2021 is finally behind us. Thank God!! Now is the perfect time to make some important strategic decisions for 2022.
One of the tools that I find helpful when making major business decisions is the Boston Matrix, first created by Boston Consulting Group and widely used by strategic consultants and business leaders.
You have four types of products or offerings; Dogs, Cash Cows, Question Marks, and Stars. Most businesses will have a mixture of the four types.
A Dog is in a market that is not growing. Plus, you have a low market share. Dogs typically barely break even at best. They might tie up your capital, but they don’t generate a return.
A Cash Cow is a product in a market that isn’t necessarily growing, but you have a high market share. As the name implies, Cash Cows generate lots of cash.
Question Marks are speculative ventures that haven’t paid off yet. They are in high-growth markets, but their market share is still relatively low.
Stars are the holy grail. They’re in a market growing at 10% per year or more, and they are number one in the market. Stars may not generate a lot of cash in the short term, but they will eventually become Cash Cows as the market matures.
The basic idea is to invest the profit from your Cash Cows to create new Question Marks that will hopefully become Stars. Then, as the market matures, your Stars will become your next Cash Cow, and you repeat the process.
A funeral home owner needs to look at each part of your business separately. Here are the parts.
- Traditional Funerals
- Direct Cremations
- Farewell Events (aka non-traditional funerals)
In most of the country, traditional funerals are barely growing or declining. That means this part of your business is either a Dog or a Cash Cow. If it’s not making money, you have a Dog on your hands. If it is making money, you have a Cash Cow.
Direct cremation is growing, so you might have a Question Mark or a Star. But the margins are so low that even if you have a huge market share, you’re not making much money. Realistically that part of your business is just a big Question Mark.
Farewell Events are things like Life Celebrations or Farewell Parties. This part of the funeral business is growing because of the high demand from baby boomers. It might be a Question Mark today, but if implemented correctly, this can turn into a Star.
SCI is in the business of buying Cash Cows; that’s why they just bought Schoedingers. But if one of their locations becomes a Dog, they sell it. Even if they lose money on the deal, they don’t want a Dog on their balance sheet.
Foundation Partners is in the business of creating Stars with their ShareLife Farewell Event business. As the market matures, they will own a lot of Cash Cows.
So what can a typical funeral home owner do with this information in 2022?
If your traditional funeral home business is a Cash Cow, protect it! You should build a fence around your cows by keeping in constant contact with the families you’ve served and collecting as many five-star Google reviews as possible.
If your funeral home, or one of your locations, is a Dog, you should do everything possible to turn it into a Cash Cow. If you can’t do that, you should seriously consider selling it.
If you have created a Question Mark, invest in marketing to grow it. Let your team manage the Cash Cow while you (the owner) focus on increasing market share and turning this into a Star.
If you have created a Star, CONGRATULATIONS!! Put a marketing system in place to keep it growing and consider replicating your success by opening another location.
Remember, the key to long-term success is to always be in the business of protecting your Cash Cows and creating new Stars.
For funeral home owners, that means you should protect your traditional calls while creating a new Farewell Event offering that will pay off down the road.
In 2021, I focused most of my efforts on providing one-on-one consulting to my clients. Together we have protected a lot of Cash Cows and even created a few Stars.
In 2022, I plan to create turnkey marketing campaigns that I can use to help more funeral home owners accomplish similar results. I will have the first campaign ready for you by the end of January 2022.
My other objective for 2022 is to help more owners or future owners transform from Funeral Directors to Funeral Business Builders. I wrote about this transformation in a previous newsletter, and I feel there is a huge need for training on specific business building subjects. This is especially true when a new generation takes over the family business.
Here’s hoping that 2022 is a better year for all of us!!
Until next time
John
