Last Updated on May 27, 2020
Funeral home owners 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 to honor and remember their loved ones. While funeral homes were traditionally passed down through families, the industry is changing and more 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.
Funeral homes offer a variety of services, including memorial services and preparing the dead for funerals or cremation. Funeral directors usually help to manage the funeral arrangements and plans, supporting families through this difficult time. Funeral directors may help families to choose caskets, urns, and other products, and 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 families to the cemetery.
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 2014 through 2019, the funeral home industry experienced 1.0 percent annual growth, and the industry was projected to bring in $17 billion in revenue in 2019. During that five-year period, the number of businesses increased to 29,769, while industry employment also grew to 121,404.
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, and families are looking for funeral homes who 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, too. 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.
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 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.
Who is the target market for a funeral home?
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.
Skills, experience, and education useful in running a funeral home
A funeral home owner doesn’t necessarily need a business degree, but certain skills, experiences, and education programs can increase the business’ chance of being successful.
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 degree in funeral service education), complete an internship, and pass the National Board Examination.
Interpersonal skills. Funeral home owners need great interpersonal skills, since they work with families going through some of the worst days of their lives. A funeral home owner 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 home owners 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 home owner needs to be well-organized.
Costs to Start a Funeral Home
Funeral homes require significant startup costs. Smaller operations can cost $150,000 to $250,000 to start, while larger businesses can cost as much as $450,000 and up.
Common startup costs for a funeral home include:
- Embalming equipment
- Inventory, like caskets and urns
- Furniture and decorations
- Vehicle purchases or leases
- Building renovations and modifications
Steps to Starting a Funeral home
Step 1. Write your Business Plan
After coming up with the idea, the next step in starting your business should be to write a business plan. Not only will a bank require you to have a business plan, but multiple studies have shown that a business plan helps increase the odds of starting a successful business.
Step 2. Form a Business Entity
A business entity refers to how a business is legally organized to operate. There are four primary business entities to choose from which include the sole proprietorship, partnership, corporation and LLC. Each type of entity has its own pros and cons such as liability exposure, costs and administrative requirements.
Related: Comparison of Business Entities
Step 3. Select your Location
The rent for a funeral home can be significant because of the size of the building needed. In addition to rent, most buildings will require significant renovations to make them suitable. Because of these renovations and the unique design that a funeral home requires, many funeral home owners purchase their buildings, rather than renting them. Finding an existing funeral home for sale or rent may be the best option, saving on renovation time and costs and allowing the business to open sooner.
Related: Choosing a business location
Step 4. Apply for Business Licenses and Permits
While there isn’t licensing specifically for a funeral home business, states require different licensing requirements for embalmers and funeral directors. There is 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.
In addition to professional licensing, there are general business registrations at the local, state and federal level that a funeral home might need such as a sales tax permit, Employer Identification Number, and Occupancy Permit among others.
Step 5. Find Financing
Coming up with a good business idea and having the skills to run it are one thing, but getting the funding to start a funeral home is another. In general, banks like to loan money to funeral homes as demand is steady. That said, 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 invest 15-25% of their money towards the total start-up costs.
Step 6. Get your Marketing Plan in Place
Funeral homes rely on ongoing marketing to bring in new clients. Some of the common marketing activities include social media marketing, print advertising, and even TV and radio ads. Marketing costs will vary depending on the type of activity being performed.
Step 7. Get Insurance
A funeral home will require several types of insurance policies to be fully covered:
- General liability insurance protects the business if a customer is ever injured while on the property. This type of policy can cover costs like legal fees and expenses.
- Commercial property insurance will reimburse the business for insured equipment, property, and inventory that’s lost or damaged in an event like a fire.
- Commercial automobile insurance helps to protect the business against expenses that can occur if a business vehicle is involved in an accident.
- Worker’s compensation insurance helps to cover expenses like medical bills or lost wages if an employee is ever hurt while on the job.
Insurance policy costs vary depending on many factors like the value of the business’ equipment, the business’ location, and the number of employees on staff. For the most accurate idea of what insurance will cost, request quotes from multiple providers. When comparing the quotes, pay attention to details like policy coverage limits and exclusions, premiums, and deductibles.
Step 8. Hiring Employees
Funeral homes need even a small staff to operate well, and many staff positions are specialized, requiring particular education and skills. According to ZipRecruiter, the following are average annual salaries for common funeral home staff positions:
- Funeral home manager – $66,666
- Funeral director – $50,228
- Embalmer – $42,909
- Funeral home driver – $38,710
- Mortuary assistant – $35,997
- Funeral assistant – $27,701
In addition to budgeting for salaries, a funeral home’s budget also needs to account for expenses like worker’s comp insurance, paid time off, and health insurance contributions.
Related: Hiring your first employee
Amazon has several books that go into detail on starting and running a funeral home:
- Why Facebook Works for Funeral Homes: And Everything Else Doesn’t!
- Staying Alive In The Funeral & Cemetery Profession: Building A Business, Weathering Changes, and Finding Growth
- Lessons from the Dead: Breathing Life into Customer Service (Free on Amazon Kindle Unlimited)
How much can you potentially make owning a funeral home?
Funeral home income will vary depending on the business’ location, its expenses, and even the presence of local funeral home competitors. Mortician Guide states that funeral homes perform approximately 110 funerals per year. With funerals averaging nearly $10,000 each, many funeral homes bring in a revenue ranging from $1 to $1.5 million. Even with accounting for a business’ expenses, it’s clear that the funeral home industry can be a profitable one.
Things to consider before starting a funeral home
The funeral industry can be emotionally stressful, so it’s important that you open a funeral home for the right reasons. If you’re mainly focused on the profits that you might enjoy, you’ll probably find it difficult to stay with the business long-term. Successful funeral home owners find the process of helping families rewarding, so they’re able to focus on the positives of the industry, rather than the sadness that can surround the business.
Funeral homes tend to have high operating expenses because of facilities and staff, however revenues and profits have been on a decline. As more people choose cremation over traditional burial and online sales of caskets and urns increase, funeral homes are having to find creative ways to remain profitable.
It’s important to thoroughly research your location and your target market to understand the services that will be most in-demand. Be prepared for the multicultural differences that occur with funerals – each culture has its own practices and traditions that shape the mood and design of a service. The more awareness and sensitivity you have to this, the greater your target audience will be and the better your business reputation will become.