How to Start a Funeral Home

A funeral home provides essential services to families during one of the most difficult times of their lives.

This guide will provide an overview of the funeral home sector, including the startup costs and earning potential involved, and walk you through the essential steps you’ll need to take to launch your own successful funeral home business.

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Industry Overview

The U.S. funeral home industry is part of the broader death care services market, offering a wide range of services such as traditional funerals, cremations, memorial services, and pre-need planning.

This industry is made up of small, family-owned businesses as well as larger corporate entities, which together cater to the diverse needs of consumers.

Projected to grow significantly in the coming years, the funeral home industry’s market value is expected to reach $39.3 billion by 2031, up from $22.8 billion in 2022, growing at a compound annual growth rate (CAGR) of 5.6%.

The sector’s steady growth is primarily driven by demographic changes — particularly the aging baby boomer generation — which leads to a growing population of elderly individuals and, in turn, a higher demand for funeral services.

Startup Costs

If you’re considering whether a funeral home is right for you, the first thing you’ll need to know is whether it’s a) affordable, and b) worth the investment. I mean, how much can you actually make running your own funeral home?

Well, it depends. The initial investment for a funeral home varies widely based on factors such as the size and scope of the facility, the range of services you plan to provide, and on whether you’re purchasing an existing business or starting a new one.

However, in most cases, the initial investment will fall somewhere between $500,000 and $2,000,000, which is broken down as follows:

• Facilities: You will need to secure a property — regardless of whether you choose to purchase or lease it — which can range anywhere between $100,000 and $1 million+ depending on your desired size and location.
• Equipment: You will need to invest in embalming tools, cooling units, furniture, and other necessary funeral home equipment; these costs range from $100,000 to $300,000 depending on the type and quantity of items.
• Vehicles: You will need to purchase a hearse and, in some cases, a limousine or service van, which can cost between $100,000 and $350,000 depending on the type and number of vehicles required.
• Inventory: You will need an initial stock of caskets, urns, and other funeral products, which can range from $25,000 to $150,000, based on the variety and quality of products offered.
• Licensing and Permits: You’ll need to obtain several licenses and permits, such as a funeral establishment license, an embalming room permit if you offer embalming services, and a crematory license if you provide on-site cremation. Depending on the services you plan to offer, the total costs for these licenses can range from $10,000 to $50,000.
• Staffing: You will need to hire and train both funeral directors and support staff, with the overall cost varying depending on your location and the size of your team. Typically, a funeral director’s salary averages around $63,622, but can range between $41,906 and $96,593 based on experience and region. When you factor in additional staff and training, your total annual staffing expenses can range from $150,000 to $350,000, depending on the specific needs of your operation.

While the startup costs might seem overwhelming, there are several ways to enter the funeral home industry with a more manageable investment.

By getting certified as a funeral director yourself, for example, you can save your business around $60,000 annually in staffing costs, which adds up to a $600,000 contribution over 10 years.

Leasing a hearse instead of buying one upfront can also help lower initial expenses, and you can start by offering fewer services in order to reduce licensing and equipment costs.

Earning Potential

Although it may seem unexpected, funeral homes profit from much more than just traditional funeral services, and they actually have quite a diversified set of income streams, including:

• Cremation services, which are growing in popularity
• Pre-planning arrangements that provide steady, upfront income
• Merchandise sales, such as urns, memorial jewelry, and keepsakes
• Technology-driven services like virtual memorials and online obituaries
• Grief counseling and aftercare services, offering ongoing support for families

When you consider that the average funeral service in America costs between $7,000 and $11,000 and that most funeral homes typically operate with gross profit margins ranging between 15% and 25%, you begin to notice just how lucrative this industry can be.

This is especially the case when you take into account that a well-established funeral home typically handles anywhere between 150 and 200 services annually.

In fact, these businesses can often reach revenues of $2 million or more, even without accounting for the additional income that’s generated from things like merchandise sales, pre-planning services, and grief counseling or aftercare support.

7 Steps to Starting a Funeral Home

In order to start a funeral home, you’ll need to complete the following steps:

1. Planning Your funeral home
2. Registering Your Business
3. Setting Up Your Taxes
4. Finding and Securing the Right Location
5. Setting up Business Accounting
6. Getting all Applicable Licenses and Permits
7. Obtaining Business Insurance

We’ve broken each one of these down in more detail below.

Still exploring your options? Check out other small business ideas to starting your funeral home. These steps will ensure that your new business is well planned out, registered properly and legally compliant.

Step 1: Plan Your Funeral Home

Before diving into your funeral home, you’ll need to spend some time conducting thorough market research.

You should start by researching your local market to understand community needs, while also conducting competitor analysis to identify service gaps and opportunities where your funeral home can offer something unique.

Recently, there has been a growing trend of offering virtual memorials alongside traditional services, allowing more people to attend remotely.

Is your community embracing this shift? Are your competitors offering virtual attendance options for memorials or funerals?

If not, this could be a potential “in” for your funeral home, but whether or not this is the case, this step will ultimately all come down to three key things: research, research, and more research.

Finding a Suitable Name

Choosing the right business name is both important and challenging.

This is because your name will need to be eye-catching, memorable, and (at least somewhat) related to your industry.

If you don’t already have a name in mind and need help, you can visit our How to Name a Business guide or use our Funeral Home Name Generator tool.

If you do have a name in mind, we recommend researching the following:

• Your state’s business records
• Federal and state trademark records
• Social media platforms

You will also need to make sure that your business’s name is available as a domain — this is your website’s URL address.

Note: If you’re planning to operate a sole proprietorship, you might want to operate under a business name other than your own name — known as a “Doing Business As” (DBA) name. Keep in mind that this is not recommended for a funeral home.

Step 2: Register Your Business

One crucial aspect that cannot be overlooked when starting your funeral home is the importance of establishing a solid business foundation. While sole proprietorships and partnerships are the most common entity types for small businesses, they’re a far less stable and advantageous option than LLCs.

This is because unincorporated business structures (i.e., sole proprietorships and partnerships) expose you as an owner to personal liability for your business’s debts and legal actions, while LLCs protect you by keeping your personal assets separate from your business’s liabilities.

In practice, this means that if your funeral home were to face a lawsuit or incur any debts, your savings, home, and other personal assets could not be used to cover these costs. On top of this, forming your business as an LLC also helps it to appear more legitimate and trustworthy.

Note: If you’re interested in more information before getting started, we recommend having a look at our state-specific How to Start an LLC guide (DIY) or our in-depth Best LLC Services review (for those opting for a professional service).

Step 3: Set Up Your Taxes

The next step you’ll need to take is to register your business for taxes. To this, you’ll need to obtain an  Employer Identification Number (EIN), which you can think of as your business’s Social Security Number.

Did you know?

An EIN is also needed in order to hire employees, set up a business bank account or get a credit card.

If you form your LLC through a specialized LLC formation service, this will likely be already handled for you in exchange for a small additional fee.

Even so, it’s important to make sure that you fully understand your business’s tax obligations; since these can depend on your location, it’s a bit difficult to accurately break down exactly which taxes you’ll be subject to.

Nevertheless, most businesses will typically be subject to income tax, sales tax, and employment taxes at the federal level and — depending on your location — city or county taxes may also apply.

Due to the complex nature of business taxes, we always advise our readers to seek the help of a professional accountant or business attorney for this step.

Recommended: Book a free consultation with our trusted partner, 1-800Accountant to potentially save both time and money.

Step 4: Find and Secure the Right Location

The next step you’ll want to take is to find (and secure) the right location for your funeral home course.

When evaluating potential sites, don’t just focus on the usual factors like visibility or traffic. Remember, you’re in the funeral home business, and as such, you should be focused on very specific metrics — such as the local population’s age distribution and mortality rates.

It’s also important to consider projected demographic changes in the area, which can significantly impact the long-term viability of your funeral home.

For example, in many small towns, younger generations are moving to larger cities in search of better opportunities, and while an aging population may seem to increase demand for funeral services, this assumption can be misleading.

As families relocate, funerals are often held in the new cities where their relatives have settled, gradually reducing local demand despite the aging population that is “left behind”.

Additionally, as the town’s overall population shrinks, your potential customer base diminishes, further affecting long-term sustainability.

Note: The space you choose should be relatively close to a cemetery, church, and/or hospital, and should also have room for future expansions as your business grows (e.g., adding embalming or cremation facilities, etc.).

Step 5: Set up Business Accounting

Recording your various expenses and sources of income is critical to understanding the financial performance of your business.

You can categorize accounts specifically for funeral home operations, such as:

• Facility expenses (e.g., mortgage/rent, utilities, renovations)
• Service costs (e.g., embalming supplies, caskets, urns)
• Vehicle expenses (e.g., hearses, limousines, maintenance)
• Staff salaries (e.g., funeral directors, embalmers, support staff)
• Technology costs (e.g., management software, online memorial services)

Equally important to tracking expenses is monitoring your revenue streams. These might include income from traditional funeral services, cremation services, merchandise sales, pre-need contracts, and facility rentals for memorial services.

This should provide clear visibility into your business’s financial performance and aid in accurate cost analysis.Note: You can have a look at our LLC Expenses Cheat Sheet for more information.

Step 6: Secure All Required Licenses And Permits

The applicable licenses and permits that you’ll need will largely depend on your state and local regulations.

Even so, we’ve compiled a list of some of the common licensing regulations that you’ll likely need to satisfy in order to operate legitimately.

Funeral Establishment License

To legally operate a funeral home, you’ll need to obtain a funeral establishment license from your state’s Board of Funeral Directors and Embalmers.

This typically involves completing an application form, providing proof that you have at least one full-time licensed funeral director on staff, and submitting a detailed floor plan of the facility.

You’ll also need to show that your building complies with local zoning laws and building codes, and pass an on-site inspection.

Pre-Need Sales License

If you are planning to offer pre-arranged funeral services, then in almost every state, you’ll be required to obtain a pre-need sales license.

This involves completing a state-approved training program, passing an exam, and providing proof of a trust account or insurance for pre-paid funds.

The application process in most states is generally handled by the Board of Funeral Directors and Embalmers, though in a few, it is handled by the state’s Insurance Commission.

Crematory License

Just like with the pre-need sales license, you’ll need to obtain a crematory license from your state’s Board of Funeral Directors and Embalmers if your funeral home plans to offer cremation services.

To do this, you will need to pass an equipment inspection and complete an environmental impact assessment, with specific requirements varying depending on your state.

Zoning and Land Use Permits

Before establishing a funeral home, you’ll need to ensure that the land is zoned appropriately for a commercial facility.

Zoning regulations vary by locality and dictate the types of activities that can be conducted on a piece of land. In some areas, you may need to obtain a special use permit or a variance if the land is not already zoned for commercial use.

We recommend consulting with your local zoning authorities in order to understand the specific requirements and restrictions that will be applicable to your funeral home. Alternatively, you can consult with a business attorney if you want someone else to take care of this for you.

Health and Safety Inspections

Local health and safety inspections are mandatory to ensure that your funeral home complies with health codes and safety standards.

These inspections typically cover the cleanliness and sanitation of areas such as embalming rooms, the proper handling and storage of human remains, the safety of the facility’s structures, and the adequacy of emergency exits.

Regular inspections help maintain a safe environment for patrons and are often required for the renewal of operating permits.

Business Operation Licenses

In nearly all states, funeral homes are required to obtain some type of business license in order to legally operate.

The specific requirements will vary depending on your location, but generally involve submitting an application, paying a fee, and meeting state specific regulations.

Step 7: Secure Business Insurance 

In addition to securing the necessary permits and licenses, you will need to obtain the right business insurance.

Note

Even if you form an LLC, purchasing business insurance is still a good idea. This is because an LLC structure protects your personal assets, not your business’s.

While specific coverage needs may vary based on factors such as location, size, and unique risks, there are several key types of insurance that most funeral homes should consider. 

We’ve briefly outlined these below. 

General Liability Insurance

General liability insurance is a foundational coverage that’s essential for funeral homes because it protects against claims of bodily injury, property damage, and personal injury that may occur on your premises.

The average cost for general liability insurance according to recent data is $42 per month, or $504 annually, though costs can vary based on your business’s specific needs and risks. 

Property Insurance

Property insurance is essential for safeguarding your funeral home’s physical assets,  including the building, embalming equipment, hearses, caskets, and other inventory — it’s particularly important given how specialized and costly the equipment used in funeral services is.

The median cost for business property insurance is approximately $100 to $150 per month for plans with a $1,000 deductible and a $100,000 policy limit.

Having said that, rates can vary significantly based on factors such as your location and risk profile. 

Workers’ Compensation Insurance

If your funeral home will have employees, workers’ compensation insurance is likely going to be a legal requirement depending on your state. 

This policy provides coverage for medical expenses and lost wages if employees are injured on the job, which is especially important given the physical demands of funeral home work; employees face risks not only from operating machinery like crematoriums but also from handling hazardous chemicals used in embalming.

The cost of workers’ compensation insurance ranges between $60 to $80 per month per employee, but this can vary based on factors such as payroll, job classifications (e.g., embalmers vs. administrative staff), and your business’s claims history.

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How to Start a Funeral Home FAQs

Is owning a funeral home profitable?

Yes, owning a funeral home can be quite profitable.

Established funeral homes often generate between $1 million to $2 million in annual revenue, with gross profit margins typically ranging from 15% to 25%.

Is it hard to start a funeral home business?

The biggest difficulty with starting a funeral home business lies in the high startup costs and navigating the complex licensing process.

Having said that, with careful planning and a strong understanding of the market, these challenges can be overcome, leading to a successful and rewarding venture.

What is the largest expense to start a funeral home?

The largest expenses associated with starting a funeral home usually revolve around securing the facility and purchasing the relevant equipment.

This is because acquiring or leasing a suitable property can cost anywhere between $100,000 and $1 million+, and outfitting the business with equipment — such as embalming tools, refrigeration units, and vehicles — can add an additional $100,000 to $350,000 in startup costs.

What is the growth potential for a funeral home?

The growth potential for a funeral home is strong with the industry projected to grow significantly, reaching an evaluation of $39.3 billion by 2031.

This growth is partially fueled by the aging baby boomer population, which will increase demand for traditional funeral services, cremations, and other end-of-life services in the coming years.