Cremation and Burial Services Industry

Part
01
of four
Part
01

Death Care Market Sizing

According to our calculations based on several market reports, the total US death care market size is approximately $57,755,566,080. Our research did not produce a market size for US burials, but we have provided below information and insights regarding the funeral homes and cemetery services markets in the US, some combination of which represents the burial market. We have also provided information and insights regarding the US cremation services market, which is on the rise as increasing numbers of Americans opt for cremations in lieu of traditional burials. Below is an explanation of our research methodology, followed by a breakdown of our findings on these subjects.

Methodology

Our first approach in researching the US market size of death care as a whole, and of the burial and cremation segments within it, was to examine relevant industry organizations. Two notable organizations in this regard are the National Funeral Directors Association (NFDA) and the Cremation Association of North America (CANA). NFDA provides some relevant statistics, such as the total number of funeral homes in the United States, although its revenue figures are outdated. The organization also releases annual reports that are unfortunately only available to its members, such as its 2018 Cremation and Burial Report. The most recent of these reports that is now available to the general public is the 2015 report. CANA provides little relevant information aside from the growth rate of cremations in the US.

After failing to find a substantial amount of information via the first approach, our second approach consisted of an extensive search of United States governmental bodies to find relevant, authoritative data. The Bureau of Labor Statistics provides data regarding employment in the death care industry, but nothing else of use. The most useful government-provided data found in our search came from a brief report issued by the US Commercial Service, a division of the US Department of Commerce. This report supplied several relevant figures, albeit ones from 2016, as well as useful definitions and contextual information.

Having failed to find substantial information via the first two approaches, as a third approach we conducted a search of independent market research agencies, as well as media outlets (as newly-released market reports are often reported in news articles). This allowed us to find several market reports relating to the US death care market size as a whole. Noted market research agency IbisWorld has produced market reports on funeral homes, cemetery services, and cremation services in the US. However, we could not link directly to these reports, so instead we linked to the agency's main page and included the exact search term to locate the relevant report.

Below, we first provided an overview of the US death care market as a whole. This market encompasses both burial and cremation services in addition to other services in the death care industry. While the cremation services industry is typically treated as its own sector within this industry in other market reports, burial services are not; the cost of a burial is encompassed in services rendered by both funeral homes and cemeteries. As such, in lieu of providing the US market size of burials (which was not found in the course of our research), we provided the market size of funeral homes and of cemetery services, some combination of which can be said to be the market size of burials.

US DEATH CARE MARKET SIZE

For the purpose of market analysis, the death care industry includes: funeral services, internment (which includes cremation), and memorial services (e.g. tombstones or mausoleums). Thus, the overall death care market size encompasses both burial and cremation services, in addition to several other services in the death care process.

While market reports on this subject universally require payment to access in full, most note that the US death care market size is expected to reach $68 billion by 2023, growing at a 4% CAGR (this is noted by Arizton Advisory & Intelligence and Research and Markets, among others). The estimated 2019 size is not given, but by extrapolating from these figures, we can calculate the current US death care market size:

2022: $68,000,000,000-($68,000,000,000*0.04)=$65,280,000,000
2021: $65,280,000,000-($65,280,000,000*0.04)=$62,668,800,000
2020: $62,668,800,000-($62,668,800,000*0.04)=$60,162,048,000
2019: $60,162,048,000-($60,162,048,000*0.04)=$57,755,566,080

Thus, the 2019 death care market size in the United States is approximately $57,755,566,080.

US Cremation Market Size

According to IbisWorld (search term: 'Cremation Services in the US'), the 2018 market size of cremation services in the US was approximately $2 billion, with 11,728 businesses operating in the sector. The latter figure is substantially higher than the 7,000 crematoriums that the US Commercial Service identified in 2016. This may be explained by a more expansive definition utilized by IbisWorld, including both crematoriums and funeral homes or other businesses that operate in the cremation sector. It may also partly be due to a high rate of growth in the cremation sector, with a 7.9% rise in the percentage of deaths cremated between 2013 and 2018, as more and more Americans choose cremation over traditional burials. In fact, over half — 53.1% — of US deaths were cremated in 2018, with that figure expected to continue to rise.

US funeral homes market size

According to IbisWorld (search term: 'Funeral Homes Industry in the US'), the US market size for funeral homes in 2019 is approximately $17 billion, representing a substantial portion of the approximately $57 billion in the US death care market size as a whole. IbisWorld found that there are 29,717 US businesses in the industry, a figure substantially higher than the 19,136 reported by the NFDA (although this may be due to under-reporting, as the NFDA only utilizes the National Directory of Morticians Redbook). IbisWorld states that this market has grown at a rate of 1.2% between 2014 and 2019. Nonetheless, the agency notes that "changing funeral preferences in recent years have led more families away from burial and toward lower-cost cremation services, reducing the industry revenue generated per client," potentially spelling trouble for the industry in the future.

US Cemetery services market size

According to IbisWorld (search term: 'Cemetery Services Industry in the US'), the US market size for cemetery services is approximately $2 billion in 2019, growing at a rate of 1.7% over the past five years. IbisWorld states that there are 8,472 businesses in this sector. Like the funeral homes sector, the closely-connected cemetery services sector is at risk from a rising number of cremations, which overtook burials in 2015 (48% of US deaths were cremated that year, as opposed to 45% buried). Those who choose cremation in lieu of burial may bypass the cemetery services industry entirely, making its continual growth year-over-year of particular concern for this sector of the death care industry.

Conclusion

Our calculations, based on several market reports, suggest that the overall US market size for the death care industry is approximately $57,755,566,080. IbisWorld (search terms: 'Cremation Services in the US,' 'Funeral Homes Industry in the US,' and 'Cemetery Services Industry in the US') states that the US market sizes for the cremation services industry, funeral homes industry, and cemetery services industry are approximately $2 billion, $17 billion, and $2 billion, respectively. The numbers of businesses in these industries are 11,728, 29,717, and 8,472, respectively. Overall, the primary trend shaping these industries is the increasing commonality of cremations, due in large part to reduced costs in conjunction with environmental concerns associated with burials.
Part
02
of four
Part
02

Regulatory Environment

While much of the regulation and licensing in the United States death care industry takes place at the state level, the Federal Trade Commission's 'Funeral Rule' provides for several important regulations that form the basis of all states' regulations in this area. Most states require crematory establishment and/or operator licenses obtained either by a state agency or, in some states, by an approved licensing body. States often require crematory licensing from the state environmental agency, as well. Below, we provide a detailed description of the federal Funeral Rule, followed by an overview of the regulatory and crematory licensing requirements for California, New York, Texas, and Florida.

Federal burial and cremation regulations: the "funeral rule"

In the United States, most burial and cremation regulations, including licensing of relevant parties, are administered on the state level. The one exception is the Federal Trade Commission (FTC)'s "Funeral Industry Practices, Part 453 of the Code of Federal Regulations," commonly referred to as the 'Funeral Rule.' This federal regulation provides several protections for consumers to prevent abuses on the part of funeral homes or crematories, and as such applies equally to both of these entities, though it notably "does not apply to third-party sellers, such as casket and monument dealers, or to cemeteries that lack an on-site funeral home." The Funeral Rule guarantees consumers the following rights:

  • Consumers have the right to purchase only the goods and services associated with burials or cremations that are desired. In other words, funeral homes cannot force consumers to purchase certain goods or services.
  • If asked, funeral homes must provide consumers with pricing information via telephone.
  • Funeral homes must provide a written, itemized price list called a General Price List (GPL).
  • Funeral homes must provide casket price list, as well as an outer burial container price list, if not already provided on the GPL.
  • Funeral homes must provide a written statement of the chosen goods and services before payment is issued, to allow consumers to verify their selections.
  • If a state or local regulation requires a consumer to purchase a certain item or service, this must be explained in writing by the funeral home.
  • Crematories or funeral homes supplying cremation services must make alternative containers available for consumers who chose cremation.
  • Funeral homes and crematoriums must allow consumers to utilize caskets or urns bought elsewhere.
  • Funeral homes must allow for burials without embalming (as embalming in all cases is not required by any state law).

California burial and cremation regulations

California's burial and cremation regulations are covered by the Cemetery and Funeral Bureau and section 8115 of the state's Health and Safety Code. These regulations include specific requirements regarding dispositions after death (or before, if the deceased individual made arrangements for her- or himself), as well as specific burial and cremation arrangement requirements. By and large, the California regulations on funeral homes and crematories simply adhere to the federal Funeral Rule without any additional requirements, although the law does require that the individual making the disposition must state whether embalming is desired, and also requires that consumers purchase a "combustible cremation container," in the case of cremation.

The state's Health and Safety Code delegates additional regulatory power to localities, in accordance with their police power. However, bodies can only be buried in established cemeteries, designated by local governments. Crematory licenses are administered at the state level by the Cemetery and Funeral Bureau. To acquire a crematory license in California, the following requirements must be met:

  • A completed application must be submitted to the Bureau, along with a $400 fee.
  • If the applicant is a corporation, a written resolution must be submitted delegating the authority to submit the application, along with certified Articles of Incorporation.
  • If the applicant is a partnership, a partnership agreement must be submitted.
  • The applicant must obtain a permit from the local air pollution control district, as well as a zoning or land use permit.
  • The applicant must present a certified deed or similar document demonstrating ownership of the property in question.
  • The applicant must produce a signed statement providing financial information, plans of operation, and funding agreements.
  • Specifications of both the crematory and the building as a whole must be presented.
  • A recent fire inspection report or certificate of occupancy must be provided.
  • A written contract with the cemetery at which "final disposition of cremated remains that are in its possession after 90 days of the date of death" can take place.
  • Certification affidavits must be submitted to all involved parties (e.g. partners, officers, owners).

Additionally, crematory managers must submit an application and a high school transcript, pass an examination, and pay a $450 examination fee and an $80 licensing fee.

New York Burial and Cremation Regulations

New York's regulations on burial and cremations mostly align with the federal Funeral Rule, with few additional requirements. The state places additional requirements on funeral directors regarding death certificates, but is less restrictive than California with regard to burial location, allowing for burial on private land or a designated family cemetery rather than strictly established cemeteries. Various regulations are imposed on crematories, including clean, orderly, and sanitary operating conditions with good ventilation; restrictions on who can be present during a cremation or in a crematory storage facility; a written plan detailing how cremations will be executed; and others.

In New York, the state has only limited jurisdiction over crematories that are not not-for-profit organizations (of which there are three currently in the state; two operated by municipalities and a third operated by a religious institution). However, the vast majority of the state's crematories (44 of 47) are not-for-profits, and as such are subject to Article 15 of the state's Not-For-Profit Corporation Law. While crematories themselves need not be licensed, the crematory operator must be certified by "an organization approved by the [state's] division of cemeteries," as well as the Cremation Association of North America and the state's Department of Environmental Conservation. The latter two licenses require completing a training program, while the former varies based on the organization through which the license is obtained (e.g., the National Funeral Directors Association requires a training course, as well).

Texas Burial and cremation regulations

Texas's embalming regulations are slightly stricter than other states, as they do require embalming or refrigeration if a body is not interned or cremated within 24 hours of death. Like New York, Texas allows for burial on private property or in designated family cemeteries in addition to established cemeteries. The Texas Funeral Commission issues licenses for crematories, with the following requirements:


Florida Burial and Cremation Regulations

Like in Texas, Florida requires embalming or refrigeration if a body is not interned or cremated within 24 hours of death. Like New York and Texas, Florida allows for burial on private property or family cemeteries in addition to designated established cemeteries. The state's Department of Financial Services, Division of Funeral, Cemetery and Consumer services handles most licensing for the death care industry, including a crematory license (in this state called a 'direct disposal license'). The requirements for this license are as follows:


Additionally, a crematory operator (here called a direct disposer) must also obtain a license from this body, submitting the relevant application and $380 in fees. The establishment must also obtain an Air General Permit (AGP) from the state's Department of Environmental Protection.

Conclusion

At the federal level, the so-called Funeral Rule provides regulation of the burial and cremation services industries in the United States. Licensing and additional regulations are required at the state level. Most states have their own licensing regimens for crematories, or, like New York, outsource at least part of the licensing process to approved licensing bodies. States also generally require some form of approval from the state environmental agency, given the environmental implications of cremation.
Part
03
of four
Part
03

Average Costs

The average cost of an adult burial with a viewing and funeral in the United States as of 2017 is $7,360. If a vault is also purchased, the average cost increases to $8,755. The average cost of an adult cremation with a viewing and funeral in the United States as of 2017 is $6,260. Of California, New York, Texas, and Florida, New York has the highest average costs at $7,420 without a vault, $8,870 with a vault, and $6,430 for cremation. California has the lowest average costs at $6,626 without a vault, $7,570 with a vault, and $5,610 for cremation. A full accounting of our methodology and findings are below.

Methodology

To find the average cost of burial and cremation in the United States, we turned to the foremost authority on costs: The National Funeral Directors Association (NFDA) This organization conducts a pricing survey on burial and cremation services every other year and we discovered that the most recent survey was conducted in 2017 on 2016 prices. We continued to look for more recent pricing and found that the NFDA considers the information from 2016 relevant for 2017 as well, which put this data near our 24-month limit. Still, we wanted to make sure no other organization provided more recent information, so we continued searching for market research reports from sources like Research and Markets, IBISWorld, MarketWatch, ReportLinker, and others. However, we discovered that all such reports rely on information from the NFDA survey. Therefore, we concluded that the information contained in the NFDA 2017 General Price List Final Report is the most current data available.

We then turned to determining the average costs. The report provides the median cost of an adult funeral with a viewing and burial and the median cost of an adult funeral with a viewing and cremation. These median costs are based on the "most typical elements" that consumers purchase from funeral homes. These items include the following:

  • Nondeclinable Basic Services Fee
  • Removal/Transfer of Remains to Funeral Home
  • Embalming
  • Other Preparation of the Body
  • Use of Facilities/Staff for Viewing
  • Use of Facilities/Staff for Ceremony at Funeral Home
  • Hearse
  • Service Car/Van
  • Basic Memorial Printed Package
  • Metal Casket

The organization also includes median pricing for an optional vault, so we included information for both burials with a vault and without a vault in our analysis as well. The median price was determined at the point where "half of all prices for the item fall below and half are above." While we would have preferred to provide the mean of pricing rather than the median, this was the only method for calculation provided. Therefore, we also used the median in our analysis as well, except for the additional costs associated with burial that we provided as extra information. Note that embalming is not required for cremation, but the NFDA asserts that most people who choose cremation also choose to have a viewing, for which embalming is necessary. Therefore, it is included in our average costs, just as the NFDA has also done.

Having found the national average costs of burial and cremation, we turned our attention to the average costs in California, New York, Texas, and Florida. The NFDA provided analysis of average costs for census districts, and each requested state belonged to a different region, but we wanted to ensure we couldn't find actual averages for each state before using the regional data. We repeated our searches through market research studies and there appears to be some data available behind a paywall on the Research and Markets report, but we are not able to access this information.

We then continued our search for per-state averages by examining industry and media articles that discussed the costs associated with burial and cremation. Examples of sources we searched include SmartAsset, OCRegister, GoFundMe, Parting.com, and EverDear, among others. Unfortunately, every article we could find either quoted the NDFA regional data or was deemed unreliable because they appeared on funeral home websites that were attempting to sell their services.

Finally, we turned to the Federal Trade Commission, which provides U.S. consumers with an informational series on Shopping for Funeral Services. It was our hope that the FTC would provide average costs per state so consumers would be protected from overpaying. Unfortunately, only an overall range of costs for caskets was given, along with tips on how to save money when shopping for various funeral services and products. Therefore, we concluded that the best way to illustrate the differences in costs among California, New York, Texas, and Florida was to use the census district analysis provided in the NFDA General Price List Final Report. It is our assumption that burial and cremation prices do not vary much between the states in a given district, which is why the NFDA chose to present the data in this manner.

Since the NFDA report does not include information on services other than those listed above, we attempted to find average costs of the remaining services and products related specifically to burial. We found multiple funeral home articles that provided pricing ranges and averages, but none offered the source of their data. Media articles also provided cost ranges, but usually only for the items already identified.

After much searching, we obtained an article from Lincoln Heritage Funeral Advantage that provided ranges of costs for flowers, wreaths, funeral plots, headstones, and the opening and closing of the plot. Although we typically do not use information from entities attempting to sell their services, this company used the NFDA data for the average cost of an adult funeral with a viewing and burial, so we assumed it used data from other reliable sources to provide a range of costs for the other services and products as well. To calculate the average prices for these services and costs, we added the high range and the low range together, then divided by two (all calculations appear after the triangulated amounts).

Finally, because we were uncertain if the average costs based on the most commonly purchased products and services were actually the desired average, we used the NFDA data to provide average costs of immediate burial and direct cremation to show the most basic cost comparison available. We did not, however, provide these numbers as the direct answer because it appears that the majority of sources use the median costs of the most commonly purchased products and services as the average cost of burial and cremation in the United States.

To find the percentage growth and CAGR of costs over specific time spans we used a percentage calculator and a CAGR calculator to prevent errors.

Note that the total costs for the Unted States and each census district are taken directly from the NFDA report and they may be off by $1.00 due to rounding errors.

Average Burial Costs (United States)

According to the National Funeral Directors Association, in 2017, the median cost for an adult funeral with a viewing and burial was $7,360. If a vault is added, the average cost increased to $8,755. The following average costs are associated with burial in the United States:

  • Removal or Transfer of Remains to Funeral Home: $325
  • Other Body Preparation: $250
  • Viewing Facility Usage: $425
  • Funeral Ceremony Facility Usage: $500
  • Service Car: $150
  • Printed Memorial: $160



Average Cremation costs (United States)

According to the National Funeral Directors Association, in 2017, the median cost for an adult funeral with viewing and cremation was $6,260. The following average costs are associated with cremation in the United States:

  • Removal or Transfer of Remains to Funeral Home: $325
  • Other Body Preparation: $250
  • Viewing Facility Usage: $425
  • Funeral Ceremony Facility Usage: $500
  • Service Car: $150
  • Printed Memorial: $160
  • Cremation Fee: $350

Average Burial Costs (middle Atlantic Census district, including New York)

  • Removal or Transfer of Remains to Funeral Home: $350
  • Other Body Preparation: $253
  • Viewing Facility Usage: $495
  • Funeral Ceremony Facility Usage: $500
  • Service Car: $195
  • Printed Memorial: $150



Average Cremation costs (middle Atlantic census district, including new York)

  • Removal or Transfer of Remains to Funeral Home: $350
  • Other Body Preparation: $253
  • Viewing Facility Usage: $495
  • Funeral Ceremony Facility Usage: $500
  • Service Car: $195
  • Printed Memorial: $150
  • Cremation Fee: $325

Average Burial costs (South Atlantic Census District, Including Florida)

  • Removal or Transfer of Remains to Funeral Home: $300
  • Other Body Preparation: $200
  • Viewing Facility Usage: $400
  • Funeral Ceremony Facility Usage: $475
  • Service Car: $150
  • Printed Memorial: $125



Average cremation costs (south Atlantic census district, including Florida)

  • Removal or Transfer of Remains to Funeral Home: $300
  • Other Body Preparation: $200
  • Viewing Facility Usage: $400
  • Funeral Ceremony Facility Usage: $475
  • Service Car: $150
  • Printed Memorial: $125
  • Cremation Fee: $400
  • Cremation Casket: $995

Average Burial costs (West South Central Census district, including Texas)

  • Removal or Transfer of Remains to Funeral Home: $300
  • Other Body Preparation: $200
  • Viewing Facility Usage: $320
  • Funeral Ceremony Facility Usage: $525
  • Service Car: $100
  • Printed Memorial: $136



Average cremation costs (West South Central Census District, Including Texas)

  • Removal or Transfer of Remains to Funeral Home: $300
  • Other Body Preparation: $200
  • Viewing Facility Usage: $320
  • Funeral Ceremony Facility Usage: $525
  • Service Car: $100
  • Printed Memorial: $136
  • Cremation Fee: $375
  • Cremation Casket: $995

Average burial costs (Pacific Census District, Including California)

  • Removal or Transfer of Remains to Funeral Home: $350
  • Other Body Preparation: $245
  • Viewing Facility Usage: $290
  • Funeral Ceremony Facility Usage: $648
  • Service Car: $150
  • Printed Memorial: $175



Average Cremation costs (pacific Census District, including California)

  • Removal or Transfer of Remains to Funeral Home: $350
  • Other Body Preparation: $245
  • Viewing Facility Usage: $290
  • Funeral Ceremony Facility Usage: $648
  • Service Car: $150
  • Printed Memorial: $175
  • Cremation Fee: $313
  • Cremation Casket: $995

Burial Averages Comparison (without Vault)

  • National: $7,360
  • Middle Atlantic (New York): $7,420
  • South Atlantic (Florida): $7,078
  • West South Central (Texas): $7,196
  • Pacific (California): $6,626

Burial Averages Comparison (with Vault)

  • National: $8,755
  • Middle Atlantic (New York): $8,870
  • South Atlantic (Florida): $8,477
  • West South Central (Texas): $8,491
  • Pacific (California): $7,570

Cremation averages Comparison

  • National: $6,260
  • Middle Atlantic (New York): $6,430
  • South Atlantic (Florida): $6,077
  • West South Central (Texas): $5,921
  • Pacific (California): $5,610

Immediate burial Averages Comparison (Container provided by funeral Home)

  • National: $3,152
  • Middle Atlantic (New York): $3,095
  • South Atlantic (Florida): $3,290
  • West South Central (Texas): $2,968
  • Pacific (California): $2,520

Direct Cremation averages comparison (Casket provided by funeral home)

  • National: $2,700
  • Middle Atlantic (New York): $2,678
  • South Atlantic (Florida): $2,295
  • West South Central (Texas): $2,673
  • Pacific (California): $1,795

Comparison and analysis

In 2014, the median cost for an adult funeral with a viewing and burial was $7,181 (without a vault). This means there was an increase of just 2.49% in costs over three years. Since 2000, the viewing and burial costs have risen from $5,180 to $7,360 in 2017. This represents a CAGR of 2.09%. Therefore, it is apparent that burial costs in the United States are growing, but only slightly.

In 2014, the median cost for an adult funeral with a viewing and cremation was $6,078. This means there was an increase of just 2.99% in costs over three years. There is no earlier data on cremation costs in the report from the National Funeral Directors Association, but from the data over the three-year period, we can see that cremation costs are growing slightly more than burial costs, but are still relatively flat.

The costs for removal or transfer of remains to the funeral home grew the most over a 10-year period between 2006 and 2016, with a percentage increase of 39.5%. Printed materials have the second highest growth of 34.5%. The costs for the use of viewing facilities has grown the least over that same time frame, at 4.7% and the use of funeral facilities has the second lowest growth of 8.0%.

Based on a market research study conducted by Research and Markets, the death care market in the United States is expected to grow at a CAGR of 4% through 2023. Funeral homes, which account for more than half of the death care market and are responsible for the costs analyzed here, are expected to grow at a 2% CAGR through that same year. This is roughly the same percentage it has grown annually since 2000.

Cremation is expected to continue to outpace burial services as people are beginning to "prefer cremation thanks to better value and more sustainable alternatives." In fact, the National Funeral Directors Association predicts the cremation rate in the United States will reach 80% by 2035. Currently, the cremation rate already outpaces the burial rate at a percentage of 53.5% to 40.5%. However, even as the cremation rate rises, the demand for cemetery space will also continue to grow as people purchase property to have a place to visit their loved ones. Currently, 37.1% of cremated remains are buried at a cemetery, while 1.6% are scattered at a cemetery, 8.6% are "placed in a columbarium," and 19.8% are scattered at non-cemetery locations.

Of the four regions compared here, which encompass California, New York, Texas, and Florida, New York has the highest average costs of $7,420 without a vault, $8,870 with a vault, and $6,430 for cremation. These costs are all slightly above the national average. California has the lowest average costs of $6,626 without a vault, $7,570 with a vault, and $5,610 for cremation.

The region with the highest costs overall, though, is the West North Central Census District, which includes the states of Iowa, Kansas, Minnesota, Missouri, North Dakota, South Dakota, and Nebraska. The average cost of a burial and viewing without a vault for this region is $7,815, which is $455 more than the national average. When a vault is added in, the cost increases to $9,295, which is $540 more than the national average. Cremation costs average $6,763 in this region, which is $503 more than the national average. The region with the lowest costs overall is the Pacific region, which has already been compared, as it was used as a proxy for California.

Additional costs associated with burial

The costs provided by the National Funeral Directors Association do not include flowers, wreaths, funeral plot, headstone, or the opening and closing plot fees. If these costs are included, the average burial and funeral cost jumps to $15,110 ($7,360 + $7,750) without a vault or $16,505 ($8,755 + $7,750) with a vault. These numbers are based on the following additional average costs and are added to the $7,360 average without a vault and the $8,755 average with a vault:

  • Flowers: $600 ($500 + $700 = $1,200 / 2)
  • Opening and Closing Plot Fees: $1,000

  • Total: $7,750 ($600 + $150 + $2,500 + $3,500 + $1,000)
Part
04
of four
Part
04

Profitability

Funeral homes may earn revenue by offering a range of products and services related to funerals, from remembrance products like memorial folders to funeral products like caskets to burials or cremations themselves. The average funeral home profit margin is only between 6 and 7 percent, while the average gross profit margin is about 62.5 percent (though it may be substantially smaller for small or independently-owned funeral homes). The average funeral home serves about 113 customers per year, though this can vary somewhat widely across the industry, with a small number of funeral homes serving over 500 customers a year. The trends that have affected the industry in recent years and will continue to do so in the future include rising numbers of cremations, the advent of e-commerce, and the aging of America. A complete breakdown of our findings on this subject can be found below.

How do funeral homes produce revenue?

Funeral homes are businesses that conduct funeral services and associated tasks like embalming, transportation of the deceased, and internment. These businesses also offer funeral-related products like caskets, urns, and remembrance materials. Funeral homes may or may not offer cremation services, but a stand-alone crematory is not considered a funeral home. In the United States, the Federal Trade Commission's "Funeral Rule" requires that a General Price List (GPL) be provided to all consumers seeking the service of a funeral home; examining a sample GPL is one method of understanding how funeral homes make money. Below are items from one such sample.

  • A "basic services charge," which is allowed under the Funeral Rule, covers "services that are common to all funerals, regardless of the specific arrangement." This includes filling out the necessary paperwork, cost of labor, coordinating with a cemetery, and others.
  • Embalming the deceased's remains
  • Additional preparation of the body, if desired, such as cosmetic enhancements, removal of organs for donation, or refrigeration.
  • Transferring the remains to the funeral home
  • Use of the funeral home facilities and staff, which can include visitation/viewing time, the funeral service itself, the memorial service, graveside service, church viewing or funeral, etc.
  • Use of the funeral home's automotive equipment, when generally includes a hearse and may also include a flower van or funeral car.
  • Direct cremations or immediate burials
  • Forwarding the deceased's remains to an alternate funeral home, or receiving remains from another funeral home
  • Remembrance products, such as register books, memorial folders, prayer cards, etc.
  • "Anticipated cash advances," which include the medical examiner's permit fee that varies on a per-state basis, in addition to any limousine fees
  • Funeral-related merchandise, including caskets, outer burial containers (not required by law but sometimes required by cemeteries), cremation vaults, air shipment trays, alternative cremation containers (the Funeral Rule requires that these be offered), and funeral-related clothing such as suits

Thus, funeral homes produce revenue by selling some combination of these products and services to the deceased (if they made funeral preparations before passing) or their loved ones.

Funeral homes' profit margins and Average annual business

The average profit margin for funeral homes are between 6 and 7 percent. The average gross profit margin in the industry is approximately 62.5 percent, though, like in many other industries, scale can improve gross margins, and smaller or independent funeral homes may often have a gross margin of between 10 and 30 percent. As might be expected, the profit margin or gross margin for any given funeral service will vary depending on the products and services chosen, from the type of internment (burial vs. cremation) to the remembrance products selected (if any).

The most significant factor in this regard is cremation, which already outpaces burial as the most common internment choice in America, and is projected to outpace it by over 15 percent by 2020. Cremations are substantially cheaper than burials for both the consumer and the funeral home, which reduces the gross revenue realized from a given service, but makes gross margins from cremation services typically higher than those of burials. Thus, funeral homes may see decreased revenue but increased margins as the amount of cremation services performed rises. Similarly, so-called "green burials," or natural burials, have a substantially lower cost base than traditional burials, making them beneficial to the funeral home's gross margin.

The average American funeral home serves about 113 customers per year. 58% serve 150 or fewer customers per year, while 8.5% serve over 500 per year. The National Funeral Directors Association (NFDA)'s 2018 report projected the 2018 burial rate to be 40.5%, with the cremation rate at 53.5%; those rates are projected at 39.0% and 55.1%, respectively, for 2019.

Recent trends and Future projections

Cremation rates are projected to continue to rise for the foreseeable future, as the costs and the environmental impact of traditional burials deter people from choosing them. The NFDA projects traditional burials to represent a paltry 15% of US deaths by 2035, with 79.1% of deaths being cremated that year. This will continue pushing funeral homes' gross revenues down, even if it raises their gross margins to some degree. Additionally, since not all funeral homes have cremation capabilities, and since some individuals choose direct cremation at crematories over funeral homes, the amount of business for funeral homes will inevitably fall as the cremation rate continues to rise.

Though the rise of cremation is likely the most significant factor in this space, there are other factors affecting the future of US funeral homes. One is the gradual aging of America. The massive Baby Boomer generation is becoming older, naturally raising the demand for funerals. What's more, senior citizens tend to request funeral services and traditional burials at a higher rate than other age groups, raising their cost per customer. Counteracting this effect is the advent of e-commerce, which has made it easier than ever to shop for funeral products like caskets outside of the funeral home (a right guaranteed to Americans by the Funeral Rule). Thus, this important revenue stream is becoming less and less viable.

Overall, changing conditions present numerous challenges for funeral homes moving forward, leading advisers to recommend that funeral homes make profit primarily from funeral services, which can be purchased for cremations or burials and regardless of if the consumer purchased funeral products at the funeral home or not. Marketing to specific audiences, such as a niche religious community in the area, and utilizing innovative marketing strategies can be other ways to combat the challenges faced by funeral homes in the modern environment.

Conclusion

Funeral homes produce revenue by offering goods and services related to funerals and internment of the deceased, which may include burials and cremations. The average profit margin for funeral homes is only between 6 and 7 percent, while the average gross margin is about 62.5 percent (though potentially much lower for independently-owned funeral homes). On average, a funeral home will provide service to about 113 customers per year, though this can vary fairly substantially depending on the size of the funeral home (some small number of homes serve over 500 per year). The rising number of cremations per year, as well as the advent of e-commerce, present challenges for funeral homes, even while the aging of America presents opportunities for increased business.
Sources
Sources

From Part 02
Quotes
  • "The funeral home industry is regulated on a state-by-state basis. Rules can vary widely by state and are subject to frequent changes making state regulations one of the greatest complexities of the funeral business. The vast majority of the jurisdictions require individuals to be licensed to provide funeral related services."
Quotes
  • "The Funeral Rule, enforced by the Federal Trade Commission (FTC), makes it possible for you to choose only those goods and services you want or need and to pay only for those you select, whether you are making arrangements when a death occurs or in advance. The Rule allows you to compare prices among funeral homes, and makes it possible for you to select the funeral arrangements you want at the home you use. (The Rule does not apply to third-party sellers, such as casket and monument dealers, or to cemeteries that lack an on-site funeral home.)"
Quotes
  • "While most funeral homes look out for the best interests of consumers, unfortunately not all providers are ethically sound. In 1982, the U.S. Federal Trade Commission (FTC) mandated Funeral Industry Practices, Part 453 of the Code of Federal Regulations, to protect consumer interests. This commonly is referred to as the "Funeral Rule.""
From Part 04
Quotes
  • "The average gross profit margin across the funeral industry is 62.5 percent, as of 2010. This ranks just above the midpoint compared to other common industries. However, independent operators may barely squeeze a margin of 10 to 30 percent."
  • "Burials have traditionally cost more than cremation, but gross margins are also typically lower. Apart from the differences in the cost of materials to produce caskets, cemetery plots are becoming increasingly expensive to purchase and maintain."
  • "The cost base of eco-friendly burials is substantially lower than traditional burials, sometimes by as much as 50 percent. Depending on the location and natural flora and fauna of the burial site, however, green burials can boost the gross margins of funeral operators."
Quotes
  • "The Funeral Home industry comprises of funeral homes combined with crematories; on the other hand, businesses whose core business activities is to conduct cremation are not included in the Funeral Home industry; they are classified under the Cemetery Services industry."
Quotes
  • "The average profit for a funeral home in the United States is between six and seven percent. That means many firms are below these paltry numbers."
  • "The next step is to select pricing based on a percentage of projected death calls, both casketed and non-casketed. Making your profit from funeral services, rather than from the sale of products, makes sense because consumers are not purchasing funeral products from funeral homes as in the past. A pricing strategy dependent on product sales is a recipe for trouble."