Funeral Home Startup Business Funding

Considering the entire market is worth more than £2.7billion annually, the UK's funeral service market looks set to continue growing at a rapid (and lucrative) rate. The rising cost of funeral care, combined with an ongoing demand due to an ageing population, means funeral providers can enjoy stable profits and career security. 

Funerals in the UK tend to be either burial or cremation, with varying costs for the families of the deceased depending on the level of complexity and involvement the funeral incurs. The average cost of a UK funeral is around £4,056, and profit margins in the industry can be anywhere from 10-60%, depending on your costs and business expertise. 

In addition to having the right qualities to run a funeral home, you'll also need a keen eye for business to ensure overheads remain low enough to make your business profitable and appealing to customers.  Much of this involves setting the business up correctly from the start, investing in the right way to set the foundation for lasting success. 

How to start a funeral home

The UK's funeral market is mainly composed of independent funeral directors and two corporate groups. To establish your own funeral home business, you'll need to hold the right qualifications, write a business plan and then apply for finance to purchase the premises, equipment and employees you'll need to make your business a reality. 

A startup funeral home will therefore need a business plan as a matter of utmost priority, as it will not only set the entire structure of the business in motion but will also serve to win lender interest and attention. Before you write your business plan, however, you'll need to do some research to make sure the business is viable. 

Do vital research first

Before you can write a business plan or approach lenders, you need to know if your business idea is going to be worth it. To find out, there are some clear areas you need to research. 

The first is that of 'market', namely what your customer/client base will be like in any given area and what competitors exist in your space. As with all professional services businesses, the main thrust of your income will be as a result of providing a service to customers -- so it's imperative you know that there will be enough of them in your area to make the business worthwhile. Areas with higher ageing populations and more disposable income will provide better opportunities for costly funerals than poorer areas, though death rates may be higher in the latter. 

Some areas may also have certain religious leanings that will prioritise burial or funeral services, or even have customs that seek to limit your involvement as a director entirely. You need to look deeper into any potential location than just assessing death rates or average funeral costs as these preferences and religious customs can heavily impede your ability to generate profit. 

Another consideration is the rise of new funeral customs such as eco-friendly burials, which may be more popular in certain areas. If you plan to offer these services, choose a location that has demonstrable demand for them. 

Create a business plan

Writing your business plan is a good way to cement your own ideas about the business and its direction, but also to win investor confidence when making an application. The first thing a lender wants to see is your business plan, with certain parts of it like your financial forecasts and employee structure most critical to their decision. 

The first thing you need is an executive summary that quickly equips a reader with the key points of your plan. To create the summary, however, you'll need to complete the other parts of the plan. The following areas should be core to the plan: 

• Executive summary - recaps the main findings below. This is usually the only thing a lender will read, so make sure you grab attention early. 
• Market and competitors - discuss the market and competitors that you've already researched above, outlining them in the context of how they impact your business' chance of success. 
• Sales and marketing plan - summarise the ways in which you'll market your funeral business to secure customers. 
• Financial projections - use the help of an accountant or business expert to create detailed financial projections in terms of costs, projected revenue and profit. 
• Employee/workforce plan - showcase your own experience, discuss the ownership structure of your business and detail how your funeral home will be run on a day-to-day basis. This will include your policies and procedures, as well as your staffing and facility needs.

Funding for a startup funeral business

As a new business, you'll need to find a lender willing to take on the risk you represent. Businesses typically don't start generating profit until their third year, so any lender has to understand the funeral industry, your background and how you'll drive the business to success before they will offer you favourable terms. 

However, the basis on which they may offer terms depends on you as an owner. If you're an experienced Funeral Director who is stepping into sole ownership, it will help strengthen your application and chances. If you're new to the industry, lenders will place more scrutiny on your business plan and generally offer less favourable terms. 

The type of business you want to operate matters too - some funeral providers only offer cremation, while others only offer burials - though most offer both. Some are embracing new trends such as eco-burials, while others are more traditional: these will all be factors that a lender considers before they issue any agreement. 

Perhaps most crucially, however, is the idea of buying an existing business to run as your own or building a funeral home from scratch. An existing home has the benefit of coming with the equipment and premises you need, but also incurs baggage in terms of employee contracts, prior reputation and costs. Funeral home business loans can help you buy an existing business, while development finance is probably needed for any scratch build and will be far more challenging to negotiate. 

You can also apply for finance to help with equipment costs such as embalming facilities, vehicle fleets and refrigeration. 

Getting the right loans for your funeral home startup

As part of your business plan, you'll outline your vision and lenders can get an idea of costs. These costs can be funded through a variety of financial options such as Secured or Unsecured loans. These loans will be varied in rate and length, so having a team on your side like Rangewell can help you 'put the best foot forward' in terms of winning lender interest. 

Get no-obligation advice and guidance by calling our team today.

What about buying an existing home?

The term 'startup' funeral business may conjure ideas of an app-wielding generation with brand new ideas, but it also applies to Directors who are just branching out from their own employment and want to become owners. For many, buying an existing funeral home is a great route to accomplish this and carries less risk than starting from scratch. 

To buy an existing business, you'll need to identify the right sales opportunities and then approach the listing or agent. You'll then need to negotiate the sale and make a legally-binding agreement, before completing the purchase with the help of specialist professional services finance. 

Before you make any buying decisions, speak to our team to make sure you understand the market and your financial limitations. By knowing what lenders can offer and at what rates, you can make smarter decisions about your budget. 

Funding your new premises

Whether you buy an existing business and want to upgrade, or start from scratch, there are key considerations around premises & equipment costs you need to know. 

The first is that of leasing - which can cost as much as £3000-4000 on average for funeral businesses in the UK. The lease cost will depend on the area you've chosen and may be more if it's in a busy city centre location or near public transport links.

You'll then need to fund the construction project and outfitting, which can see costs soar as you pay for materials and labour. Development finance is designed to help you afford these projects but will incur different rates to a standard commercial loan and the lender must be the first to be repaid. Commercial Property Finance is always arranged on an individual basis and ultimately your success will depend on your experience, business plan and lender support. 

Equipment costs for a funeral home can also be high - but the bigger challenge is finding a lender who understands the industry and is willing to offer favourable terms for the specific equipment you'll need. These can vary but will generally include:

• Mortuary equipment - Refrigerated units, trolleys, lifts
• Workshop equipment - woodworking equipment, Engraving equipment
• Embalming equipment - units, sluices
• IT equipment - handheld tablets with a centralised system for reception, together with operating licences and renewals, training and maintenance

Many of these pieces of equipment can be purchased using a Hire Purchase agreement, but again this will depend on the lender and the agreement you negotiate. 

Funding for funeral cars & vehicles

Perhaps the most visible part of a funeral home's business is the fleet of vehicles you purchase. Present at almost every event and used to ferry passengers and the deceased, these cars have unique requirements. Finding the finance to purchase a new fleet or lease them is important for your eventual success. As a start-up, you may be better using a hire agreement as opposed to outright purchase. 

Business Contract Hire can provide the specialised vehicles your funeral home will need. Costs are based on the purchase cost, less the value of the vehicle after the contract period, and which will substantially reduce the costs of operating new prestige hearses and limousines by your business

Why you need an expert on your side

In an industry that is built on long-term reputation, launching a startup funeral home business is no easy feat. In addition to winning lender's over without the level of experience they expect, you'll also have to convince customers to choose you over your established competitors. 

However, if you're determined about your business and have the right capabilities and offering, you'll be able to provide a different level of service to what your customers are used to. By elevating your service above the competition, you can stand out as an innovative funeral home that makes families comfortable in a trying time. 

Lenders, unfortunately, care little for how much you can help your customers - they want to see a business' justification for their application before they offer any finance to you. Without long-term ownership experience, it can be tough to find loans at rates which make sense for your goals. 

At Rangewell, we can help you launch a funeral home business from scratch. We'll review the lender market and identify those most comfortable with your industry. We'll talk through your plans and needs, advising where possible, to map the right financial products to your projects - whether that's negotiating commercial mortgages to fund your office buyout through to asset finance for equipment.

Whatever your needs are, we'll help you establish the right plan to get finance and make your funeral home vision a reality. Call us now to get our experts working for you.