You may want to buy a funeral home or could have wondered if owning a funeral home is really profitable. You may be thinking about starting out in the funeral industry or expanding your business to new horizons. First of all, you should know that the figures for the industry and the economic outlook for the coming years are encouraging, so this is an industry full of possibilities for good entrepreneurs.
Is owning a funeral home profitable?
The first thing to bear in mind if you are planning to buy a funeral home is that it is a market that is directly dependent on the mortality rate. It is therefore an industry with an established and relatively constant demand, except in exceptional cases such as the pandemic. As a general rule, the economic growth of funeral homes is solid and stable according to the forecast for the next five years. Between 2015 and 2020, the value of the industry has grown by 17.4% and gross revenues have increased by 14%.
The funeral industry is a strong market, based on progressive growth and with a high demand, a figure that is rising slightly year on year due to the ageing of the population. It is an attractive market in which thousands of funeral homes operate, with a tendency towards concentration in large groups.
Average turnover of a funeral home
In addition to low competition and growing demand, before you buy a funeral home you should bear in mind that 82% of funeral homes have an annual turnover of less than one million euros. The total turnover in 2019 was around 1,565 million euros. Although the economic crisis resulting from the covid-19 pandemic has also hit Spanish funeral homes, the industry is expected to recover its profit margin during 2021 and 2022.
Funeral homes have the potential to earn high revenues, but they also have to assume high costs, including an initial investment that can be an entry barrier for new entrepreneurs or those looking to expand their business with new branches. We are talking about equipped warehouses, halls, offices, staff, hearses, health licenses… Once this first difficulty has been overcome, a well-managed funeral home is profitable, among other reasons because there has always been and there will always be demand.
“Funeral homes for sale”: how to find buying opportunities
There are usually three options for starting a business: renting, transferring or buying premises. The two most economically viable options to start with are renting or transferring. Buying a funeral home and setting up premises requires a larger investment that many entrepreneurs cannot or do not want to take on.
Transfer vs. renting
The difference between transferring and renting is that with the first option, the new owner also acquires the licences and operating rights, as well as the possibility of keeping machinery, furniture and decoration if there is an agreement between both sides. In the case of renting, it is necessary to obtain all the necessary licences for the funeral home to be able to operate.
For this reason, the transfer is usually more expensive and includes factors that are difficult to evaluate, such as the reputation of the company. Also, remember that the initial investment in a funeral home is a very high cost, so the rental contract should be signed for the long term and should not exceed 10% of the monthly turnover.
How to find funeral homes for sale near me
There are many websites that you can consult if you are trying to buy a funeral home. There you can find offers for sale, transfer and rental of funeral homes such as: Loopnet, BizBuySell, Businesses For Sale, Distrito Negocio, Negocius or Traspasalo.
You can also use a real estate agent to help you find good premises and go around the areas you are interested in to find the “funeral homes for sale or lease” signs.
Don’t forget to consider asking around the funeral home trade. This type of operation is known and publicised by the various professional associations.
How to buy a funeral home step by step
If you want to buy a funeral home there are several considerations you should take into account.
- Try to understand the real reasons why the business owner is selling the funeral home. Study the business you are buying carefully because the seller’s reasons are not always honest.
- Evaluate the financial statement of the funeral home you are buying, as well as the tax payments for the last five years. Analyse the financial situation and ask yourself if the business is growing and if there is room for improvement. If you want to be thorough, you can conduct market research to get a true picture of the financial status of the funeral home you intend to buy.
- Also check the dates of invoices issued to see what remains to be paid and received.
- Examine market trends. You should be fully aware of the demographics of the area in which the funeral home is located, the average income of your potential customers, including whether cremation or burial is prevalent in the area.
- Know the legal requirements for setting up a funeral home and check that the business you are going to buy meets the conditions and has its papers in order.
- The location of the funeral home can be crucial to the success of the business: is the area easily accessible, is the road suitable for mortuary vehicles? Also assess the competitive environment with particular attention to the movements of potential rivals.
- Check the company’s facilities and the operation of machinery. Consider the expense of replacing all physical assets that no longer work or are too old.
- Talk to a bank that understands the funeral industry. Try to get the best terms for a loan or credit. Many people perceive that the loan terms to buy a funeral home are the same as in the residential market, but this is not the case. It is worth talking to an expert to understand the options.
Remember that an existing business brings a reputation with it that is not up to you. If you do decide to buy a funeral home, you should work on keeping it or changing it, as the case may be.