How To Open a Funeral Home

As a potential business owner, you'll want to survey your options. Look at your finances and determine if you're in the right place to start a business. Discuss your plans with your significant other or family and friends.

This is also the time to consider worst-case scenarios. Don't be afraid to scrutinize your business idea before you start your business venture.

Next, start researching your business plan. This is often the most exhaustive part of the process. You will make critical decisions about your business and research various facets of the funeral home industry.

You'll also need a robust business plan when approaching lenders and investors for financing.

Survey the broader landscape before zeroing in on the market where you plan to open your funeral home. Make a checklist of all the issues your business plan should address. The most important questions every funeral home business plan should answer are:

• Are you purchasing an existing funeral home business or starting anew?
• Will your funeral home lease or buy its location?
• Are you the sole owner, or will there be multiple owners?
• Which legal business entity structure will you choose for the business?
• How do you intend to finance the funeral home's opening?
• Who are your competitors, and is there a market demand for your services?
• What services will your funeral home offer, and who must you hire to provide them?
• What is the business name for your funeral home?
• How will you market your services?

There are online templates that can help you draft your business plan.

You must register your business with your state. This action recognizes your funeral home as a legal entity. You can do this through your state's corporations office, usually a Secretary of State. Registering your business does involve a fee. In most states, you will also be subject to renewal fees each year.

You'll also need to decide on a business structure (or type of legal entity) for your funeral home:

• Sole proprietorship
• Partnership
• Limited liability company (LLC)
• Corporation

The default entity type is a sole proprietorship. So, if you don't choose another structure, your business is a sole proprietorship.

As a sole proprietor, you and your business are a single legal entity. The main drawback to a sole proprietorship is that your personal assets are not protected against the business's debts and liabilities.

In a general partnership, partners share liability. Limited partnerships protect partners from personal liability.

Most funeral business owners register their business as either an LLC or a corporation. These structures offer owners liability protection and tax flexibilities unavailable with sole proprietorships or general partnerships.

Next, apply for an Employer Identification Number (EIN) with the Internal Revenue Service (IRS). The IRS uses these nine-digit numbers for tax and identification numbers. It's like a social security number for your business.

You'll need an EIN to hire employees and open a business bank account.

Getting an EIN through the IRS is free. Watch out for commercial sites that charge a fee—some of them look similar to the official IRS website. 

Your business bank account further separates your personal assets from business assets. Conduct your funeral home's transactions through a business bank account and maintain diligent records.

You may need extra capital to fund your everyday operations. This is especially true when your business is just starting. You may need to access business credit to cover some costs.

An option that can work well for small businesses is Net-30 accounts. Net-30 terms allow your business to receive goods or services upfront without immediately paying for them—usually 30 days. This can help with cash flow management while building business credit.

Net-30 vendors are suppliers that offer Net-30 payment terms. They provide payment history to credit reporting bureaus.

Another option is to fund your business expenses with a business credit card.

Securing financing can be challenging, but it's easier for businesses that are always in demand. Most funeral home owners must take out a small business loan to secure capital to cover startup costs.

Your commercial rent and any buildouts or renovations will likely be your most significant expenses. You must also outfit your funeral homes with specialized equipment. Consider these equipment costs as you formulate your budget:

• Embalming equipment, supplies, and tables
• Hydraulic lifts capable of lifting human bodies
• A hearse
• A cremation chamber and urns
• A refrigeration system
• Caskets, both to sell and have on hand

You will also need to factor in office items and technology, furniture for the public space, and commercial insurance. If you hire an attorney, accountant, or business consultant, you should also include professional costs.

Prepare to contribute up to a quarter of the opening costs from your own personal assets. Business owners with good credit and available funds should be able to secure a business loan from a bank or credit union.

You can also look into small business loans from the Small Business Administration (SBA). SBA-backed loans can be easier to secure because they reduce lender risk.

Finding the right commercial real estate for your funeral home can be costly.

You will need a commercial space large enough for:

• All your business's necessary equipment
• A public space for viewings and memorial services
• A private working area for embalming, cremation services, and general preparations

Take your competitors and the local market into account as well. Where are your competitors located? Choose a spot where competitors don't crowd you.

Depending on the state or municipality where you operate, you might need to register for a certificate of occupancy (COs). COs confirm that your location meets all necessary building codes and zoning laws.

Your space must also be accessible under the Americans with Disabilities Act (ADA).

Your business is subject to the regulations of both the federal government and the state where you operate. Every state has different requirements—check with your state's business administration office or secretary of state for licensing requirements for your funeral home.

While most states don't require a general business license, funeral directors need a mortuary science (mortician's) license. For this license, funeral directors must graduate from an accredited mortuary science program and pass a state licensing exam.

Embalmers also need a license in every state except Colorado.

Your funeral home must also meet certain occupational health and safety standards. Plan for inspections with your local health department and the Occupational Safety and Health Administration (OSHA) before you can open for business.

OSHA also requires funeral homes to employ various safety programs, including:

• Bloodborne pathogen exposure control
• Hazard communication and certified safety data sheets
• Formaldehyde exposure control
• Respiratory protection and personal protective equipment
• Spill response
• Confined space safety
• Lockout and tagout (specific to crematoriums)

See the Licensing Boards and Requirements section of the National Funeral Directors Association (NFDA) website for your state's licensing requirements. The NFDA also provides preneed regulations, licensing fees, and continuing education requirements for each state in its Regulations in Funeral Services Licensing guide.

Some funeral goods and services are exempt from sales tax in some states. Still, you may need a sales tax permit for your business's taxable aspects.

When holding visitations, your funeral home will see a lot of foot traffic, and accidents can happen. You should always make the safety of your visitors a priority, but every business should have insurance.

At a minimum, every funeral home owner should have general liability insurance and workers' compensation insurance (if you have employees). But you may want additional insurance. Consider your business's potential liabilities and how much financial risk you are willing to assume when deciding on coverage.

Trademark protection grants you exclusive rights to your business name. It also prevents others from using confusingly similar names or marks and allows you to enforce trademark rights in the event of infringement.

Once you have conceptualized your business name and logo, file for a federal trademark with the U.S. Patent and Trademark Office (USPTO). Be patient—this application process can take up to 18 months. Some business owners get help from an intellectual property attorney for this.

You can also file for a trademark at the state level. This is separate from registering your business with the state, which does not automatically provide trademark protection.

Your marketing strategy is the primary way your target market will find out about your funeral home. There is no one right strategy for advertising, but here are some avenues to consider:

• Establishing an online presence with a user-friendly website and social media profiles
• Using relevant keywords, meta tags, and other search engine optimization (SEO) strategies
• Leveraging traditional media like print advertisements and direct mail
• Listing your business in online and printed business directories
• Getting involved in your community (like community events, partnerships with other businesses, and sponsorships)

If you're in an area with steep competition, your messaging should include what differentiates your services from other funeral homes in the area.

Funeral services are a relationship-oriented business. Connect with your audience and community by establishing trust and providing support.

Familiarize yourself with pricing and advertising laws that affect funeral service providers. Namely, the Federal Trade Commission's (FTC) “Funeral Rule" which requires funeral homes to:

• Provide customers with an itemized price list of goods and services
• Provide price quotes over the phone upon request
• Disclose if embalming is not required under state law
• Use a casket or container purchased elsewhere without charging a handling fee

Some states have additional regulations for funeral pricing transparency and disclosure.

The kind of employees you will need and how many depend on the scope of your business and your direct involvement. Consider the following:

• Will you be managing the day-to-day affairs of the business?
• Do you plan on serving as a director or an embalmer?
• Is there a seasonal aspect to your business?
• What range of services does your funeral home provide?

Your education and background will also determine the extent of help you need. Still, potential hires to make include:

• Business manager to oversee day-to-day operations
• A funeral director who coordinates visitations
• Removal staff
• A professionally trained embalmer
• A driver for the hearse
• Hairstylist and makeup artist
• Assistants for the director, manager, and embalmer
• Maintenance and janitorial staff

A good place to source potential talent is through mortuary science programs. Connect with students and recent graduates seeking opportunities in the industry. You can also use online job platforms, LinkedIn, and professional associations to find candidates.

It is also important to understand hiring laws. For example, federal law prohibits employers from asking certain questions during the interview process. You also must verify each employee's identity and eligibility to work in the U.S.

You should also perform a background check for every employee you hire.

Next, open your funeral home and provide an essential service to your community. Operate your business professionally and with empathy—your customers will remember you and your business in their time of grief.