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 relevant customer-centric funeral laws and insurance.
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, Franchise, or Start A Funeral Home from Scratch?
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, or startup your business from scratch. There are advantages and
disadvantages to each option.
Funeral franchises have established marketing and advertising. But they may not have 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 funeral 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 funeral 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 funeral owner assists with the transition.
Starting a funeral business from scratch has its own set of challenges. New owners must market their own business to attract clients. Because people don’t typically think about funeral services until it becomes a necessity, it’s important to reach as many people as possible with your advertising. This would require a huge increase in starting costs, 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.
How to Start: Legal Issues Related to Business Operations
Before you open a funeral home to grieving families and start getting your name out, 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, which means you’ll need to reference the laws and insurance of the state you’re starting the funeral business in before you take the first step.
Before opening a funeral home, you’ll need a funeral license in the state where you plan to do business and need a degree in mortuary science, or alternatively, a partner who has a degree.
The Funeral Rule of the Federal Trade Commission requires funeral businesses to be transparent when it
comes to their costs. (1) As a funeral parlor owner, you will need to inform your clients about funeral costs and options. You’ll have to provide pricing information over the phone and have a costs list on hand for funeral services, caskets and burial containers.
The structure you choose for your business can affect taxes costs as well as your liability if a dissatisfied
customer sues your business. As a new business, 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. This should be established in the initial business plan.
Business Plan: What Does the Business Offer?
All funeral services provide transportation and preparation, including embalming. Some offer cremation as well as burial, and obituaries hosted on their funeral website. Loved ones of the deceased can consult with a funeral director to receive guidance and assistance with planning the service. You will likely also sell caskets and urns.
Modern parlors offer more than traditional funeral services and the family of the deceased are really beginning to expect these ideas to begin with. Many offer hair and makeup services by licensed technicians. These new ideas are are also more likely than ever before to be interactive, using technology such as a website or recording equipment to bring the best of the memorial service to people who are unable to attend. Ideas like this are what will help the funeral industry thrive.
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 so long as it is covered by your funeral insurance.
According to Forbes, eco-friendly cremation and green burials are increasing in popularity despite the current cost as families agree with the new ideas for burial planning and education on human impact proposed in recent years. 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 are willing to pay the cost at the set up phase of starting a new trend. Many individuals preplan green burials, but your funeral insurance might need to be upgraded to cover alternative funeral services depending on the state you are doing business in.
Offering preplanning to those 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 once they are satisfied that their ideas and plan will be put into place when the time comes.
Set Up: Is Owning the Business Profitable?
The profit you generate from a funeral home will depend a lot on the market where it’s located and the cost of services. The best location for a small funeral business is in communities with an aging population typically earn 7% or more in profit. However, if the individuals who live in that small area are likely to choose alternatives like cremation and private memorials, the funeral home industry won’t be as profitable, so you’ll need to have the facilities and insurance to host cremation services. 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 the funeral business is your education, and experience with local regulations. If you have a degree in mortuary science, you won’t need to hire someone who does help run the business. While you won’t want to do all of the funeral work yourself, necessary payroll will play a role in how much of the profit you take as a salary. All of this should be in your initial plan, as it can affect how quickly you can start a funeral home and get proper insurance to cover your services as well.
The most successful funeral directors are compassionate but also prolific salespeople willing to provide education. They get referrals because they don’t take advantage of people in their time of need. Instead, they help their clients find solutions and cut the cost without sacrificing profit.
An Important Step: Research the Local Market
In order to succeed as a small business 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 that are insurance friendly. 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 and what your cost will be for the location, from real estate to insurance. This funeral services research will give you the information you need to determine if it will be profitable to purchase an existing funeral business right now or wait until the cost lowers.
Starting a Funeral Home: Where Do I Get the Money to Open the Business?
Starting a funeral home business means incurring a lot of cost upfront. For example, if you start your business from scratch, you’ll need a physical business location as well as a place to hold services. You’ll need to invest in funeral inventory.
Marketing is another cost that could require a significant amount of money to start. 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 at the start. Lenders typically require strong financials and years of funeral industry business 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, credit card or equity in their home. Of course, using personal funds to start a business is risky, no matter how solid the business plan looks.
That particular risk could be reduced by purchasing an existing profitable funeral home to start. Banks and private lenders are more likely to take a risk on a business that has a proven plan in place and demonstrated profitability.