How to Start a Funeral Home Business
Death is one of the only certainties in life. For those who are looking for a business venture, it makes sense to consider the funeral home industry. It’s a good choice for someone with a strong business acumen who is at peace with their own mortality.
Running a funeral home could be a lucrative business in the right market. Nearly everyone will use one or more of the products a funeral home offers, so there is a lot of competition. In some cities, there are funeral homes on nearly every block. Fortunately, it’s not hard for a new funeral business to differentiate itself from the others with the help of technology.
As a prospective funeral director, you’ll first have to decide whether you want to start from scratch, franchise or purchase an established business. You’ll also need to understand the customer-centric laws related to the funeral industry.
After you’ve answered the basic questions, you’ll need solid business and marketing plans to ensure starting a business in this industry is worth your time and money.
Buy, Start from Scratch or Franchise?
The first question you’ll have to answer when you decide you want to own a funeral home is if you’ll buy an existing business, open a franchise or start your business from scratch. There are advantages and disadvantages to each option.
Franchises have established marketing and advertising. But they may not have name recognition in your community. Franchising comes with a lot of support from the franchise. You might choose this option if your strengths lie in sales but not marketing.
Existing businesses already have a reputation. Those with a good reputation may have a steady flow of clients but it could be challenging to personalize your new business. Former customers may be hesitant to work with a new owner, so you’ll have to show your target market you are trustworthy as well. In an ideal situation, the former owner assists with the transition.
Funeral home owners may sell their businesses for a variety of reasons. For some, selling has always been their exit plan. In other cases, the owner is no longer able to manage the daily operations, or they want to pursue other interests. As a prospective buyer, it’s important to consider how much interest the seller has in the business and if they will be available to answer questions or even to recommend you to their existing client families.
Starting a funeral business from scratch has its own set of challenges. New owners will need to market their own business to attract clients. Because people don’t typically think about funeral homes until they need one, it’s important to reach as many people as possible with your advertising. This could require a huge investment, but your business will be completely your own if you choose this option.
While it may take some time for your community to think of your business first when their loved ones pass away, the effort you put into marketing will let them know who you are and how you can be of service to them. If you purchase an existing funeral parlor and want to change the branding, this could be more of a challenge.
Legal Issues Related to Funeral Home Operations
Before you open your doors to grieving families, it’s important to understand the laws related to the industry. State and federal laws regulate funeral homes. Every state has laws that govern operation of businesses.
Before opening a funeral home, a you’ll need a license in the state where you plan to do business. You’ll also need a degree in mortuary science or a partner who has a degree.
The Funeral Rule of the Federal Trade Commission requires funeral homes to be transparent when it comes to pricing. (1) As a funeral parlor owner, you will need to inform your clients about pricing and options. You’ll have to provide pricing information over the phone and have a price list on hand for funeral services, caskets and burial containers.
The structure you choose for your business can affect taxes as well as your liability if a dissatisfied customer sues your business. As a new business owner, it’s essential to carefully consider whether you want to operate your business as a sole proprietorship, a partnership, a limited liability company or a corporation.
What Services Do Funeral Homes Offer?
All funeral homes provide transportation and preparation, including embalming. Some offer cremation as well as burial. Loved ones of the deceased can consult with a funeral director to get guidance and assistance with planning the service. You will likely also sell caskets and urns.
Modern funeral homes offer more than traditional funeral services and customers are beginning to expect them. Many offer hair and makeup services by licensed technicians. They are also more likely than ever before to be interactive, using technology to bring the memorial service to people who are unable to attend.
Memorial services could take place at the funeral home’s facilities or a location chosen by the survivors. Families might be interested in choosing their own music and décor. As the director, you should help the grieving loved ones by ensuring the memorial service meets their needs.
According to Forbes, green burials are increasing in popularity. The process involves burying an unembalmed body and allowing nature to complete the process. (2) If you offer green burials, you are likely to appeal to millennials and those who want to decrease their carbon footprint. Many people preplan green burials.
Offering preplanning to help people who want to have more control over their final arrangements can give you a steady flow of income. Offering these consultative services could also contribute to goodwill because your satisfied clients will refer you to others.
Is Owning a Funeral Home Profitable?
The profit you generate from a funeral home will depend a lot on the market where it’s located. Those in communities with an aging population typically earn 7% or more in profit. However, if the people who live in the area are likely to choose alternatives like cremation and private memorials, the funeral home industry won’t be as profitable. Funeral homes located in areas with a more youthful population may struggle if they have competition for the limited number of funerals that take place there every year.
Another factor that will play a role in determining whether you earn money in this industry is your experience. If you have a degree in mortuary science, you won’t need to hire someone who does. While you won’t want to do all of the work yourself, payroll will play a role in how much of the profit you take as a personal salary.
The most successful funeral directors are compassionate but also prolific salespeople. They get referrals because they don’t take advantage of people in their time of need. Instead, they help their clients find solutions.
It’s Important to Research Local Market
In order to succeed in a market that is more likely to choose alternatives to funerals, you’ll need to offer services that will help them make these kinds of decisions. They may want to combine aspects of a traditional funeral and a modern celebration of life.
Before you decide to start your own business, it’s important to research the market. This research will give you the information you need to determine if it will be profitable to purchase an existing business right now.
Where do I Get the Money to Open a Funeral Home?
Starting a funeral home business means incurring a lot of upfront expenses. For example, if you start your business from scratch, you’ll need a physical office location as well as a place to hold services. You’ll need to invest in inventory.
Marketing is another expense that could require a significant amount of money. Some of these expenses, such as the funeral home building, may be included in the cost of the business if you buy it from another owner.
Financing for a funeral home business depends on whether you buy an existing funeral home, franchise,
or start from scratch. If you start from scratch, the most affordable type of financial is a business loan
backed by the SBA. Business loans have low interest rates, but they aren’t easy to qualify for. Lenders
typically require strong financials and years of industry experience.
Because it’s difficult for a brand-new funeral home to qualify for a commercial business loan, people who start their businesses this way may use their own money. The fund could come from personal savings, personal credit card or equity in their home. Of course, using personal funds to start a business is risky.
That particular risk could be reduced by purchasing an existing profitable funeral home. Banks and private lenders are more likely to take a risk on a business that has a proven model and demonstrated profitability.