Opening a Funeral Home

UPDATED 11/20/20

Have you always wanted to start your own business? Do you want to know how to open a funeral home business? If so, then you’ve come to the right place.

From your local cleaning company to daycare centers across the country, there are more than 30 million small businesses in the United States alone. The best local businesses have a clearly defined purpose and serve a serious need in the community. A funeral home is just that kind of business.

Funeral homes handle funeral services for people who have died. They provide burial, cremation, and memorial services for families of those who have passed away. As a funeral home business owner, you’ll be providing these families with much-needed closure following their loss.

To learn how to open a funeral home business and find out if it’s the right fit for you, keep reading.

How to Open a Funeral Home Business in Nine Steps

average cost of prepaid funeral

Once you’ve decided on the perfect business idea for you, the process of setting up that business can be divided into nine steps. When it comes to how to open a funeral home business, the following steps will apply.

Plan Your Business

No matter what kind of business you’re starting, a clear plan is essential to your success. Creating a business plan helps you discover current unknowns in your idea, as well as mapping out the specific aspects of your business.

When figuring out how to open a funeral home business, you’ll want to consider the following topics:

  • Startup costs and operational expenses
  • Your target market
  • Your services and what they will cost
  • The name you’ll give your business

For startup costs, you’ll need to be able to afford a building to do business in. You’ll also need the right equipment for embalming and cremation: a cremation table and system, hydraulic lifts, and refrigerated storage. Like any business, you’ll also need a computer with a printer and filing system.

Ceremonial equipment you’ll need include caskets, tables and couches for the viewing area, and a hearse. You’ll also need staffing before you launch the business, which means you’ll need money to pay your employees while you wait to get paid for your first funeral.

Besides these startup expenses, you’ll need to know what your ongoing operational expenses are going to be. That way you will know how much money your business needs to make in order to turn a profit. As a funeral home owner, you’ll need to pay for your operating space, utilities, labor, marketing, caskets, and equipment for embalming and cremation. These things will cost more or less depending on how much business you have.

You should contact a real estate agent to help you find an affordable building to rent. The rent could range between a few hundred and a few thousand dollars per month, depending on the building’s size and location.

Next you’ll need a few specialists to help you run your business: a funeral home manager, a marketing expert, a receptionist, and an accountant. Additional staff will probably be needed to assist the manager. Good help can be really expensive, but it’s worth it to have competent people working for you.

Once you’ve estimated these costs, not only will you know how much money you have to invest upfront, but you’ll also know how much you must bring in to sustain your business. This will determine what you must charge customers for the services you offer.

Finally, you’ll need to choose a name for your funeral home. This isn’t the most complicated part of how to open a funeral home business, but it is one of the more important parts. The right name will convey a sense of trust, dignity, and calm to potential customers. It should also be available to register in your state, available as a web domain name, and not trademarked by anyone else.

Form a Legal Entity

Forming a legal entity for your business is important because it protects you from personal liability if your business is ever sued. You will have to choose a business structure to adopt, whether that be a corporation, DBA, or LLC. Most small businesses register themselves as an LLC, or limited liability corporation.

basic funeral and cremation

Although you can do the registration paperwork yourself, the simplest way to register your business is to hire a business formation service to do it for you. You should also consider hiring a registered agent service to protect your privacy and help you stay compliant with all laws and regulations.

Register for Taxes

No one likes to pay taxes, but it’s a necessary part of starting and running a business. As Ben Franklin is known to have said, nothing’s certain but death and taxes, which is oddly relevant when you’re learning how to open a funeral home business.

There are a variety of state and federal taxes you must register for before opening your new business. The first step is always to apply for an EIN, or Employer Identification Number. You can get your EIN free of charge through the IRS website, by mail, or via fax. From there, the process of registering for business taxes is fairly straightforward.

Open a Business Bank Account and Credit Card

You may not see the need of having a dedicated bank account and credit card for your business, but it’s quite important. If your personal and business accounts are mixed together, assets that you own — such as your car, your house, and any other valuables — can be at risk if your business is sued. This almost defeats the purpose of forming a separate legal entity for your business in the first place.

Not only that, but there are benefits to working with business finances separate from your personal finances. Learning how to build credit as a business can give you opportunities for credit cards, financing opportunities, and higher lines of credit in your business’s name. You may also get credit at better interests rates in this way.

To get these benefits and avoid financial trouble later, you’ll need to open a business checking account at a bank that you trust. Besides separating and protecting your personal assets from your business’s assets, this also makes tax filing and accounting easier.

Once you have a checking account for your business, you should apply for a small business credit card. Using a business-only credit card is a convenient way to keep track of all your business expenses, all in one place. It also helps build your company’s credit history, which may come in handy later if you need a bank loan or financial services later.

Set Up Business Accounting

Once your business is registered to pay taxes and you have financial accounts ready, it will be time to set up a system for your business accounting. This may sound complicated, but it’s really as simple as recording the money you spend, the credit you use and the debt you carry, the taxes you have to pay, and the money that comes in as revenue.

Keeping careful, detailed track of these financial records is absolutely critical, because it gives you an accurate picture of how your business is doing financially. If you aren’t earning more money than you’re spending on taxes and expenses, your business isn’t going to be viable. But if your financial records aren’t completely reliable, you won’t ever know for sure how you’re doing financially, which could lead to disaster.

Old-fashioned ways of managing accounting involved books and file folders, but today it’s more convenient to use business accounting software. There are several options available which you can learn about with a quick web search. Once you’ve purchased and installed the accounting software to your business computer, you can connect your business bank and credit accounts, and then you’re ready to start tracking finances.

Obtain Permits and Licenses

When discovering how to open a funeral home business, a critical part is the permits and licenses you need to legally operate. Not everyone can decide they know how to open a funeral home business and simply open for business. The authorities want to know that you’re qualified for the job, and you prove these qualifications by acquiring the right licenses. Without them, you could face hefty fines or even have your business shut down.

A business consulting service may be able to help you identify the licenses and permits that you need. You can also check with your town, city, or county clerk’s office to learn what you need. However, we’ll disclose a couple of the legal documents you might need below.

First of all, you should consider having a service agreement that you require clients to sign before providing services. A service agreement clarifies your customer’s expectations and ensures there’s no misunderstanding between you. This can be invaluable if a customer tries to start a legal dispute over the services you did or didn’t provide.

Next, you’ll also need a Certificate of Occupancy, or CO. This certificate confirms that building codes, zoning laws, and government regulations have all been met by your business. When you’re renting business suites or storefronts from someone else, the landlord is typically responsible for obtaining a CO. However, you should always check with them just to make sure. If the location is renovated before opening for business, you may need to have a new CO issued.

If you’re going to purchase or build a location, you’ll be solely responsible for complying with all regulations and getting a Certificate of Occupancy.

Get Business Insurance

Much like licenses and permits, your business requires insurance in order to operate safely and legally. Business insurance will protect your company’s finances in the event of a covered loss.

Depending on the type of business you’re starting, there are multiple kinds of insurance policies, and each one applies to businesses that face different risks. If you’re not sure what kind of insurance is right for you, start with general liability insurance. It’s the most common type of coverage that small businesses need, so it’s a good place to start when you aren’t sure.

Although general liability coverage is essential, you might also want to get workers’ compensation insurance. In most states, it’s legally required that you have this kind of coverage if you intend to hire employees.

Define Your Brand

Now we get to the fun part of starting your own business: defining your brand.

Branding is one of those business subjects that’s over-hyped, but not always well understood. Basically it’s the part of your business’s reputation that you control. When it comes to your reputation, most of it is out of your hands — you can’t directly control what people say about your services when you’re not there. But the quality of your services, the design and ambiance of your facility, and the approach you take to funeral home services are all things you can control that affect your reputation. These are all parts of your brand.

You can create a fancy philosophy for your business if you want to, but when it comes to funeral home services, the product is pretty much the same for every business. Obviously, you should strive for excellence in what you do and how you deal with customers. So to keep things simple, you might want to focus on the most obvious aspects of branding, such as your logo, your slogan, and your website and promotional materials.

A significant part of branding is your marketing efforts. Your primary audience is the elderly, as they’re the ones thinking about wills and making preparations before their death so as not to burden their surviving families afterward. Since senior citizens are more likely to read print newspapers than young people, you might find it most effective to advertise in the local newspaper instead of using online ads. However, you also want to be easily discovered by people who are actively looking for funeral services. You should make sure you have a prominent listing in local phone books, but you should also prioritize search engine optimization, or SEO, since lots of people find local businesses that way.

Get Online

As the last step in how to open a funeral home business, it’s important to establish an online presence to keep up with evolving technology and trends. Getting an easy-to-use, beautifully-designed website is the first step to having a good web presence. A business website will provide people with all the information they need about your services, right when they need it.

As mentioned earlier, you should prioritize search engine optimization so that people looking for funeral services online will easily discover you. You should also utilize a social media strategy to establish yourself in the community, so your business will be the first thing people think of when they need funeral services.

Do you think you have what it takes to own a funeral home? First of all, you must possess empathy. Your customers are going through a tragedy and need you to show compassion during this difficult time. Next, you’ll need to evaluate your start-up costs. For example, you’ll need to know how much it costs for all the equipment you need for embalming. What services will you offer? Right now, during the COVID-19 pandemic, live streaming a funeral is a popular choice, so you’ll need live streaming equipment. You’ll also need to find a building to work out of and pay your employees before you even host your first funeral or basic cremation services. Is it all worth it? Yes. Owning your business is a dream come true for many people and a funeral home is a lucrative one to pick. Research your competitors to find out the average cost of prepaid funeral, basic funeral and cremation services, and burial casket prices to get an idea of how much you can make.

And with that, you should now know everything you need to start thinking about starting your own funeral home. From buying cremation containers to registering your business, this is how to open a funeral home business.

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