How Do I Start a Funeral Business?
More than 2.8 million people in the United States transition from the earthly realm to the afterlife each year, according to recent reports from the Center for Disease Control and Prevention. Those left behind by lost loved ones turn to funeral businesses for help with memorial, burial and cremation services.
Some entrepreneurs tend to shy away from the funeral business, but this sector certainly needs a continual infusion of new members starting.
Innovation is what is going to drive the funeral business forward. For those who are considering opening a funeral business, particularly when many funeral businesses are seeing an increase in demand, it’s important to remember that while it’s an old business, it’s currently undergoing many innovative changes that will modify the face of funeral homes services for years to come.
Entrepreneurs who are looking to get in at the beginning of the bell-curve and open a funeral home can easily use new and unique services that meet the needs of modern clients as a competitive advantage.
Experts believe the necessity of death care services will only grow during the years to come. Considering these factors, some business owners are taking a closer look at the prospect of starting a funeral business. If you fall into this category, it’s important to fully understand what’s involved in such an endeavor.
How to Get Started in the Funeral Business?
Starting in the funeral business is somewhere between a modern business and a traditional trades skill, which means getting started in the funeral business entails a certain amount of education and experience. If you’re looking to become a funeral director yourself, you’ll need to acquire the right licensure and undergo an apprenticeship and later open a parlor. After all, it’s impossible to run a successful business without the right background, and each location will require something different. The type of experience and knowledge necessary depends largely on how involved you plan to be in the daily operations of your funeral parlor.
For example, if the idea of running a funeral business is interesting to you, but you don’t have the necessary skills or don’t wish to be involved in the day-to-day work, you might invest in running the backend of the business, and hire on a funeral director to take over the management of daily operations.
If you intend to hire a complete staff to run the business on your behalf, you may not require anything more than a degree in business management or administration. Courses in these fields give you the tools and knowledge necessary to effectively get a business off the ground and keep it going.
Either path has its own pros and cons to contend with, so it’s important to consider what you want out of the business. Is it more meaningful to facilitate a business that will help individuals grieve and receive closure over the death of a loved one? Alternatively, you could be up close and personal, able to lend a helping hand, or a tissue, to those people?
This question will help you position yourself in the right role to find more purpose in the everyday work, and may change the necessary requirements.
Business Essentials: Obtaining a Funeral Director’s License
In the business, most funeral business owners prefer a more hands-on approach, such as filling the role of funeral director or mortician. In the past, these positions were considered one and the same, but they’ve branched out into two distinct skillsets over the years.
After receiving an associate degree in funeral services, you’re required to pass a national licensing exam. Most states also require funeral directors to complete an internship at some point during the process.
Each location has its own requirements. Don’t hesitate to reach out to the licensing board in the state in which you’ll be operating for details. Speaking with local funeral directors will also help give you a better understanding of statewide requirements.
While this might not be necessary if you are planning to hire a funeral director to manage the daily operations of the parlor, it’s important to always check with the local laws in your area, as they do vary.
Also keep in mind, you may need additional education if you plan to take on more responsibilities once your business is up and running. There are many supplementary classes available online or through ABFSE that can help you determine where your educational gaps are and ensure you are up to date on all necessary coursework.
Finding the Right Location for the Business
Once you’ve obtained the proper licensure to legally operate the business, you’ll need to find a space from which to offer services. Though it’s possible to find a funeral home for sale or lease that already has all the integral facets in place, this isn’t likely. You’ll likely need to either purchase a building and customize it to fit your needs or build one from the ground up.
Industry experts recommend keeping a few considerations in mind when deciding where to start a funeral business. Some advise newcomers to seek out a city with a sizable aging population; others say it’s best to find an area with minimal competition. In truth, both are significant factors because they indicate a substantial need for funeral services.
Overall, a dense population center is going to have a wider client base to potentially draw from, but you should also take into consideration the current direct competition, which is likely to be more difficult to overcome in cities than it might be in small towns.
Though small towns certainly need the services your business has to offer, they often pose more hurdles for business start-ups than larger, more populated cities. In most cases, long-running, locally owned and operated funeral businesses dominate the market in these areas. If you prefer to set up your business in a small town, be sure to choose one in which an established business hasn’t already gained residents’ unfailing trust and devotion.
In the funeral service business, a lot of clients come to trust the individual running the practice. If they give your business a chance and you show them the same kind of unfailing trust and care that you’d want to receive in their position, then they are more likely to come back when needed, or to refer your business to others they know in need of a reliable funeral business.
What Does the Business Need?
When you think of a funeral business, you might think about a spacious interior with well laid-out reception and conference area, nice furniture, and plenty of fresh flowers. This can be misleading, allowing you to think that your business will not need to purchase many additional assets in addition to the building or business itself.
In fact, there are many things that must be in place before a funeral business opens its doors to the public. Less than a century ago, funeral directors commonly operated out of people’s homes according to Caleb Wilde, a sixth-generation funeral director from Pennsylvania. In an interview with Forbes, Wilde explained bodies were often embalmed in the deceased’s kitchen, and viewings and memorials were held in the parlor. (1)
That’s not the case these days. Health agencies would quickly shut down any morticians caught storing or embalming bodies in a non-approved facility. Fines, penalties and legal issues could also likely ensue for the business.
At present, viewing rooms are essential for allowing families and friends of the deceased to gather and pay their respects to their lost loved ones. It’s also a good idea to have an on-site chapel for memorials. Reception areas for speaking with families and making funeral and financial arrangements are necessary. That’s why a complete repertoire of office equipment is crucial.
While vanity items are often overlooked in a business’ initial purchase list, they are still essential to new funeral businesses without any previous assets. This means that you’ll also need a separate area available inside the building for displaying the various caskets, protective liners, urns, memorial jewelry, registry books and other supplies available to clients. Restrooms for staff members and guests are fundamental.
Consider the packages you intend to offer before you begin as well. For example, if you offer cremation, you’ll need a dedicated, well-ventilated space set aside for the furnace, processor and additional equipment. This can tack on anywhere from $10,000 to $50,000 to any funeral business start-up cost easily, but if you are in the right area with enough demand for the service, it can bring back several times that amount in revenue in a short timeframe.
These are only a few of the basic elements. Your needs may vary based on the products you offer. A fleet of vehicles is important as well. At the very least, you’ll need a van for transporting bodies from hospital morgues to your facility and a hearse for carrying bodies to families’ chosen funeral service locales and cemeteries.
First Step for Any Small Business:
Consider Legal and Technical Factors
Along with deciding on location, interior décor and other aspects to start a funeral home, certain legal and technical factors enter the mix. You must come up with a name for your mortuary, form a business entity and register the business for tax purposes. Legal documents, like employment agreements and service contracts, are also key for your protection as well as that of your staff and clients.
Before opening your doors to the public, funeral homes require a variety of inspections must take place. State and national gov organizations are involved in this phase of the process. During inspections, those agencies examine your establishment, any embalming equipment, refrigeration and biohazard containment measures as well as numerous other elements to ensure it is following the law. They also ensure all staff members are adequately trained and certified, and that any potential dangers are clearly conveyed to employees to minimize insurance burden and create a good foundation for a safety plan.
Each step is a critical requirement for ensuring the funeral home is operating in a safe and well-informed environment, particularly concerning the number of toxic chemicals and biohazard material that must be stored, even if temporary.
On top of all that, you’ll need to supply documentation confirming your business complies with all building, safety, and zoning codes to start. Business liability insurance, worker’s compensation, fleet vehicle and other types of insurance coverage are likewise required to start any funeral home business.
While the business plan seems like a good place to start, it’s important to take these ideas and ensure it works with the state as well. When you learn about all those factors and more via the funeral directors or funeral service program, it’s also a good idea to speak with an attorney and insurance agent along the way. This will also help you estimate the operating costs associated with opening a funeral home and keeping it running year over year.
How Much Does It Cost to Start a Funeral Home Business?
All those fundamental aspects and extra elements you’ll need for anything you offer come with a price tag whether you’re operating as an LLC or corporation. Leasing, purchasing or building a facility and equipping it with all the necessary tools is a significant expense. An embalming machine alone may cost $3,000 or more. Acquiring all the vital permits and certifications come with a cost.
All those components and many others will factor into your funeral home start-up cost. You could be looking at an upfront investment of around $200,000 for a small or medium facility. For a larger funeral home offering an extensive list offerings, you may need a million dollars or more.
It’s also fair to mention the option of becoming a mortuary franchise owner. At an initial cost of around $30,000, total start-up expenses for this alternative are a great deal lower than building a funeral home business from scratch. This could be a significant advantage if funds are limited and you’re looking for a simpler way to transition into the space.
Still, funeral home franchises are relatively new alternatives, and these opportunities are limited at present unless you have excellent credit. This route is also more restrictive as far as branding, especially if a website is already established, and in being able to tailor your offering to local clientele.
Keep in mind that while the expenses can be rather low if you’re willing to get a little creative with your frugality, it will still take some time for your funeral home to become established and known among the local population. A website is a great start, but any funeral business’ focus should be on endearing themselves to the community.
When you get started, it’s a good idea to factor in how many staff members you will need, what the utilities will look like, and annual taxes and accounting fees. By planning ahead for these roadblocks, you can ensure that you have enough financing to handle the initial year without receiving an influx of revenue. It’s like the old adage: plan for the worst and hope for the best.
For most businesses, three years of business will determine its future. If your business is set to thrive in the local market, you can expand and scale more aggressively based on that funding, offering new and innovative services to your clientele and providing an even better experience through good business ideas.
Likewise, if your business sees fewer clients than you were expecting in the business plan, you will have some wiggle room to adjust your current strategy and find a new path that fits your business at each step.
Once Open, How Much Profit Can You Start to Generate?
Based on the national average, the Cremation Association of North America notes cremations cost around $3,000. Basic funerals come in at a little more than twice that price, but many are willing to pay much more to ensure their lost loved ones have the highest tier of everything. Funeral businesses make their profits on products and services surrounding both those options.
Likewise, in states that are allowing new, innovative business ideas and methods of burial, like green burials without embalming chemicals, these business services can be priced according to the industry demand. Often, the cost is higher because it is a new service, which allows you to price the service higher and play with the profit margins.
For many, these services are desired, but not widely known about, so offering and advertising it is a great starting point to get individuals in the door at a low cost.
Above all else, what often makes a funeral service meaningful to the living is the care that the funeral director puts into it. In addition, they are often seeking some semblance of closure, like a way to remember their loved one and the ideas they stood for.
Funeral directors no longer provide cookie-cutter service, but bespoke services that can be tailored to the clients’ individual needs. For funeral businesses, this means that each individual part of the funeral process can be priced and a profit margin attached to it.
You can start to make a real profit by marking up items in a certain department, like the caskets, urns and other products offered to clients. It’s also possible to ramp up profits by charging for extra services, like obtaining copies of death certificates for the living or writing obituaries and having them printed on your website and in local or state newspapers.
Funeral directors are essentially allowed to name their own prices for the products and services. Still, the Federal Trade Commission, and often the state, has rules in place to protect consumers from price gouging and similar practices. Because of this, you should look at the prices other mortuaries in your area are charging and try to keep your cost comparable to theirs.
Location, services and client volume are the determining factors when it comes to how much profit you can expect to make and put into your business plan. In a high-demand area with little competition, even a small funeral home can bring in tens of thousands of dollars in profits each year. Larger operations and those that have made a name for themselves among local residents may generate hundreds of thousands of dollars.
The emotional toll this empathy and customer care takes on a funeral director is enormous, so it’s important to prepare yourself for balancing pulled heartstrings with a thin wallet.
To efficiently remove the burden of providing discounts, you can make it a part of your business plan to build your services out with a profit margin that supports a discount right off the top. That way, if you come down for someone who can’t afford your services, you have a discount that doesn’t eat into your costs.
Likewise, remember that it is always better for business to negotiate scope of work, rather than price. If the client cannot afford the services they are looking for, you can work with them to provide an alternative option for service. Take into consideration all costs from the start of the service, such as insurance from the funeral itself.
For example, perhaps they are open to dropping the lavish casket to the middle-tier choice, or choosing a graveside funeral service to accommodate 50, rather than a memorial and visitation service plus funeral or burial service. These ideas and accommodations, while not a part of the business plan, can significantly reduce business loss.
By relying on smart business practices and ideas, funeral home owners can easily keep their business afloat and profitable for a long time, so long as enough demand is present to sustain the monthly business operating costs from the state, insurance, and local utilities.
Other Considerations for Starting
Having an associate degree and being licensed is crucial for those who want to start a funeral home business. Still, understanding the finer points is only part of the process and other considerations also apply during the business plan phase. Depending on your circumstances in opening a funeral home, these considerations can differ, from how you are going to identify the most aggressive competitor and surpass their marketing, to how you are going to adapt to the future in a business that is often slow to change.
When the living comes to you for funeral services, they’re stricken with grief. Most are also often a bit confused. Dozens of questions come into play when planning memorial services and funerals, and clients aren’t always going to immediately know the answers. If you’re going to enter this field, you must have ample patience, compassion and leadership skills.
With these so-called “soft skills”, a funeral director can really shine in the business, becoming the difference between a struggling funeral home business or a failed one. The death industry is a highly personal one, and there are many industry laws in place that must be followed to provide the best client experience possible from the business plan to daily operations.
Individuals from all walks of life will come to you in their times of greatest need and despair that require a delicate touch. Funeral customs vary greatly from one culture or religion to the next. In order to serve all your clients well, it’s important to have at least a basic understanding of a wide range of funeral and memorial practices.
At the same time, traditional funeral services are becoming increasingly rare. Many now prefer to customize loved ones’ memorial services, and they have countless options for doing so. While it can be difficult to offer between insurance policies and state laws, funeral directors are starting to tailor their services to meet expectations within their business plan
While many still think of funerals as somber, traditional ceremonies, the modern world has placed a growing demand to cater to growing desires, provide more innovative approaches to how the business of death is treated, and increase the options available to not just the deceased, but the living who remain behind.
Also consider purchasing an additional plot of land to use as a cemetery next to the business. Not everyone has the desire or opportunity to be buried near a religious place of worship or in a military cemetery. Being able to offer burial plots in addition to your other options better serves the public and gives you another source of business profit. This will add to the initial investment, insurance costs of opening a funeral business, but it’s sure to pay off in the long run.
All Things Considered: Credit, Loans, and a Path Forward
Starting a funeral home requires quite a bit of preparation, thought and funding, not unlike other businesses. Having a solid business plan in place and researching prices, state regulations, funeral trends and demand in the area you’re thinking of operating can go a long way toward improving your chances of success when you start the business.
Becoming part of the funeral business may seem morbid to some. Still, it’s a service people are always going to require, and provides you with an opportunity to be someone’s compassionate, listening ear in a confusing, painful world without their loved one. Being able to fill their needs and meet their expectations is a rewarding experience and a potentially lucrative business venture to start.
Looking to buy or sell a funeral home business? BSF is the top choice for funeral home financing advice and guides like this on the various state requirements needed. Get in touch with one of our experts today to learn more about becoming a funeral home director or purchasing a funeral home business today.