Do you want to know how much money funeral homes make yearly? If YES, here are 7 factors that determine the income & profit margin for funeral home owners.
Funeral home businesses provide burial, cremation and memorial services for those who have passed away. In the United States and almost everywhere in the world, these businesses play an important role in providing families of deceased persons with the much-needed closure.
How Funeral Homes Generate Income
Most funeral homes charge a “basic service fee” which includes services that are common to all funerals, regardless of the specific arrangement.
Most non-declinable service fees average around $2,000 – $2,500. This basic service fee may include obtaining copies of the death certificate, securing any permits needed, sheltering the remains, and coordinating the arrangements. The fee will not include any optional services or products such as caskets.
Some funeral homes also sell caskets, flowers, urns and other items/services related to death. Funerals cost around $6,000 to $7,000. This cost includes embalming, cosmetics, viewings, transportation expenses and professional charges. However, it is possible to charge more if a funeral home business offers extra services.
According to reports, a funeral home business located in the right area with plenty of senior citizens has the potential to rake in thousands of dollars per year. However, it will likely take several years for the funeral home business to reach this point of profitability.
Since the global population in the United States is aging, death rates and the demand for funeral homes are expected to continue increasing. There are a variety of factors affecting the profitability of funeral homes. These factors include:
7 Factors That Determine How Much Money Do Funeral Homes Make Yearly
1. Management Style
A successful funeral home business owner is expected to meet with prospective clients, handle the demands of existing clients, performs research on funeral-related equipment, steer marketing efforts and delegates work to employees. Their ability to effectively perform these duties and their skills in business management will ultimately affect the bottom line of the business.
A funeral home business owner who has solid people skills, an aptitude for marketing and the ability to console those who are grieving, will succeed in this industry. The key is to get to know the community. Develop a rapport with locals and market the funeral home business in a tasteful manner.
2. Burial Versus Cremation
Burials traditionally cost more than cremation, but gross margins are also typically lower. Apart from the cost of materials to produce caskets, cemetery plots are becoming increasingly expensive to purchase and maintain. The average cost of a cremation ranges from $1,000 – $8,000 depending on the state and services chosen. A cremation can cost almost as much as a funeral because of the various fees paid to the funeral home.
3. Green Burials
Eco – friendly funerals are on the rise and may save families and funeral homes hundreds – even thousands – of dollars on funeral costs depending on the style chosen.
Biodegradable caskets are often much cheaper than traditional caskets. The cost base of eco – friendly burials is substantially lower than traditional burials, sometimes by as much as 50 percent. Depending on the location however, green burials can boost the gross margins of funeral operators.
4. Industry Experience
A new funeral home owner with less than 1 year experience can expect to earn an average total compensation (includes tips, bonus, and other pay) of $38,424. An early career Funeral owner with 1 – 4 years of experience earns an average total compensation of $41,686.
A mid – career Funeral home owner with 5 – 9 years of experience earns an average total compensation of $46,960. An experienced Funeral home owner with 10 – 19 years experience earns an average total compensation of $71,443. In their late career (20 years and higher), these business owners earn an average total compensation of $92,000 or higher.
According to reports, the cost of a funeral with burial was highest in the north central region of the country, such as Minnesota, Michigan, Wisconsin, Ohio, Nebraska, and Kansas. The cost of cremation services was highest in the north east region of the country, such as Maine, Massachusetts, Vermont, and New Hampshire.
Howbeit, Funeral Homes in New York earn an average of 44.7 percent more than the national average. They can also find higher than average income in Chicago, Illinois (26.4 percent more) and Philadelphia, Pennsylvania (18.5 percent more). The lowest can be found in Los Angeles, California (12.2 percent less).
6. Additional Products
Some funeral homes also sell caskets, flowers, urns and other items/services related to death. The general funeral cost is around $6,000 to $7,000. This cost includes embalming, cosmetics, viewings, transportation expenses and professional charges. Embalming averages around $500 – $700 and usually doesn’t cost more than $1,000.
Embalming is not always required and depends on whether or not the body is buried or cremated and how quickly the service takes place after the deceased’s passing. Refrigeration is often an alternative to embalming, but even refrigeration can cost several hundred dollars. Flowers cost around $500 – $700, while wreaths displayed around the casket typically cost about $100 – $200 each.
A decent sized casket wreath will probably cost between $500 – $700 depending on the florist, flowers used, and size of the display. An average grave plot will cost around $1,000 – $4,000, but metropolitan areas, such as areas of Los Angeles and Chicago, may cost more.
Upright headstones usually stand on top of the grave and cost around $2,000 – $5,000 depending on the design. Grave markers lie flat on the ground and cost around $1,000. Each cost depends on the type of material used, with stone and bronze material being the cheapest.
7. Additional Funeral Services
A funeral home’s least expensive option is usually a direct burial. Having a direct burial means the body is not embalmed and there is no visitation. Another option is direct cremation, which is essentially the same as a direct burial, except the body is cremated not buried.
A horse drawn funeral is not available everywhere, but can provide a unique alternative to a regular hearse and provide families with additional style and elegance. Funeral Homes that provide this service usually offer black or white horses and decorations in the colour of choice.
The cost of a horse and carriage is higher and is usually charged per hour. Shipping a body can increase funeral costs by $2,000 or more. Any funeral home that offers these additional services will make money and profit than funeral homes who offer fewer services.
In conclusion, the profit of a funeral home will depend on the factors mentioned above. Howbeit, relationships are at the foundation of this business. Funeral home business owners who establish a flawless reputation within their local community will win the business of locals for generations.
Estimated Profit Margin for a Funeral Home
According to reports, the average gross profit margin across the funeral industry is 62.5 percent. This ranks just above the midpoint compared to other common industries. However, independent operators may barely squeeze a margin of 10 to 30 percent.
Although this business might not be for everyone, but working in the funeral service can be a profitable career move. A non – managerial employee can earn around $57,580 per year with an associate’s degree. That rate certainly jumps for funeral service managers, who have a median annual wage of $79,180.
Morticians, undertakers and funeral directors, on the other hand, have a median annual wage of $52,650. Embalmers tend to be on the lower end of the pay scale with a median annual wage of $45,060. Top – earning owners are said to make over $92,000, according to according industry reports.
Starting a funeral home will cost between $150,000 and $300,000 for a small – scale and intimate mortuary. But creating a large – scale franchise could cost upward of $2 million.