How to Start a Funeral Business

How to Start a Funeral Business

In South Africa, burial remains the most popular end-of-life choice. “Just how many burials take place is difficult to measure because there is a formal and an informal funeral industry in South Africa,” says Rey von Ronge, secretary of the National Funeral Directors’ Association,  an industry watchdog organisation specialising in resolving disputes between undertakers and the public.

Franchise vs independent operators

In South Africa, the funeral industry operates through two channels – independent companies and franchises.

The two franchise players are Martins Funerals and 21st Century Funerals, both members of the Franchise Association of South Africa (FASA).

A Martins Funerals franchise costs upwards of R485 000. This includes start-up stock. Royalties are paid on gross monthly turnover at 7%, working on a sliding scale. The franchise contract is renewable after ten years and full training and ongoing support is included.

There are independent operators in the market, but setting up a well run business that complies with the laws of the country is expensive. “The problem we face is that there are many fly-by-night funeral businesses in South Africa,” says Von Ronge.

Fly-by-night undertakers do not provide proper services and are in the business purely to make money. Fly-by-nights operate without a licence and do not comply with the industry’s rules. People are buried in the wrong graves and health requirements are not met.

Some smaller private funeral homes make use of government crematoriums and store bodies at private and government mortuaries until it is time for the burial or cremation. It’s the responsibility of local municipalities to ensure the proper management of cemeteries, crematoria and funeral undertakers within their areas of jurisdiction.

The cost of running a fully functional private funeral home

“Most people think that the funeral business is an easy way to make money, but it isn’t,” says Theo Rix, MD of Independent Crematoriums of SA.

He says the cost to set up a fully functional crematorium in South Africa is around R7 million. A cremation furnace costs around R1,5 million and you need at least two to run a profitable business. Other costs include smoke extractors and their installation, protective clothing for radiant heat and so on.

A typical start-up

Consider a typical existing upmarket funeral home based in Johannesburg:

  • Sales revenue: R4 million
  • Cash flow: R1,2 million
  • Employees: 7
  • Hearses: 3
  • Leasehold rent: R108 000 per annum
  • Size of the premises: 300 m2

It can take up to two years to get the necessary permits and permission to run a funeral home from local municipalities and government authorities.

“Because the paperwork is so extensive, we don’t attempt to do it ourselves. We employ attorneys to get the process going on our behalf,” says Rix.

Are you the right person for the job?

Starting a funeral home is not for everyone. Here are some points to consider:

  • Because of the nature of the business funeral directors must be able to work at odd times of the day.
  • A person who runs or owns a funeral home should be an excellent communicator and a good listener. People from various cultures and traditions will have to be managed with equal ease.
  • An understanding and caring attitude is a must, while at the same time the funeral director has to be emotionally strong and not shaken by other people’s distress.

Usual tasks include:

  • Speaking to the bereaved in order to make funeral arrangements.
  • Liaise with others such as the clergy and cemetery workers, and even write obituaries.
  • Keep records, such as lists of items that come with the body.
  • Obtain all clearances and adhering to regulations associated with the event, he or she will need to be well versed in procedures and legal issues.
  • Have extensive knowledge and respect for the religious sentiments and beliefs of various cultures and communities and will also need to know about different customs and rituals followed by various religious groups during the funeral service.

Study the art of funeral directing

Many funeral home owners seem to view training and personal development as more optional than essential; that is all set to change with the opening of the very first funeral director training school in Gauteng.

The Funeral Academy for Africa (FAfA) offers a Certificate in Funeral Service (NQF Level 3) which has been introduced for the first time in South Africa and Africa. The course teaches students to prepare and present funeral services and manage funeral logistics and administration. FAfA also offers a variety of short courses and has opened campuses in Durban and Cape Town.

For more information, visit www.fafa.co.za

Regulation for burial societies on the cards

The burial society business in South Africa is largely unregulated. But this is set to change with the establishment of a new, overarching regulatory body –the Burial Society of South Africa. By Gill Abraham

What is a burial society?

A burial society is an informal self-insurance scheme. It absorbs the costs of social activities and cultural requirements of funerals. The total amount invested annually in burial societies is said to be around R6,4 billion

“Burial societies have massive potential for wealth creation within South Africa’s poor and vulnerable communities, given the right assistance. Research has shown that more than 20% of the South African adult population are members of a burial society – so the importance of this sector must not be underestimated. Burial societies also represent a significant spend with members prioritising 15% of their income for this financial product,” says Inseta’s CEO Sandra Dunn.

“The aim of the newly formed Burial Society of South Africa (BSSA) is to unite all the burial societies that operate in the informal sector under one umbrella,” says secretary general of the BSSA, Zulu Ratswana. “Each burial society has about 30 members and each member contributes R50 a month. This money is then deposited into a bank account where it stays until it is needed.”

Banks and insurance companies need to change

Tradition and belief influences the decision-making of a burial fund member when arranging a funeral for a member of the family. “Banks offer policies, but they have never consulted with the burial societies and they do not appear to understand their needs,” explains Ratswana. All causes of death are covered by burial societies with no questions asked, whereas formal insurers exclude (or at least make it difficult to claim on) certain deaths such as HIV/Aids or suicide. The banks do not include the needs of the extended family, whereas burial societies do.

“We also want to provide a free last will and testament to those who join the BSSA,” he says. The membership fee is R100 per year. The BSSA will also seek to mass produce coffins in order to keep costs down.

“We want to assist with pauper funerals and we believe ‘a human being is a human being’, meaning that even if someone is destitute, that person deserves a decent funeral. So we would adopt the corpse, and by giving that person a proper funeral; they will be able to rest in peace,” explains Ratswana.

Another aim is to allow members to borrow money at very low interest rates. Ratswana says the BSSA plans to include education and training for the industry as well, and will offer bursaries to deserving students.

A need to unite

Because the industry is unregulated, Ratswana explains that burial societies need to organise themselves, which is why the BSSA has been formed. Ratswana sees the insurance companies and banks as a possible threat because the burial societies lack the skills and resources to provide their growing market with the right products and services at the right price.

“If we organise the players in this industry we will be able to compete with the formal funeral insurance sector. We will be able to provide proper control and manage fraud as well as the many problems that HIV/Aids has created. Once we are united, it will be much easier.

“We intend to establish offices in all provinces of South Africa and we will impose standards. We will become the watchdog of the industry,” he says.

“As the informal market becomes more sophisticated, and companies include funeral insurance in salary packages, the market will change,” says Dr Chris Molynex, past president of the National Funeral Directors’ Association.

Registering burial societies as co-operatives

Inseta is pushing for burial societies to register as co-operatives in an endeavour to become more professional. Inseta has committed to provide capacity building workshops that will be held nationally.

Contact Inseta’s call centre on 0860 113 0013 for  dates and venues for these workshops.

Pros and cons of funeral businesses

“R5 billion is spent on funerals annually in South Africa,” says Inseta’s CEO, Sandra Dunn. Threats to the industry as a whole include the lack of burial land. At Avalon cemetery in Soweto, for example, it has been reported that over 200 funerals take place every weekend. This is Johannesburg’s biggest and busiest cemetery, accounting for 40% of burials.

Another threat to the sector is emissions caused by cremation. Cremation spews about 400 kg of carbon dioxide – a greenhouse gas blamed for global warming – into the air, along with other pollutants like dioxins and mercury vapour which are emitted if the deceased have silver tooth fillings.

But these threats to the industry also can and have created opportunities. Internationally, there are many new practices which are being used to deal with these problems. In Japan, most deceased people are cremated. According to a recent BBC report, it has become extremely difficult for the Japanese to find places to store ashes, especially in big cities. The solution has been to save space and money by converting old warehouses into storage facilities for the ashes of family members.

Because Israel is such a small country and tradition dictates that the dead are buried, a simple solution has been devised where two family members are placed in a single grave that is dug deeper by an extra metre. Israel has also designed above-ground niche burials, in which the niches are pre-cast concrete units. However, the most significant innovation is the multi-level cemetery. It allows for single and double conventional graves as well as niche burial, on at least two levels.

Sub-contracting is a good way to make money

“A funeral director is in fact an events manager, but one who doesn’t have as much time to organise an event,” says Dr Chris Molynex, past president, National Funeral Directors Association Southern Africa. Funeral directors sub-contract services such as catering, fresh flower arrangements, rental of tents and chairs, transport for mourners, tombstones, coffin name plates and wreaths.

A popular tribute at a funeral can be a dove or butterfly release at the graveside. Another appealing choice is a bagpiper or a ‘live’ jazz band to play at the end of the ceremony. These services are all spin-off revenue earners. Other business opportunities include the manufacture of casket trimmings, linings and handles.

Green burial

In some parts of the world, and especially in the United Kingdom, the increasingly popular green or natural burial movement is working hard to reform how the dead are returned to the earth. With natural burial, bodies are not embalmed; coffins are simple and made of easily decomposable, non-toxic materials.

Sonja Smith, CEO of Sonja Smith Funerals for Pretoria, has been awarded the franchise rights in South Africa for natural woven coffins. “I want to help the funeral industry in this country to become a friend of the environment,” says Smith. “I started my research two years ago when I read an article about natural woven coffins in a British publication called The Funeral Journal.

“I was convinced that this concept would work well in South Africa and started to liaise with the company in England. I was offered the sole mandate for South Africa and Africa. The range features coffins woven from natural fibres like seagrass and cocostick. They are bio-degradable and made from easily renewable resources that don’t pollute the atmosphere when they are burnt in crematoriums.”

Smith’s first consignment of adult woven coffins arrived in April and she was overwhelmed by the response from funeral directors across South Africa. More than 80 funeral homes took a keen interest and wanted more information.

Coffin making

In South Africa a coffin should be manufactured to SABS standards. Coffins are generally made from wood, while caskets are produced from wood or metal. Most importantly, a coffin must be sturdily constructed in order to protect the dead and safeguard the health of the living, which is why the SABS has set strict standards.

There is a growing demand for coffins and training centres where coffin making is taught. Courses are available throughout South Africa and they provide the necessary practical knowledge to start a coffin and casket manufacturing business. Online business coffins.co.za was formed eight years ago due to the huge demand for affordable funeral products.

Gill Abrahams

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