Welcome to Biz Brainstorms –

My name's Connor.

I go down weekly rabbit holes of business ideas, lessons, & good finds.

What Are The Economics Of A Funeral Home?

Today's Outline:
⚰️ Why I’m Thinking About Funeral Homes
📈 Trends In The Industry
📊 Economics of a Funeral Home
💡 Ideas You Can Launch


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Why Am I Thinking About Funeral Homes?

We are on a 16 year bull run.

If you’re anything like me, you probably have never seen the stock market go down.

Well, it has.

And it probably will again.

And, if you’re an entrepreneur who owns 15 Airbnbs, a restaurant, or you a “nice to have” product on the internet, you probably don’t know what it’s like when people need to save more money.

Your job as a business owner is to place a bunch of bets that have high upside & very little downside (cue Wolf of Wall Street sales pitch)

Well, want to know what’s recession resistant? Death.

It’s morbid, I know.

But if you’re a business nerd like me (which, you probably are) the numbers are interesting.

Economics Behind A Funeral Home

Average Cost per Funeral

• Traditional Funeral Services: The average cost in 2023 was $8,300.

  Cremation Services: Typically less expensive, averaging around $6,280

• Additional Products: Sales of caskets, urns, memorial stationery, and other merchandise contribute to revenue.

• Average Number of Funerals per Year

  • An average funeral home conducts approximately 150 funerals per year, but can range from 100 to 300 based on the area's population. More people = More business.

• Total Annual Revenue

  • Calculation:

    • Assuming an average service cost of $7,500 and 150 funerals per year:

    • $7,500 x 150 = $1,125,000 annual revenue from funeral services.

    • These places typically make 25% margins, so ~$280,000.

It’s not a great business, can we make it better?

Biggest Trends 📈

Industry:

Cremation Rates are growing – 61.9% of everyone who dies in 2024 & expected to reach 82.1%

Traditional Burials are dropping – 33.2%

US Funeral & Cremation market should hit $18.4 billion over five years.

Estimated 3.6 million deaths per year in 2037 compared to 3.09 in 2023.

$1M: Business Opportunities 💡

Eco-Friendly Options – The Living Urn sells Urns (vessels for your ashes) with tree seeds in them to sprout a plant after someone passes.

Death Doulas – Non-medical professional who provides emotional, physical, and spiritual support to people who are dying and their loved ones. Is there a marketplace play here?

Celebrations of Life – Easy opportunity for Etsy digital downloads with templates, or even an event planning service for this in your city.

$10M: Can Funeral Homes Be Rolled Up?

There’s actually a pretty interesting play here.

There are 19,000 funeral homes in the US. Including some big players like Carriage Services.

The average multiple for a funeral home is anywhere from 2-3x profit.

But with regional consolidators, those numbers balloon up to 6-10x profit.

So the napkin math for my non-Private Equity readers looks something like:

Buy:
10 funeral homes
1M each - $250k SDE
x 3 multiple = $7.5M acquisition costs

Optimize:
Can we grow these by 20% via shared services & better marketing?

Probably. So profit goes from $2,500,000 to $3,000,000… that feels conservative.

And that’s hardly touching a lot of the expenses.

Sell:

10 homes
1.2M each – $300k SDE
x 6 multiple = $18M disposition

$11.5M profit… the napkin math works out very well.

Final Thoughts

Death isn’t for me. And funeral homes on there own don’t seem like a small business I’d want to get into.

That being said, I think there is an opportunity to jump into growing trends around cremation techniques and even make a big play here if you wanted to go out and raise capital.

That’s a wrap! What did you think?

✌️ See you next week

-Connor