important one over a ten-year window. A contract written today produces a modest commission now and — if the program is run well — an at-need call worth many multiples of that commission somewhere down the road.
When an owner tells me their preneed program is "break-even," what they almost always mean is that this year's commissions roughly equal this year's direct costs. That framing treats every contract as if it lives and dies in the calendar year it's written. It doesn't. A preneed contract is a reservation for a future at-need call, and the value of that reservation is where the real return lives.
Reframe: Commission is the deposit on the sale. The at-need service is the sale. If you're only measuring the deposit, you're not measuring the program.
At-need capture is the real return
Here is the calculation I walk owners through. Take your average at-need call value — not just merchandise, the full call including services, cash advances, and any cemetery or monument work you do. In most NC firms I work with, that number lands somewhere between six and twelve thousand dollars depending on market, service mix, and cremation rate.
Now look at your preneed contracts from five, seven, ten years ago. What percentage of those families called you when the death occurred? A well-run program in eastern NC or the Piedmont should be seeing capture rates well north of ninety percent on the contracts that mature. If yours is lower, that's a separate conversation about servicing and follow-up — but even at ninety percent, the math changes everything.
A contract written this July for a seventy-two-year-old is, statistically, an at-need call somewhere in the next ten to fifteen years. If your average call is nine thousand dollars and your capture rate is ninety percent, that single contract carries roughly eight thousand dollars of expected future revenue — before you count growth, before you count the family members who come with it, before you count the referrals.
The family multiplier nobody tracks
Preneed families bring other families. A husband and wife sign contracts; the wife's mother comes in six months later; the husband's brother calls after a hospital scare; the neighbor at church hears about it at a Sunday school class in Wilson or Rocky Mount and calls to ask who to talk to. I've watched a single well-served preneed family produce four and five additional contracts over three years without a single dollar of marketing spend.
Most owners I talk to don't track this. They don't ask on the intake form how the family heard about the program, or if they do, the counselor doesn't write it down consistently. If you want to see the real ROI of your program, start tagging every new contract with its source. Within eighteen months you'll have a picture of which contracts are actually seeds and which are one-offs. That data changes how you think about counselor time.
The costs nobody puts on the spreadsheet
Now the other side of the ledger — because the ROI conversation cuts both ways, and I've also seen owners overestimate their program's health by ignoring real costs.
Servicing time is the big one. Every contract on your books requires touches over its lifetime: address changes, beneficiary questions, families relocating out of state, contracts that need to be transferred, questions about what's covered and what isn't. If you have three thousand active contracts and no dedicated administrative time for servicing them, that work is falling on your director, your office manager, or nobody — and "nobody" shows up later as a family that thought they had something they didn't.
Compliance and record-keeping is the second cost. NC has real requirements about how contracts are documented, how funds are handled, and how records are retained. If you're doing this on paper in a filing cabinet, the cost isn't zero — it's the risk of an audit finding, plus the hours it takes to find a contract when a family walks in with a document from 2004.
The third cost is the one owners hate to hear: the cost of underpricing at the time the contract was written. If you locked in service pricing seven years ago and your costs have climbed since, that contract's at-need value to you is smaller than a fresh call. Growth on the funding side helps, but it doesn't always keep pace. This is one of the reasons periodic pricing review matters more than most owners give it credit for.
A better way to run the numbers
If you want an honest read on your program, do this exercise once a year. Pull the contracts that matured in the last twelve months — the ones where the death occurred. For each one, note whether your firm handled the service, what the full call was worth, and what the original contract paid you in commission when it was written.
Add up the at-need revenue from that group. That number, minus the commissions you already recognized, is what your preneed program actually delivered to your bottom line this year — separate from any new contracts you wrote. Compare that against your total program cost: counselor compensation, administrative time, marketing, and a reasonable allocation for servicing the whole book.
In most NC firms I've worked with, when owners run this calculation for the first time, the program looks four to eight times more profitable than their commissions-only spreadsheet suggested. Occasionally it goes the other way — a program that looked healthy turns out to be losing capture at the back end, which is its own kind of urgent problem to solve.
The program is a decade-long asset, not a monthly line item
Every preneed contract you write this month is a claim on a future at-need call, plus a chance at the family and friends who orbit that household. Measured that way, the program is one of the most durable assets an independent NC funeral home has. Measured on commissions alone, it looks like a marginal side business — and owners make bad decisions from that view, including cutting staffing and marketing at exactly the wrong time.
The action item this month is simple. Pull the matured contracts from the last twelve months, add up the at-need revenue they produced, and put that number next to your program's cost. Whatever you find, you'll be making decisions on real data instead of a feeling. That alone puts you ahead of most firms in the state.
Duane Cutlip is a Licensed Preneed Funeral Director serving independent North Carolina funeral homes. This article reflects his field experience working with programs across NC.