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How To Start A Funeral Home In 2023

How To Start A Funeral Home In 2023

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How To Start A Funeral Home In 2023

How To Start A Funeral Home

Funeral homeowners have the chance to make families’ lives easier during incredibly difficult times. This can be a rewarding industry to work in, and many business owners find satisfaction in helping families honor and remember their loved ones. While funeral homes were traditionally passed down through families, the industry is changing, and more funeral business owners are starting their own funeral homes. If you’re looking for an emotionally rewarding and financially profitable business to go into, starting a funeral home might be the right option for you.

Business Overview

Funeral homes offer a variety of services, including memorial services and preparing the dead for funerals or cremation. Funeral directors usually help to manage funeral arrangements and plans, supporting families through this difficult time. A funeral director may help families choose caskets, urns, and other products. They coordinate with all of the parties involved with a funeral, including clergy, the cemetery, and the crematorium. Funeral homes also supply many of the materials for funerals, including flowers, music, and memorial cards, and they typically provide transportation for the deceased and their families to the cemetery.

The funeral industry can be emotionally stressful, so you must open a funeral home for the right reasons. If you’re mainly focused on the profits you might enjoy, you’ll probably find it difficult to stay with the business long-term. Successful funeral homeowners find the process of helping families rewarding, so they can focus on the positives of the industry rather than the sadness that can surround the business.

Industry Summary

Demand for funeral home services is fairly steady since most families rely on funeral homes when a loved one passes away. According to IBIS World, the industry is still affected by economic health, though, since more families with limited budgets opt for cremation services, which are less expensive than burial services. From 2018 through 2023, the funeral home industry experienced 1.5 percent annual growth, and the industry was projected to bring in $19.5 billion in revenue in 2023. During that five-year period, the number of businesses increased to 29,134, while industry employment grew to 117,780.

Unlike so many other industries that face competition from large corporations, approximately 89.2% of funeral homes in the United States are privately owned by families or individuals.

The National Funeral Directors Association notes that many trends are transforming the funeral home industry. Baby boomers are increasingly planning funerals that are personal to honor the loved one who has passed. Today, it’s common to incorporate the deceased’s hobbies and interests in a funeral. Families are looking for funeral homes that can honor these wishes and customize a funeral to best reflect their loved ones.

With the increased awareness of eco-friendly living, those environmental values are now reflected in the funeral planning industry. Green funerals have grown in popularity, and they’re expected to continue to become even more popular. Green funerals are sometimes held outside, may feature organic flowers that have been locally grown, and may use sustainable or biodegradable caskets and clothing. In addition to green funerals, funeral homes can adopt eco-friendly practices like natural burial and using formaldehyde-free products in embalming.

Another trend is the increasing number of cremations, driven by changing attitudes towards traditional burial practices and a growing awareness of environmental concerns. Other trends include pre-planning end-of-life services, celebrants, return to big in-person services, glass-front cremation niches, dividing ashes for scattering and scattering ceremonies, family participation, death doulas, and an emphasis on pets.

Like so many industries, the funeral home industry is also embracing technology. More funeral homes are listing their products and services on their websites so that potential clients can research from the comfort of their own homes. Some funeral homes have even begun to offer broadcasts of funeral services, allowing family members who can’t travel to still view the service live.

In addition to these different service offerings, the face of the funeral industry is also changing. Traditionally, most funeral homes were staffed largely by men, but women are increasingly getting involved in this industry. While funeral homes were often passed down through families, today, people are choosing to join the industry. With over 60 percent of American mortuary science students being female, we’re likely to continue to see a shift toward greater female staffing in funeral homes.

Target Market

Funeral homes generally market to families whose loved ones have passed away, but that’s not always the case. Funeral homes are increasingly offering funeral pre-planning where individuals can specify their wishes and even pre-pay for a funeral, so funeral homes may also market to people who want to ease their loved ones’ burden when they pass away. Different businesses may have specializations, like offering green funerals, that can also refine their target market.

Checklist To Start A Funeral Home

If you’re thinking about starting a funeral home, it’s important to do your research first. Here is a checklist to help you get started.

Step 1: Research the market

Conducting market research for a new funeral home business is a critical step. The aim is to understand the local death rate, local competition, cultural norms, and customer preferences to get a clear picture of the local market’s needs and how your funeral home can best meet them. Here are some ways and resources that can be utilized for this:

Demographics and Death Rate Statistics: Consult your local government data or resources such as the U.S. Census Bureau and the Center for Disease Control’s National Center for Health Statistics. These agencies often publish demographic information, death rates, and projections.

Competitor Analysis: Identify existing funeral homes in your targeted area. Visit their websites, premises, or even use their services to get an idea of what they offer, their pricing, and how they operate.

Industry Reports: Check industry-specific reports such as those from the National Funeral Directors Association. They provide valuable insights into industry trends, competition levels, customer preferences, and more.

Business Consultants and Local Economic Development Offices: You can get help from professional business consultants who specialize in market research or reach out to your local economic development office for advice and resources.

Step 2: Develop a business plan

Writing a business plan for a funeral home is crucial not only because it provides potential lenders or investors with information about your business, showing them how you plan to become profitable., but it also helps articulate your vision for the business and define the strategies to achieve it.

While all sections of a business plan are important, there are a few sections to pay particular attention to:

Market Analysis: This should contain a thorough understanding of your local market, demographics, death rate, customer preferences, and competition. This section will demonstrate your understanding of the unique dynamics of the funeral industry.

Marketing & Sales Strategy: Given the sensitivity around marketing funeral services, your strategy here should be thoughtful, respectful, and community-oriented.

Financial Projections: Due to the high startup costs and specific pricing structures, your financial projections should be clear, detailed, and realistic. Consider including different scenarios to show your financial sustainability under various circumstances.

Related: How to write a business plan

Step 3: Find a suitable location for the funeral home

Choosing the right location for a funeral home is important and can significantly affect your business’s success. Here are some factors to consider:

Demographics: The location should be in a community that matches the demographics your funeral home will serve, whether that’s based on age, religion, income level, or cultural group.

Accessibility: The funeral home should be easily accessible. It should have adequate parking for a large number of vehicles and be ADA-compliant to ensure accessibility for elderly or disabled individuals.

Proximity to Hospitals, Hospices, and Cemeteries: Being close to hospitals, hospices, and cemeteries can make transport of bodies more efficient and cost-effective.

Visibility: A location on a busy street or in a well-known area can help with visibility and branding. However, you’ll need to balance this with considerations of respect and privacy.

Size and Layout: The building should have sufficient space for all the necessary facilities (chapel, viewing rooms, preparation areas, offices, storage, etc.). Consider the flow of operations and how families and mourners will move through the space.

Parking: It is important for a funeral home to have adequate parking because it allows for the convenience of the family and friends attending the funeral service. A funeral can attract a large number of people, including older individuals who may have mobility issues. Having enough parking spaces close to the funeral home can help ensure that everyone, including those with mobility issues, can easily access the funeral home without having to walk a long distance or navigate difficult terrain. This can help reduce stress and make the experience more comfortable for everyone involved.

Local Regulations: Check local zoning regulations to ensure a funeral home is allowed in your desired location. Some areas may have restrictions or special requirements for businesses handling human remains.

Community Acceptance: Funeral homes can be sensitive subjects, so community acceptance of your location is important.

Competition: Consider the location of other funeral homes in the area. You might want to avoid areas with numerous established funeral homes unless you have a strong differentiator.

Potential for Growth: Consider if the location will allow for potential expansion or growth in the future.

Building Inspection: Hire a professional to thoroughly inspect the building and identify any potential issues, such as structural problems, outdated electrical or plumbing systems, or lack of accessibility features.

Get detailed quotes from multiple contractors for necessary renovations, in order to avoid costly surprises and ensure your funeral home starts on a solid foundation.

Step 4: Obtain licenses and permits

The next step in starting your funeral home is to make sure it’s properly registered and legal to operate. It’s important to note, however, that the exact process can vary from state to state, so you’ll need to check the specific requirements for your location. Here’s a general guide to the key registrations:

Form a Business Structure: The first thing you’ll need to decide is what business structure is best for your business. This could be a sole proprietorship, a partnership, a limited liability company (LLC), or a corporation. Each of these structures has different implications for liability, taxes, and administrative complexity. An LLC or corporation is often recommended for a funeral home to limit personal liability.

Related: Comparison of business structures

Register Your Business Name: After registering the business structure, you may need to register your business name. This process will vary depending on what business structure you pick. Sole proprietors and partnerships will often be required to register a “Doing Business As” (DBA), while corporations and LLCs register with the state.

Related: Tips and ideas for naming a funeral home 

During this time, it’s also a good idea to check if the name you want is available as a web domain, even if you’re not ready to set up a website yet.

Related: Finding a domain name for your business

Obtain Business Licenses and Permits: To open a funeral establishment, several licenses and permits are going to be required.

For starters, most states require funeral directors and embalmers to be licensed, which often includes having a degree from an accredited mortuary science program, completing an internship or apprenticeship, passing a state and/or national exam, and paying a licensing fee. Additionally, some states require funeral homes to have a separate establishment license.

There is also oversight from the Federal Trade Commission (FTC) as funeral homes are regulated under the Funeral Rule, which protects customers from non-transparent bundling of products and services being sold. Many states also have regulations on pre-need planning services, which results in funeral homes being audited.

Local health departments and the Occupational Safety and Health Administration (OSHA) have regulations to be aware of such as formaldehyde exposure and bloodborne pathogens. Ensure you understand these regulations and have plans in place for compliance.

Last, in addition to funeral provider specific requirements, there will likely be a variety of general licenses or permits needed before opening. This could include a business license, seller’s permit, and Employer Identification Number (EIN).

Related: State guides for business licensing

Starting a funeral home involves a lot of legal and regulatory steps, and these requirements vary by state. It’s highly recommended to consult with a business attorney or consultant familiar with the funeral industry in your state to ensure you are meeting all the requirements.

Step 5: Secure financing

Getting funding to start a funeral home can be a significant undertaking, as the initial investment for facilities, vehicles, and equipment can be quite high.

There are a few common sources of funding for a funeral home.

Personal savings can be a good starting point, although, for many people, personal savings alone may not be enough to cover all startup costs.

In general, banks like to loan money to funeral homes as demand for their services is steady, however, getting the funding to start a funeral home can be difficult.  In order to get a loan, the borrower(s) will need to have good credit and be able to personally invest 15-25% towards the total start-up costs. Traditional bank loans can provide significant capital, especially if you have strong personal credit and can provide collateral. The U.S. Small Business Administration (SBA) offers several loan guarantee programs that can be used by the lender to reduce their risk.

Private investors, such as friends and family, may be willing to invest in your funeral home business in exchange for equity. However, this is less common in the funeral home industry than in some other industries.

Related: Finding the money to start a business

Step 6: Acquire and set up the facility

Once you’ve secured the financing and licensing, it’s time to acquire the property and prepare it for opening. Here are some tips to consider:

Building Renovations or Construction: You will likely need to make modifications to the building to meet the specific needs of a funeral home. This could include building viewing rooms, a chapel, a preparation room, restrooms, and office space. Be sure to work with a contractor who understands the unique needs of a funeral home.

Compliance with Laws and Regulations: Make sure your location complies with all local, state, and federal regulations. This includes zoning laws, health and safety codes, the Americans with Disabilities Act (ADA), and regulations from the Occupational Safety and Health Administration (OSHA).

Interior Design: Design the interior of your funeral home to be comfortable and welcoming. Consider hiring an interior designer who specializes in funeral homes. The goal is to provide a soothing and respectful environment for grieving families.

Technology Setup: Install the necessary technology, including phones, computers, printers, and audio/visual equipment for services. There are several industry-specific software programs that can help manage various aspects of a funeral home, including scheduling, case management, and billing.

Vendors and Partnerships: Establish relationships with vendors for products you’ll need on an ongoing basis (like caskets, urns, and flowers). You may also want to create partnerships with local businesses such as florists, caterers, and monument companies.

Remember to have all your systems and processes in place before you open your doors. The more organized and prepared you are, the smoother your operations will be, allowing you to focus on providing the best possible service to your clients.

Step 7: Purchase equipment and supplies

Purchasing the necessary funeral equipment and supplies is a pivotal step in establishing a funeral home. Initially, the owner will need to determine the specific requirements based on the size of the funeral home, the services they intend to offer, and the local regulations. Essential equipment may include embalming machinery, preparation tables, body refrigeration units, caskets, urns, and funeral vehicles. Other necessary supplies can encompass consumables for the embalming process, office supplies, and decor to create a comforting environment.

When purchasing equipment and supplies, it’s important to carefully consider the quality, price, and longevity of the items. Cost-benefit analyses may be useful in this regard. When possible, it’s a good idea to establish relationships with multiple suppliers to ensure availability and competitive pricing. Leasing expensive equipment could also be an option to consider, as it can offer flexibility and help manage upfront costs.

Establishing strong relationships with local suppliers is integral to the funeral home’s operation. This includes not only those supplying equipment and caskets, urns, and other funeral-specific supplies but also local florists, caterers, printers, and monument or headstone manufacturers. By nurturing these relationships, the owner can ensure reliable, timely service, which is crucial in an industry where delays can be particularly distressing for clients. Furthermore, these relationships can sometimes provide the opportunity for cross-referrals, contributing to business growth. It’s crucial to maintain open and consistent communication with all suppliers, fostering a collaborative relationship that will benefit the funeral home in the long run.

Step 8: Create marketing and advertising strategies

Marketing a funeral home requires a thoughtful and respectful approach, considering the sensitive nature of the business.

Establishing strong relationships within the local community is crucial. This can be achieved by participating in local events, supporting local causes, and engaging with community organizations. Offering educational seminars about funeral planning and grief support can position your funeral home as a resource and trusted authority in the community.

Setting up an online presence is also essential. For starters, a professional and informative website can provide potential clients with valuable information, comforting imagery, and testimonials from satisfied families you’ve served. Social media, although a sensitive platform for this industry, can be effectively used to share obituaries, event announcements, or comforting quotes and messages. Online directories and Google My Business can increase visibility in local search results.

Traditional methods such as print advertising in local newspapers, radio ads, and direct mail can also be effective, especially with older demographics. Finally, word-of-mouth referrals are particularly powerful in this industry. Providing exceptional, compassionate service to every family will naturally encourage referrals.

Every interaction, every service, is an opportunity to demonstrate your funeral home’s care and professionalism, contributing significantly to your overall marketing strategy.

Related: Low-cost ideas to market a new business

Step 9: Hire Employees

Hiring the right team is crucial for a funeral home owner, as the employees directly contribute to the reputation and service quality of the business. Hiring in the funeral service industry involves not only looking for skilled and qualified professionals but also individuals who are compassionate, empathetic, and sensitive to the needs of grieving families.

Common types of employees in a funeral home include funeral directors, embalmers, office administrators, and drivers.

When hiring for a funeral home, there are a few industry-specific considerations to keep in mind:

Licensing Requirements: Ensure that the staff members you hire, like funeral directors and embalmers, have the necessary licenses and qualifications required by your state.

Soft Skills: Look for individuals who are compassionate, patient, and excellent communicators. They should be comfortable interacting with grieving families and able to provide support and guidance.

Physical Abilities: Some roles, such as embalmer or driver, may require a certain level of physical fitness due to the nature of the tasks they perform.

Availability: Given that death and bereavement services often can’t be scheduled in advance, having staff who can work flexible hours, including nights, weekends, and holidays, is crucial in the funeral industry.

As for training, make sure to provide thorough on-the-job training that covers your funeral home’s processes and practices, customer service expectations, and any software or equipment they’ll need to use. Ongoing training and professional development opportunities should also be provided to ensure your staff stays up-to-date with industry trends and regulations.

Related: Hiring your first employee

Step 10: Prepare to launch

Starting a funeral home is a significant endeavor and there are numerous aspects to consider as you move towards opening day. Every funeral home owner will have different needs, here are some of the more common items still needed before starting the business:

Business Insurance: As previously mentioned, securing the appropriate insurance is essential. Policies should cover general liability, professional liability, property, commercial auto, workers’ compensation, business interruption, environmental liability, and cyber liability. It is recommended to work with an insurance broker experienced in the funeral industry to ensure all necessary coverages are in place.

Bookkeeping and Accounting: Establish a reliable bookkeeping system from the outset. This could be managed internally or outsourced to a professional accountant or bookkeeping service. Keeping accurate and up-to-date financial records will help you monitor the financial health of your business and is crucial for tax preparation.

Related: Setting up the accounting for your business

Bank Accounts: Opening a dedicated business bank account is essential for managing your funeral home’s finances. This helps to keep personal and business finances separate, simplifies tax preparation, and presents a more professional image to clients and vendors.

Credit Card Processing: In today’s digital age, it’s crucial to have a system in place to accept credit card payments. This can provide convenience to families and can improve cash flow by ensuring prompt payment for services. You can set up credit card processing through your bank or a third-party payment processor.

Remember, every funeral home will have different needs depending on its size, location, services offered, and other factors. The above points should serve as a guide, but it’s crucial to conduct your own research and due diligence to ensure your funeral home is well-prepared to serve your community. It can be helpful to consult with professionals such as lawyers, accountants, and business advisors throughout this process.

Common Questions When Starting A Funeral Home

How much does it cost to start a funeral home?

Starting a funeral home can be a considerable investment, with costs potentially ranging from $450,000 to over $1,000,000, depending on various factors. These factors include the location, size of the property, the extent of renovations required, equipment needed, inventory, and more.

Breaking down the costs further, here are some of the most significant expenses:

Property Costs: The cost of buying or leasing a property can vary widely depending on the location, size, and condition of the property. If you’re buying, you could be looking at several hundred thousand dollars. Leasing could be a few thousand dollars per month.

Renovation and Construction Costs: Modifying a building to serve as a funeral home can be quite costly. Depending on the scale of the renovations, this could range from tens of thousands to several hundred thousand dollars.

Equipment and Supplies: You’ll need to invest in professional-grade equipment for embalming and body preparation, funeral vehicles, and a stock of caskets and urns. This could easily amount to over $100,000.

Licensing and Permits: Fees for necessary licenses and permits will vary by location, but you should plan for several thousand dollars in this category.

Initial Inventory: Purchasing an initial stock of caskets, urns, and other funeral goods could cost several tens of thousands of dollars, depending on the range and quality of products you plan to offer.

Operating Expenses: Funeral homes have various operational expenses that are essential for running their business and providing funeral services. Common operational expenses incurred by funeral homes include insurance, utilities, staffing, marketing, and more. It’s generally recommended to keep three to six months of operating expenses on hand as a buffer. This could be an additional $50,000 to $100,000 or more, depending on the size and operating costs of the business.

These estimates provide a general idea of the costs involved in starting a funeral home. Keep in mind that costs will vary widely depending on numerous factors, so it’s important to conduct a detailed cost analysis as part of your business planning process.

How much can a funeral home owner make?

Funeral home income will vary depending on the business’s location, expenses, and even local funeral home competitors’ presence. 

Though the data is only as recent as 2021, according to the National Funeral Directors Association, the average cost of a funeral is around $8,000.

In general, profitability in the funeral home business is often calculated based on the number of calls (funerals) handled per year and the average revenue per call. For instance, if a funeral home handles 100 calls per year (the average NFDA-member funeral home serves 113 families per year), and the average revenue per call is $8,000 (taking into account a mix of services like burials, cremations, viewings, etc.), the total annual revenue would be $800,000.

From this revenue, one needs to subtract operating expenses, which can include salaries, cost of goods sold (like caskets, and urns), facility costs, marketing, insurance, and other overheads. For example, if these costs total $500,000 per year, the owner would be left with a gross profit of $300,000 ($800,000 – $500,000).

It’s crucial to remember that these are just examples, and real-life figures can vary significantly. Factors such as local market conditions, competition, service offerings, pricing, and the business owner’s management skills can greatly influence profitability.

Also, the initial years might yield lower profits or even losses as the business establishes itself and builds its reputation. The funeral home business is a long-term investment and requires not only financial resources but also dedication and commitment.

What skills are needed to run a funeral home?

A funeral homeowner doesn’t necessarily need a business degree, but certain skills, experiences, and education programs can increase the business’s chance of success.

Experience in the funeral industry. A business owner who has worked or held an internship in the funeral industry will be better prepared for the challenges that come with owning a funeral home.

Education. According to the American Board of Funeral Service Education, all states require funeral directors to be licensed, and those licensure requirements vary from state to state. Many states require that a candidate have post-secondary education (often a two- or four-year certificate or degree in funeral service education), complete an internship, and pass the National Board Examination.

Interpersonal skills. Funeral homeowners need great interpersonal skills since they work with families going through some of the worst days of their lives. A funeral homeowner who is warm, kind, and compassionate can make a lasting impression on families.

Attention to detail. From ensuring that all of a family’s wishes are met with each funeral to managing inventory, funeral homeowners work with important detail every day.

Management experience. Funeral homes need multiple employees, so experience in hiring, training, and managing staff is important.

Organization skills. From coordinating all of the elements of a funeral to managing employee schedules, a funeral homeowner needs to be well-organized.

What is the NAICS code for a funeral home?

The NAICS code for a funeral home is 812210.

The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.

Related: What is a NAICS code?

Resources:
American Board of Funeral Service Education
International Cemetery, Cremation and Funeral Association
National Funeral Directors Association
National Funeral Directors & Morticians Association

How To Start A Funeral Home In 2023

How To Start A Funeral Home In 2023

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