Last week Netflix co-CEO Ted Sarandos told reporters in this article that Netflix has no plans to pursue mergers and acquisitions next year. . . . .what is interesting about his comments is that he also said, “We are better builders than buyers”.

I found that a really interesting statement from a company that has grown its subscriber base from 34 million subscribers in 2013 to approximately 283 million subscribers this year.  In the article, Sarandos states that Netflix has done small acquisitions but re-iteretated, historically (we’ve) “. . . been a better builder”.

It made me think, “What about funeral homes?”  What are the options. . . and what works better — expanding and growing services organically or taking on debt to build or grow through acquisition?

It is an interesting question. . . and there is no right or wrong answer.  Growing organically by gaining more market share or expanding a geographic reach of a single location through marketing may be more profitable in a more immediate sense, but large gains in volume and profitability probably only come from acquisitions of other locations.

Yet, growing organically poses little downside, especially in the thought of long-term debt, whereas a purchase puts long-term debt on the table, which if all does not go as planned leaves a funeral home servicing debt from its present location.  i.e. acquisitions carry more risk. . . . and, you even see the large public companies sometimes talk about having too much debt.

Netflix and the streaming industry also has the idea of what I call “service flux” in common with funeral establishments.  While an acquisition by Netflix of a legacy media company such as a cable company creates risk in the possibility of many of those customers leaving cable (cutting the cable cord) for a streaming service that may not be Netflix should an acquisition happen.  In essence, it is a lot like a funeral home acquisition — there is no guarantee consumer families may continue to use the acquired funeral home (or the acquired cable firm).

That’s somewhat like purchasing a funeral home in a 50% cremation market that over the next few years might become a 70-80% cremation market.  i.e. a funeral home purchaser needs to almost have a crystal ball to know going forward the cremation percentage of his future business much like Netflix needs that crystal ball to know how many customers it will keep from an acquired company. . . . So that risk to a funeral home acquisition, in my opinion, is somewhat akin to the risk a streaming company might have when buying a legacy media company.

So, what if you want to grow your funeral business and are somewhat averse to the risk of long-term debt?  I was fortunate in my business that at times I stressed both ways of growth— at one time we put a strategy together to raise our market share organically and at another time we took on some debt to buy out a competitor.

Tom Anderson
Funeral Director Daily

Both strategies worked for us. . . . . but before you go after one of them you need to know and plan how you will implement your strategy.  In the case of organic market share we did it with a highly-defined strategy and maximum effort in preneed marketing and  sales.  Interestingly enough, we found that our additional marketing dollars put into our preneed campaign also brought benefits in the area of “Top of Mind” awareness by consumers at the time of At-Need deaths.

We also worked very hard to be the funeral home that could get the job done in the fashion that pleased the family.  Concentrating on satisfying families always played a role in building market share. . . . because to first build market share I contend that you have to retain market share of existing clientele.

We gained both in the At-Need death market share at the time of the campaign and the preneed effort solidified that market share expansion over time.

And in the case of acquisition expansion, I always made sure that I had a way to fund the on-going debt service in case that the acquisition plan didn’t materialize exactly as I thought it would.

Every week or so Funeral Director Daily has an article about an acquisition.  But don’t be fooled by that . . . . like Netflix does, the really good funeral homes are also building their location market share organically every single day. . . .That’s one of the best kept secrets that legacy funeral homes know and understand.

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