The business model of death
- Business Model Innovation
I was born and raised in a funeral home. You could say we were a “6-feet-under” family. I loved it. When I was 7 years old I was in charge of cleaning the Hearse and the Cadillac Fleetwoods together with my twinbrother after each funeral. That was a tough job. Did you ever cleaned a big black car without leaving water drops? When I grew older I served in the night shifts. At 18 you realize what life is about. Some people die too young. Some people have the coolest ceremonies. Life was not easy. We needed to be quiet at home not disturbing the service. People did not understand much about our family business. We always got the same remarks from people. “The funeral business is big business!”. In the end all people will die. And, when the family is emotional, they will not go shopping finding the best deal. Of course.
But is the funeral business attractive? Do they make disruptive profits?
“All of a sudden it was quiet”
It striked me there are so few people who know about funerals. They have no clue what to do when a loved one passes away. Whom you call? What you do? Don’t even try asking what it takes to run a funeral business. Yes, people want that because they think it is big business. But running a funeral home is a different ballgame. Connecting our family business to my current business is interesting. What does the business model of a funeral home look like?
The funeral business model explained
I explain the business model of a funeral home according to the visualized business model canvas. Customer segments are the relatives and friends of the loved one in a specific region. Seldomly you see funerals organized from other locations more than 30 miles away from the hometown of the loved one. You can also add the police and hospitals into the client segments. In Europe undertakers operate directly for them. The value proposition is the funeral service including all required arrangements. In Europe the number of cremations is growing as we have fewer room to burry people.
The proposition is a product and services mix. Products like coffins, memory cards and books, flowers and catering. With services I mean arranging and executing the funeral and taking care of the loved one. Channels are important for ‘new leads’, they include relations with the church, general practitioners and the locations the funeral is operating from. Relations are known for longterm, closeness and personal with families. Revenue streams come from the products and services whereas sometimes the funeral invoices for third parties. We see cultural differences with spending on products when it comes to e.g. US and Europe. Activities: 24/7 online, administration, arrangements, taking care of the loved one and First Time Right or quality! Resources are the brand, locations of the funeral home, personnel and the car park. However, the car park is becoming lesser important except for the Hearse Partners are insurance companies, municipalities, suppliers and the channels.
The ten key factors of the business model
- What are actually the key factors of the funeral business model?
The number of clients is fixed. It is not legal to influence the number of clients. The central plan bureau predicts your revenue. As a local entrepreneur you need to be able to cope with that.
- 24/7 opening hours. You can call the funeral home day and night. Why? You can’t plan death. A funeral home operates with a call center and night shifts.
- Unpredictable. 99% of all deaths can not be planned. A funeral home needs to have a flexible resource planning both day and night. Planning is only possible 5-8 days ahead.
- Capital intensive. The average funeral home has its own assets like personnel, funeral home, facilities, car park etc.
- Traditional business. Although new innovations pop up every year like cardboard coffins, tailored painted coffins, gay funeral home, a funeral bus etc. We see in practice over 90% of the funerals follow the traditional route.
- Regional. Funeral business is local. Period. No need to start transporting loved ones or families.
- Offline driven. Whereas other businesses like retail embrace online, funeral business is offline driven. We do see memory-of.com or online services. However, these services are limited.
- Emotional and personal. No other business is dominated by emotions. Funerals become more and more personal. People want to support the services themselves including presentations, washing and care taking etc.
- First time right. Quality is key. You can’t ruin someones last experience. So you better make sure you have checked everything 3 times.
- Know your customer. Or should I say loved one? You can only execute the best experience ever when you really know about the loved one.
What are recent developments in the funeral business?
“Families do shop for the best offer” says Alexander van der Pijl, CEO Funeral Services Dunweg. “You can find a lot of information online. Families are better informed when we meet them to discuss the funeral services. In Europe we see more independent undertakers coming. Families become more demanding so we need to be more flexible. Funeral homes also move up in the chain offering complete catering services.
Is the funeral business model disruptive profitable?
“Maybe if you don’t understand the business model, you would think so” says Alexander. In the end the funeral business is just another business. You need to do the advertising, connect to customers and deliver the best quality. I do believe the business model of a funeral home is different. The average cost structure is higher as you need to serve clients 24/7, you need to have flexible resources and quality is a different ballgame.“Compare this business model with one of a plumber. You’ll never be able to call him at night and he won’t show up in half an hour.”
So what about the future?
Our 6 feet under family business exists for 100 years now. Open day and night for 100 years. Not much has changed. Ok, we use remembrance letters in stead of ‘live broadcasters” in the very early days. We use a Hearse instead of a Horse. But that’s it. So what would it look like in 100 years from now? Would the model still be very traditional? Do we shoot our loved ones into space? Do we get a Facebook alert in 60 seconds? Let’s see. I am curious.
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