Pre-need is more than just a pre-payment process. It’s a business opportunity. You, as a provider, accept risk by agreeing to provide fixed-price services at some unknown point in the future. You should be earning a reward for that risk — and covering your future costs — by making a profit on the pre-payment.
Why is this important? You are selling future services at today’s prices. It’s safe to assume that your services will cost more next year, or five years from now, than they do today.
A savvy entrepreneur uses the market earnings on pre-need contracts to preserve the operating margin of their business. Otherwise, in the words of the old adage, “you’re losing money on every transaction but making it up on volume.”