Earlier this year I organised a funeral.
Don’t tell my lady wife this, but in many ways it reminded me of organising a wedding… if you only had a week in which to do it.
The time pressure forces decisiveness.
Yet the guests, the catering, the logistics, the need to get dressed up, managing gifts, and the requirement to be a “good host” were all much the same.
So too is the eye-wateringly large invoice after the event!
organising a funeral is like organise a whole wedding in a single week!
The meeting with the very polished and professional funeral director was fascinating.
Their world has just turned upside down. Somebody close to them has passed away. Life as they knew it has come to a sudden end.
Sombre clothes. A double helping of empathy. Hushed conversational tones. Tissues at the ready.
The role also requires meeting potential clients at their most vulnerable.
Financial uncertainty abounds.
Who will pay for the funeral? Will the deceased estate be able to reimburse those costs, at some point in the (potentially distant) future? And so on.
The funeral director quickly sizes up the prospective client.
the key question: How much can they afford?
All the subsequent options the funeral director guides the grieving client through are based upon that initial assessment.
- Coffins. Recycled cardboard or a gold plated 16th century museum piece?
- Burial plots. Scatter the ashes in the ocean, or commission a bespoke mausoleum?
- Audio Visual. A Bette Midler tune on Spotify, or a live gospel choir backed by a symphony orchestra?
- Transport. Meet the coffin at the venue, or go for a funeral procession including a gun carriage?
Printing. Photocopy a bunch of Order of Service handouts, or handwritten by Benedictines monks on vellum parchment?
Catering and drinks at a wake.
The list goes on.
The funeral director I met with had maybe a dozen different folders full of pre-configured funeral / cremation options to choose from. Each folder represented a customer segment combination of price point and cultural / religious customs.
Their initial assessment determined which folder the client was guided through.
At every decision point the funeral director offered their assistance in taking care of arrangements “at this difficult time”. Whenever they were not taking ownership of something directly, they were quick to recommend one of their “trusted partner” service providers. All very polite, but also all too persuasive.
The margins available on provision of funeral arrangements are huge.
According to PBS the margins on coffin sales can be as high as 75%, compared to sourcing it yourself from somewhere like CostCo.
Finally there is the burial plot itself. In some respects cemeteries closely resemble commercial property management businesses. In many locales when you pay for a funeral you are not actually buying the grave site. Instead you are leasing the grave for a period typically ranging from 75 to 99 years. After that time the grave can, and often is, leased to somebody else. The same is true of the niches often used to inter ashes after a cremation.
Profiting from death
The funeral invoice initially had me thinking that I was in the wrong game.
I briefly considered what a typical day in the life of an undertaker must look like: collecting dead bodies from (very) recently bereaved families, embalming, lashings of empathy, and the occasional request for some extreme taxidermy!
Moving swiftly along, I mentally worked through the funeral director business model.
There is a vast pool of potential new clients: everyone alive today will die at some point.
Few people bother organising their own funerals, the service a funeral director provides is not to the deceased but rather to the person tasked with taking care of the funeral arrangements.
This creates a powerful lever for up-selling. Funeral directors can subtlety push the guilt button by talking about wanting to present the deceased in the best possible light, making sure the last memory the audience has of them is a positive one, and playing the “keeping up with the Joneses” card by talking about what other people do.
There is little competition, many undertaking firms are independently owned and operate in a discrete sales territory.
The money definitely isn’t in their unique selling proposition… the duties of an embalmer: part masseuse, part makeup artist, part plastic surgeon, and part plumber.
No, the money is in the supporting services that operate surrounding that core function. The retail markup. The referral commissions. The add-on sales. The project management. The supply chain management. None of these is unique to the funeral industry, all are actually commodity skills.
However when linked to the (often) government mandated use of a licensed embalmer, these supporting services form a remarkably lucrative sales funnel. This results in a remarkably lucrative business model.
Nice work if you can get it!
Profiting from happy endings
That got me thinking. Could a generic version of this supporting services operating model be reverse engineered from the funeral business, and applied to other industries?
I concluded it could.
Continuing on a theme of extracting body fluids, consider the live streaming cam modelling industry.
The cam model’s target client is the virtually infinite number of lonely people looking for some companionship to help pass the time or tickle their fancy. Many of them have credit cards.
A model needs to be sufficiently compelling to capture and hold the attention of the client… then persuade them to pay for the model’s interest.
Unfortunately for models, this time there is no barrier to entry for potential competitors. Anyone with a broadband connection, computer and a webcam can set themselves up as a cam model.
So cam modelling itself is probably not a road to riches for the majority.
Geographic arbitrage does provide an advantage to models living in low cost of living locales however. A model living in Bucharest or Manilla can charge the same amount for their time as a competing model located in San Francisco or Berlin. The internet is a great equaliser.
What about if the cam models themselves were the target clients?
We saw earlier that embalmers required a host of complementary supporting services to operate a successful undertaking business.
Cam models are selling a dream to their target clients. The more believable that dream, the easier the sale.
Supporting services might include operating broadcasting studios and technical infrastructure. Providing access to hair and makeup artists, personal trainers, and English language tutors. Perhaps even professional services such as legal, tax and accounting advice.
This would be a much stronger business plan, as the sales funnel is perpetually full of aspiring cam models hoping to make a living by selling their attentions.
Profiting from parenthood
Finishing off the extracting bodily fluids theme, let’s look at the blood, sweat and tears that goes into caring for children.
Having babies is one of the few major life events that does not require the passing of a test for or the issuing of a license. That means anyone can do it, creating a renewable supply of prospective clients for child care providers.
An individual child care worker can concurrently care for a number of children capped by age bounded staff to student ratios. This means that being an individual child care worker doesn’t scale particularly well, and is not a path to riches.
Private or state schools charge a little, or a lot, to look after appropriately aged children for school hours during term time.
Working parents also need reliable outside school hours childcare. Breakfast club. After school care. School holiday care.
Time poor parents can, and do, pay a lot for these. The more flexible and accommodating the service provision, the greater the premium the provider can charge for it.
These services are challenging to provide. There is a lot of government red tape involved in the provision of childcare. It can be a difficult service to staff, as the hours are both irregular and seasonal, while the low pay leads to high staffing turnover. This creates a high barrier to entry for new entrants to the marketplace.
Supporting services to schools and childcare providers might include the provision of tutoring, sports coaching, music lessons, language lessons, and so on.
This is a compelling proposition for time poor parents, as it helps buy back their weekends. If their child has already done their swimming lessons or violin practice during the school week then “Dad’s taxi“doesn’t need to do the running around on the weekend.
Business opportunity identification framework
To summarise the repeatable model for identifying viable business opportunities involves:
Identify an existing problem
Find a problem experienced by a large, and renewable, set of prospective clients.
Identify existing solution providers
Find those already profiting from that problem, preferably those with high barriers to entry or sustainable unique selling propositions.
Identify those supporting services
Work out what can be profitably sold into those solution providers.
Invest in businesses servicing solution providers
Buy into, or establish, a business that provides those supporting services.