Many people talk of taking their business “Outside the Box” to find new creative ways to generate more revenue and build their business enterprise. I’m certainly no MBA guy in Business or Finance. . . but, more or less I’ve been involved in business for about 50 years since I had my first paper route. I don’t have a degree in any business related field, but I’ve owned about eight businesses, invested in others, have chaired health care concerns with over $50 million in revenue. and served as finance chair for a land grant university with a $4 billion budget.
So, I want to tell you that I don’t very often look “Outside the Box” but do look to Horizontal and/or Vertical integration to grow my businesses. What do I mean by that and where am I going with this? To me, “Horizontal Integration” is being able to do what you do for a new set of customers. Think at-need death — if you ran a funeral home that did only earth burials, horizontal integration may include adding cremation or alkaline hydrolysis. Horizontal integration is, in my opinion, getting a customer who needs the type of service you provide, but not necessarily the service you provide. . at-need services but cremation rather than earth burial. i.e it is on the same “horizontal level”.
Compare that to what I call “Vertical Integration”. This, in my opinion, is getting a different product than what you provide, but a product that either leads into your original business or comes to the client after your original business. In the funeral business, think of “pre-need services” prior to at-need death care services or “cemetery services” following at-need death care services as two types of vertical integration. i.e. the services are before or after at-need death care services and are on “different levels” and bring in revenue for an entirely different product.
I’m of the opinion that all funeral homes should be horizontally integrated already. You should be able to offer to those who call you for at-need services with earth burial, green burial, cremation, and, in this day and age, should very strongly look to alkaline hydrolysis — whether you use a trade service for such or build your own facility. You should also look very strongly at pet services as another horizontal integration of the at-need business. It only makes good sense to be well rounded and ready in those capacities for your client families regardless of what type of “at-need” services they prefer..
However, I think the greatest opportunities in death care going forward will come in form of vertical integration strategies and what we can be doing for our client families before and after at-need services. If we don’t do it, some other industry, probably from the health care realm, will move into death care as a vertical strategy of their own following having the opportunity to care for individuals prior to them needing “at-need” death care.
I’m an investor and one of the types of companies I find value in investing in is one with multiple channels of revenue created by moving customers along their vertical business channels. Think of those companies that serve the oil industry. Some of those companies move clients from ground transportation at the wellhead, to ocean transportation in their oil tankers, to ports with pipelines that go to refineries where they refine the oil, and finally into over the road trucks that deliver gasoline to stations for consumer use. A client can enter that company at any point, but at the time they do, the transportation/refinery company has vertical channels to charge for and create revenue with only one customer acquisition cost. Your brand should be able to do the same.
So, where do I think funeral homes should next go on the vertical channel? Today many are in the Pre-Need/At-Need/Cemetery vertical channel which is good. What about Aftercare? Many funeral homes provide, but how many charge for it? We seem to be seeing more people reach out to self-help mental health apps and funeral homes are already providing, thru a service, 365 days of help subscriptions. How about at the time of service, instead of offering it free of charge, you offer it as a $6/month subscription service? That brings in $72 per year and if you do 300 services annually, revenue of over $20,000 for what you are giving for free today.
On the other end of the vertical spectrum, I’m waiting for a funeral provider to enter the home health care business. Those in those businesses create incredible brand loyalty for their care to the people they care for. Over the time of care a company has the ability to create an affinity customer who would probably use the pre-need services of the funeral home over others – getting them into your existing revenue channels. Quite frankly it would allow for earlier customer acquisition.
These are just some of my thoughts, but I’ve been involved in the home health care, senior living care campus, and hospice care businesses through my work with a non-profit health care company. And, especially in this day of direct cremation with no services I can see a path for those type of businesses to vertically move into the death care realm through cremations. My question is who will do this first — a health care concern move into death care or a death care concern move into senior health care.
It is kind of fun to just be sitting on the sidelines watching.