The detailed calculations below accompany the memo. They retain the scenarios and definitions from V4; no underlying financial model has changed.
Comparing ownership with other delivery models
Licensing and managed services remain credible alternatives. A contract could delegate substantial operating authority without an acquisition. The economic comparison is how much contribution Good Place retains, how much change it can implement and how much capital it must commit.
| Delivery model | Annual contribution retained by Good Place | Capital required |
|---|---|---|
| Licensed agent capability | Fees less execution, support, sales, maintenance and allocated central costs | Development, customer acquisition and implementation |
| Managed operation | Contract fees and agreed performance share less delivery and allocated central costs | Setup, customer acquisition and working capital |
| Owned home | Normalized acquired earnings plus operating improvement less additional delivery and allocated central costs | Purchase, transaction costs, integration and working capital |
A home brings existing demand, premises, staff and relationships. We pay for those assets. Their existing earnings are distinct from the improvement we create, and a larger annual profit does not by itself make ownership the better investment.
Let C be annual unlevered cash flow after recurring costs, taxes, capital spending and changes in working capital, and K the initial investment. Against an alternative, ownership earns back its additional capital when the additional cash flows and terminal value justify it:
−ΔK + Σ[ΔC_t / (1+r)^t] + Δterminal value / (1+r)^T > 0
The comparison needs the same horizon T and discount rate r, with the risks of each route accounted for. Our ownership thesis is that the additional operating control and retained earnings will justify the capital required. The next question is what those improvements actually involve inside the home.
Operating economics
The economic thesis is 10% → 40%. On an illustrative $1 million of annual revenue, that means moving from $100,000 to $400,000 of home EBITDA: four times the operating earnings on the same revenue base. Additional demand offers a further route to growth.
What changes the economics
Our house models examine changes to pricing, service mix, staffing, procurement, and volume. A simple operating equation connects them:
Home EBITDA = N × (P − v − h × w) − F
N is annual cases, P is average revenue per case, and v is non-labor variable cost per case, including variable agent execution costs.
The labor terms are h, variable paid hours per case, and w, their fully loaded hourly cost. Salaried staff belong in annual local fixed expense F, alongside fixed local systems; their hours are excluded from h. Review, exceptions, and maintenance costs follow the same variable/fixed split.
The expression inside the parentheses is what one average case contributes toward fixed costs. Serving another case adds that amount only while the assumptions hold. If higher volume requires additional fixed staffing or more premises, F rises. The equation helps identify when spare capacity turns into a new investment requirement.
The seven levers act on these terms together:
| Lever | What we change | Economic effect |
|---|---|---|
| Remove duplicate functions | Eliminate repeated entry and share applicable administration | Lower local fixed expense, with shared delivery counted at company level |
| Use premises and teams more effectively | Coordinate schedules and fill usable capacity | More cases within the capacity of the operation |
| Redesign the service offer | Make useful service combinations available, including simple cremation | A different mix of revenue and delivery cost per case |
| Execute coordination with agents | Carry document preparation, dispatch, purchasing and follow-up through to completion | Fewer human hours per case, including the remaining review and exceptions |
| Reach more of the area the home can serve | Connect local discovery to a bookable offer | More delivered cases after customer acquisition cost |
| Review prices, purchasing and catalogue | Connect actual products and services to prices, supplier terms and demand | Better contribution from each sale |
| Redesign roles and shifts | Fit staffing to the work and capacity required | Less fixed labor expense or more output from the team |
Turning time saved into an economic gain
For any recurring task, annual hours released equal its annual frequency multiplied by minutes saved per occurrence, divided by sixty. We would apply that calculation across document preparation, dispatch, purchasing and other eligible work. Fewer variable paid hours lower h. Released salaried time creates capacity; it lowers F only when the home removes a fixed expense.
The same hours cannot both support more cases and disappear from payroll. Staffing and demand decisions determine which benefit reaches the financial result.
The quality of agent execution matters to the saving itself. A task that takes fewer routine minutes but creates frequent rework may release little capacity. We would measure the complete task, including review and exceptions, before using its time saving in the operating model.
From an intervention to earnings
In one selected house scenario, forty additional direct cremations at $1,495 produce $59,800 of annual revenue. Assumed fulfillment cost is $795 per case, leaving $700 each, or $28,000 annually, before marketing. At an illustrative $100 acquisition cost per case, contribution becomes $24,000.
This also gives the acquisition channel a concrete sensitivity. Every additional $100 of acquisition cost per case would reduce annual contribution from those forty cases by $4,000, with the other assumptions held constant. The useful metric is what delivered cases leave after both acquisition and fulfillment, not the revenue attributed to an advertising campaign.
Making the service mix work
Pricing and catalogue changes affect existing cases as well. A home can earn more from the same volume through a different service mix, prices, or supplier terms. Where a broader offer adds coordination, its delivery cost must include that work. The supporting house calculations retain detailed lever estimates, scenario choices, and remaining cost inputs.
For example, adding a meal after a ceremony would add a provider, a booking, and a schedule to coordinate. Its contribution would depend on what the family pays less the meal's fulfillment and coordination costs. Agents could make that option easier to offer, but the home would still need to know whether the complete service earns its place in the catalogue.
Those changes have to be modeled together. If the broader offer uses time released by agents, that time cannot also support a separate staffing reduction. Its gain would appear in the contribution from the added service. Better purchasing could improve that contribution, but the same supplier saving belongs in the model only once.
Price and demand also interact. A higher price improves the home's earnings only if any change in volume and service mix leaves it better off. We would evaluate the combination of levers against one operating plan, with consistent assumptions about capacity and demand.
From a home to a company
Company EBITDA = Σ home EBITDA − shared operating costs
Each expense appears once. Shared costs include the agent capability, central staff, and services used across homes. If fixed central cost is C, the number of homes is n, and recurring central cost per home is c:
Central cost per home = C/n + c
The fixed cost spreads across more homes, while each additional location still requires integration and recurring delivery work. Reuse improves the economics when extending a capability costs less than the additional contribution it enables.
A local saving may also become a central expense. If one shared team takes over work previously done in each home, the local accounts improve before the cost of that team is deducted. Evaluating the company after shared costs prevents us from presenting a transfer between accounts as an economic gain.
Capital efficiency also depends on purchase price, integration, and working capital. Cash remaining after capital spending, taxes, and financing must fund reinvestment and later acquisitions. Improving a home's margin increases what it earns; making the next implementation cheaper reduces the capital needed to repeat the model.