The global funeral home market is growing every year and is currently on a trajectory to reach $39.3 billion in 2031. This comes with a projected compound annual growth rate (CAGR) of 5.6% from 2023 to 2031.

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Yet funeral homes that do get established stand to build strong community ties and local customer loyalty over time. Most aim to compassionately serve families during difficult times, not merely conduct transactions. With an aging national population and a timeless need for services that honor loved ones’ lives, the broader outlook remains positive.

This guide will walk you through how to start a funeral home. Topics include market research, competitive analysis, marketing, registering an EIN, forming a legal business entity, obtaining business insurance, and more.

1. Conduct Funeral Home Market Research

Market research is an important part of starting a funeral business. It offers valuable insight into your target market, trends in services and products, market saturation, and more.

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Some details you’ll glean through market research include:

• The aging Baby Boomer generation drives much of the growth as 10,000 Americans turn 65 daily.
• The cremation rate also hit 56% in 2021, up from 28% in 2002 per the National Funeral Directors Association, leading to opportunities in that segment.
• Despite trends toward simpler, lower-cost services, traditional funerals remain prevalent with over 50% still choosing casket burials at cemeteries.
• Barriers to opening new funeral homes include substantial upfront capital for facilities, equipment like hearses and embalming rooms, and licensing fees that average $12,500.
• Many states also require funeral director education.
• Brand building in a delicate field also takes considerable marketing through placements in hospice brochures, community event sponsorships, and word-of-mouth networks.
• Established funeral homes enjoy reliable local demand paired with high customer retention and consistent repeat business streams.
• The very sensitive nature of the services offered establishes strong social ties and trust within communities that competitors struggle to break into.
• Profit margins remain high, averaging around 20% for successful funeral homes according to industry analysts.
• Cremation’s rise lowers some costs as well.
• These factors illustrate an attractive, sustainable market for new players to target once local licensing and regulations are navigated through proper research and certification processes.

The aging population and ubiquitous need for funeral services paint an optimistic outlook for the industry. Steady growth is projected from both traditional segments and emerging trends toward cremation and simpler memorials.

2. Analyze the Competition

Understanding the competitive landscape is crucial when entering the highly local funeral home industry. Begin by identifying direct brick-and-mortar competitors in your intended geographic area and determine their market share and reputation.

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• Search online directories and death notice archives to tally local deaths over the past 1-3 years.
• Estimate what percentage of those cases each competitor handled based on notices referencing them.
• Search online reviews to gauge community perception and loyalty among families served.
• Consider reaching out to local hospitals, hospices, and elder care networks to inquire who they currently refer families to as well.
• Evaluating competitors’ digital presence and marketing tactics is equally important nowadays.
• Search their names on Google and note SEO elements like reviews, structured data, and visibility on maps/search platforms.
• Analyze their website content for trust signals, empathy, and localization. Check for Google Business Profile claimed and optimized.
• Then search their brand names on Facebook to see follower counts, engagement levels, ad spend if disclosed, and breadth of community connections.
• A weak online presence by incumbents may signal opportunities to stand out through modern branding and marketing.
• Also directly ask current players about capacity constraints as fast-growing target areas may welcome new entrants.
• Discover if poor site layouts, lack of crematory services, outdated facilities, or restrictive capacity during flu seasons open niches to exploit with updated offerings.
• Location opportunities could emerge as well if competitors sit far from key neighborhoods.

Analyzing this data illuminated whether consumer needs are truly being met or gaps exist for those establishing modern funeral homes with digital-first mindsets while respecting traditional regional preferences.

3. Costs to Start a Funeral Home Business

Starting a funeral home requires substantial upfront capital and ongoing investments to cover overhead in an extensively regulated industry. Key start-up costs typically include:

Start-up Costs

• Facilities – Purchasing or leasing a suitable property with appropriate zoning and space for services averages $65-$85 per square foot in most markets according to commercial real estate data.
• A minimum of 3,000 sq ft is recommended for garages, preparation rooms, chapels, and admin offices resulting in an initial $195,000 – $255,000 facilities investment.
• Equipment – Essential equipment like embalming tables ($3,000-$6,000), preparation room tools ($8,000), funeral coach vehicles ($70,000-$100,000 each), and other death care transport can total $125,000-$175,000 upfront.
• Display casket inventory averaging $100,000 is also a necessity.
• Licensing – State and local business permits, funeral director licenses, and regulatory fees often reach $10,000-$15,000 for initial licensing. Staff licenses and training add further costs as well.
• Insurance – General liability coverage is essential given industry risks, averaging $7,500/year for $1 million coverage.
• Specific policies like life insurance to fund prepaid funerals for clients are also +$3,000/year.
• Working capital – At least 6 months of operating capital is vital when opening a funeral home to withstand seasonal volume changes.
• With an average overhead of around $25,000/month as outlined below, $150,000 working capital should be secured.

All said, over $500,000 minimum start-up funding is reasonable when entering the death care industry before even accounting for inventory, marketing, or staff. Be prepared for extensive startup costs of well over $1 million for larger facilities.

Ongoing Costs

• Facilities fees and insurance = $5,000/month minimum
• Equipment maintenance + transport = $2,500
• Labor (initial 2-3 funeral directors + admin pros) = $12,500+
• General overhead like utilities and tech costs = $3,000+
• Ongoing Annual Costs:
• Facilities maintenance = $4,000+
• Recertifications & licensing = $1,500+ per licensed staff
• Marketing + community relationship building = $5,000

Overall, monthly costs can quickly sum to exceed $25,000 in overhead. The first 1-3 years also average over $30,000/year in various annual recertifications, replenishing working capital, equipment upgrades as needed and facilities improvements to better compete.

4. Form a Legal Business Entity

When structuring a funeral home business, owners must weigh options balancing legal liability, taxation, and ease of management. The four primary entities each have pros and cons to consider:

Sole Proprietorship

A sole proprietorship provides an easy setup with no formal registration needed beyond typical business licenses. However, the owner assumes unlimited personal liability for debts and claims which is dangerous in a mortuary service business. Pass-through taxation to the individual’s rate also typically means higher taxes than corporations. Still, this is a quick structure for very small operations.

Partnership

Forming a general or limited partnership spreads ownership and financial obligations across partners jointly operating the funeral home. The business itself pays no income taxes. However, similar to sole proprietors, partners assume unlimited personal liability including malpractice risks with mortuary services.

Limited Liability Company (LLC)

A limited liability company (LLC) balances pass-through taxation to owners without burdening them with personal liability. An LLC limits owner exposure to their capital contributions alone. The LLC status also imposes fewer record-keeping requirements than corporations.

Most small business experts recommend forming an LLC to safely operate higher-risk enterprises like funeral homes. Owners can layer insurance for added protection as well. This facilitates prudent expansion too as LLCs allow unlimited partners.

Corporation

A funeral home can be incorporated as a C or S corporation although this brings administrative complexity from extensive filing requirements and regulations in most states. These entities do limit liability exposure for shareholders. However, the corporate structure is usually excessive for most small funeral homes. The increased setup costs and tax/filing burdens often outweigh the marginal liability benefit of an LLC.

5. Register Your Business For Taxes

Part of your business plan as a funeral and cremation services director is obtaining an EIN. An Employer Identification Number, or EIN, serves as a business entity’s IRS tax ID similar to a Social Security Number for an individual. All funeral home businesses must acquire an EIN to handle federal tax obligations like payroll deductions or business income taxes.

An EIN is also required to open business bank accounts properly registered to the commercial entity. Applying online at the IRS website takes just minutes and avoids mailing delays:

1. Navigate to the EIN Assistant and select “View Additional Types” to find the link for funeral homes under personal services businesses.
2. Choose the appropriate federal tax classification for your business structure. Most funeral homes operate as limited liability companies (LLCs).
3. Enter all required identification details like names, addresses, and ownership percentages to generate the EIN confirmation letter instantly.

There are no fees directly associated with obtaining a federal EIN. However, funeral homes must also complete state-level licensing and tax registration for the authority to operate and collect/remit sales taxes. State fees vary but often total a few hundred dollars for a standard funeral home license application.

At the state level, registering for required sales tax permits is also tied to the EIN status. This enables properly reporting transaction-based taxes each period. States levy varying sales tax rates and bases depending on jurisdictions so consulting regional experts is key.

Once the EIN is secured, notify all business partners and financial institutions. Add the tax ID to commercial insurance policies, vendor agreements, payroll systems, and other administrative documentation.

6. Setup Your Accounting

With significant start-up costs and ongoing overhead paired with intricate regulatory requirements, funeral home accounting warrants careful attention from day one. Mastering bookkeeping best practices independently or utilizing external accounting support establishes order amidst heavy financial workflows.

Accounting Software

Deploying small business accounting software like QuickBooks proves extremely useful for most funeral homes. Integrations with bank/credit card accounts enable automatic categorization of all transactions to simplify reconciliation and reporting. Dashboards and custom reporting provide real-time performance insights as well. Subscription plans start around $20/month.

Hire an Accountant

Outsourcing tasks to bookkeepers and CPAs also makes sense for many owners less familiar with accounting compliance. Typical monthly fees of $200-$500 for specialized bookkeeping and reconciliation assistance bring order to the accounting process. This frees up staff for client-facing activities.

Open a Business Bank Account

Maintaining separate personal and business accounts for your funeral home activities is also non-negotiable. Commingling assets invite IRS scrutiny if unable to prove earned income sources, especially as a pass-through LLC entity. Open dedicated small business bank accounts and credit cards solely for commercial transactions.

Apply for a Business Credit Card

Applying for credit cards like the Chase Ink Business cards considers both personal and business factors for limits. But keeping expenses isolated aids reporting. Carry small balances monthly, and pay in full to build a business credit history as well.

7. Obtain Licenses and Permits

Embarking on opening a funeral home requires proper research into federal, state, and local licenses plus permits to legally operate all facets of the sensitive business. Find federal license information through the U.S. Small Business Administration. The SBA also offers a local search tool for state and city requirements.

At the federal level, funeral homes must register with the FDA for oversight relating to fluid preservation rules and handling of deceased with communicable diseases. No formal licensing occurs but instead notification and compliance with mortuary regulations.

All states mandate funeral home licenses for commercial deathcare services within their borders. For example, California charges over $300 initially for funeral establishment licenses after passing exams plus facility inspections while Illinois requires a $1,000 application fee.

Specialized local permits often come into play for funeral home projects too. For instance, cities enforce zoning regulations for commercial property usage or parking constraints. Renovating historic buildings may need approvals before altering layouts. Even signage displays likely need municipal site plan permits in many areas.

Several ancillary services common at funeral homes also mandate permissions like offering cremation or selling preneed funeral plans. These specialty offerings allow families to bundle arrangements but do impose other compliance rules to research within target states before promoting such expansion plans.

Transportation services through hearses require vehicle registrations, and commercial insurance, and may necessitate commercial driver licenses for staff. States also enroll funeral homes in programs like Workman’s Compensation for employee injury benefits. Staying atop the multitude of administrative license hurdles takes diligence.

While no business looks forward to red tape, due caution safeguards funeral home investors from preventable legal troubles or suspensions down the road. The sensitive nature of death care makes adherence to codes imperative.

8. Get Business Insurance

Given the sensitive services and high liability risks in death care, securing tailored business insurance protects funeral homeowners from financial ruin. Policies cover expenses if accidents, natural disasters, lawsuits, or other incidents damage properties or disrupt operations. Without proper coverage, a single event could permanently close doors.

For example, a fire could destroy a prep room and equipment worth hundreds of thousands in replacements. Slip and fall claims or trusted employee theft occurrences may drain Savings as well. Even cyber incidents around client data or service interruptions from floods may open the business up to massive legal and regulatory issues without insurance buffers.

Typically securing general liability, commercial property, business continuation, and other policies runs $550-$850 monthly but sustains operations through unpredictable events. Structuring the proper coverage mix requires an assessment of local risks, assets, and compliance obligations.

Connecting with a trusted, specialized agent guides tailoring policies. Expect to provide details on storage areas, commercial vehicles, staff certifications, premises layouts, and more. Securing protection for first call volumes without history uses estimates. Expect enhanced underwriting down the road based on actual funeral home performance.

The application process may take 4-6 weeks requiring detailed documentation. However, obtaining quotes from 5+ regional providers ensures affordable premiums. Don’t assume current personal insurance packages transfer – commercial policies need to be structured specifically around the funeral home’s services and risk landscape.

Failing to safeguard the business from the outset with insurance invites financial catastrophe if an incident disrupts a funeral home’s sensitive operations. Legal liabilities also often exceed early expectations in death care. Protect investments through informed coverage.

9. Create an Office Space

Opting to establish a dedicated office environment for administrative duties helps structure and grow a funeral home over time even if client meetings commonly remain onsite in chapels or private residences.

Home Office

Having a centralized base aids in coordinating time-sensitive logistics across potentially distributed partner locations, memorial event venues, crematories, and other third parties involved in standard deathcare operations. It also provides privacy for sensitive legal or accounting tasks plus scalable room for new hires overseeing expanding volumes beyond early day-to-day owner roles.

Coworking Office

At launch aiming for cost-effective solutions like WeWork coworking memberships allows focusing investments on client-serving resources first. For roughly $300 monthly per floating desk, small teams can leverage shared infrastructure from spaces conducive to focused work or quick meetings just steps from home if needed.

Commercial Office

A long-term lease on stand-alone commercial office space offers dedicated room to grow at roughly $20 per square foot in many markets, translating to $1000 monthly for an ample 500 sq ft base including utilities in some regions.

10. Source Your Equipment

Launching a licensed funeral home requires extensive specialized equipment from vehicles to facility furnishings and handling tools. New owners enjoy various acquisition options balancing costs, reliability, and convenience.

Buy New

Purchasing current model offerings from leading funeral supply manufacturers like Pierce Chemicals or Mopec ensures the latest innovations and warranties but carries premium price tags before factoring in steep shipping on large goods. High-end caskets easily run $1,000 for instance. Buying entirely new carries a $75,000 price for properly outfitting a basic operation.

Buy Used

Seeking used goods through auction sites like eBay, industry forums or even local competitors retiring inventory offers significant cost savings. For example, well-maintained funeral coaches with 100,000+ miles easily serve another 5-7 years for half the cost of new.

Rent

Rentals allow access to funeral materials and transportation fleets without major upfront equity. Event-specific renting of extras like church trucks or limos for large memorials offers flexibility missing from owning outright. However, limited equipment like cremation furnaces or embalming equipment necessitates outright purchases for reliable in-house access.

Lease

Leasing agreements similarly spread costs over multi-year structures often packaged with servicing and upgrades from major equipment companies. This prevents sudden replacement costs down the road. Though total spending exceeds buying over long runs, leases help manage overhead during the risky launch phase.

11. Establish Your Brand Assets

Distinguishing a funeral home’s brand in the minds of local communities quickly proves essential to stand out from incumbent providers families rely on during emotional times. Though focused principally on compassionate care, foundations like consistent branding allow newcomers to convey trust and familiarity.

Get a Business Phone Number

Securing a personalized business phone line adds legitimacy and a local presence priceless for sensitive services. Top providers like RingCentral enable call routing, voicemail transcriptions, and mass notification services to refine responses. Number portability also aids continuity if addresses change.

Design a Logo

Creating a distinctive logo through online logo makers such as Looka provides visual continuity across marketing materials from website imagery to printed funeral programs. Given significant word-of-mouth referral chains in death care, visual familiarity builds awareness quickly at a low cost.

Print Business Cards

Simultaneously securing branded collateral like business cards through convenient printing services like Vistaprint makes professionally introducing the business to local hospitals, hospices, and religious centers effortless. These frequent exchanges market services to valuable referral partners.

Register a Funeral Service Domain Name

Registering a customized domain name for the funeral home’s forthcoming website prevents imitation, and showcases locality and branding. Sites like Namecheap make registering and managing domains easy alongside affordable hosting plans.

Design a Website

Build out pages using simple drag-and-drop solutions like Wix. For more advanced sites, specialized developers found via Fiverr craft customized online presences aligned to branded styles.

12. Join Associations and Groups

Joining regional industry associations, events and online communities accelerates market familiarity and training for newly opened funeral homes by tapping peers’ insights.

Local Associations

Longstanding groups like the California Funeral Directors Association and Illinois Funeral Directors Association offer new member onboarding guiding state regulatory nuances, pricing benchmarking, and community partnership opportunities.

Local conventions like the NFDA International Convention also feature vendor exhibits to find regional suppliers. Expect reasonable annual dues of around $400 plus convention registration fees.

Local Meetups

Attending regular regional trade events as listed on sites like Meetup encourages peer networking missing from solo launch planning. Swapping business development ideas with established funeral directors between seminars on industry trends customizes growth approaches to the local culture.

Facebook Groups

Peer knowledge sharing also continues online through industry groups like the Funeral Directors and Funeral Directors That Care. Best practices on balanced messaging cadences across digital and print mediums help newcomers refine community recognition. Ask anything from licensing questions to lifestyle realities as an owner.

13. How to Market a Funeral Home Business

Implementing an ongoing marketing strategy proves foundational for new funeral homes aiming to consistently grow volumes year-over-year within their regional community. While delivering compassionate services remains the priority, proactive outreach builds crucial awareness and trust for families during emotional times.

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Personal Networking

Initially tapping personal and professional networks to share services launches word-of-mouth referrals. Providing customers referral cards at the time of service also incentivizes sharing preferred providers when friends or family face loss. Simple personal connections seed early interest.

Digital Marketing

As for paid digital marketing, Geo-targeted Google Ads showcase top rankings for critical search terms like “funeral homes” plus the region’s name and city. Reinforce messages on Facebook and Instagram through similar hyperlocal campaigns reaching those aged 45-65.

Posting empathetic video testimonials or FAQs on YouTube also improves SEO while conveying authenticity that many incumbents lack online. High production quality is secondary to compassionate messaging.

Additionally, blogging about supporting grieving families or memorial service best practices provides helpful advice driving organic traffic and links. Optimize blog content for keywords like “how to write a funeral speech” as well.

Traditional Marketing

For traditional options, direct mail brochures sent to local religious centers and regular door knocking in 55 and up retirement communities raise visibility. Sponsoring charity events or little league teams endorses community commitment further.

• Traditional Options:
  • Direct Mail Brochures
  • Print Ads in Local Papers
  • Chamber Event Sponsorships
  • Baseball Team Jersey Sponsorships

While digital channels enable measurable lead generation, local print, and sponsorship visibility should not be ignored in a relationship-driven sector. New funeral homes combining data-driven and traditional techniques maximize reaching both aging and supporting demographics. Meet people where they are – digitally or personally.

14. Focus on the Customer

In an industry centered on compassion during turbulent times, new funeral home owners must make customer service a top priority right from launch. Some ways to improve customer focus in the funeral industry include:

For instance, proactively guiding loved ones through essential decisions around memorial styles, obituary drafting, and memento creation combines empathy and expertise to alleviate stress. Simply presenting options fails to uphold this responsibility. Instead, gently advising based on budgets, faiths, and preferences shows families their best interest matters most.

Likewise, funeral homes go beyond expectations by flawlessly orchestrating packed services honoring unique wishes for personalized programs, music, or readings. One poor sound system mishap or memorial video error damages hard-won reputations. Meticulously executed events backed by transparency builds confidence.

Post-service care also shines via check-ins on grief support group recommendations or ceremony keepsake deliveries. These small touches spread quickly within local communities, portraying the comforting environment families deserve when remembering loved ones.

In a few other industries compassion enables business growth. But within bereavement services, upholding exceptional customer service daily motivates glowing word-of-mouth referrals to friends and extended family amidst peak emotional moments. Take care of the competitive advantage from day one through retirement. Families deserve nothing less.