Home care can be a very rewarding business. The need for home care is rapidly growing and the demand is expected to more than double over the next 20 years. As an indication of that, here's a graph from AARP showing the projected number of Americans over the age of 80 which is a good indicator of expected market size.
Even more importantly, home care is a rewarding profession where you can "do well by doing good."
We asked for reasons why people started their home care business and here's what we heard:
In addition to the individual stories above, there are also big businesses entering and expanding in the home care industry because of its growth rates and their perceived ability to achieve efficiencies and economies of scale. But owners and agencies who know their communities and can recruit great caregivers are positioned to thrive.
How much does it cost to start a non-medical home care agency?
Entrepreneurs should have a budget of $40,000 to $80,000 in order to start a non-medical home care agency. For other types of home care (like certified home health, read more here)
Why shouldn't I start a home care business?
Home care is not an easy business and things will go wrong. Here's what you're taking on:
- You need to qualify and apply (in most states) for a license (more below)
- Caregivers will miss shifts and even quit without notice.
- There's lots of paperwork to contend with including contracts, policies and procedures, assessments, employment documents and more. You have to be organized and could be audited.
- It's a 24x7 businesses and when starting out you, as the owner, might be the only fill-in caregiver on your roster. You need to determine if you're ready for that.
Home Care refers to personal care and companion services, delivered in the home of care recipients that enables care recipients (usually elderly or disabled) to stay in their homes. This kind of care assists recipients with Activities of Daily Living (ADLs) like eating, hygiene, bathing, toileting, companionship and other basic supports. There are different names for this type of care, as follows:
This is what we define as home care:
There are other "near neighbor" types of services, often grouped into the Home Health Care Industry (SIC Code 8082 and NAICS code 62161) that are NOT addressed here.
These "near neighbors" are NOT home care:
Here's a simple Infographic that explains Home Healthcare vs Non-medical Home Care Courtesy of Invoiceberry.com
One of the first things you need to check are the eligibility and regulatory requirements for running a home care business in your state. To start, go to Google and search for "<my state name> home care license application" and other similar searches.
CAUTION: Many of the search results you will see will be from franchises and consultants. Opening a franchise or working with a consultant can potentially be great (more on this below), but for this initial search look for results from your state government. The website should end with .gov.
Here's what you're looking for:
Make sure to do this first!
Here is a related video from a leading home care coach named "Coach Michele."
Finding out how to get started in each state is tricky. To help, we've created this state by state guide to connect you to the state web page, home care associations, and consultants who are experts in your state. Click here for the state-by-state guide or click on the banner below:
In addition to setting up your business (e.g., LLC or S-Corp), obtained necessary licensing, obtained your Tax-ID (EIN), and everything else your state requires, you need to have your back office ready to go. These should be covered in your operating policies and procedures manual (that needs to be compliant with your state rules). Here's a starting point list:
Here are some procedure manual offerings from a wonderful consultant named Ginny Kenyon, who runs Kenyon Home Care Consulting. You'll notice that they are specific to the business line and the state:
Most home care agencies use three key pieces of software, explained below:
Home Care Agency Website: Your website does several things for you. First and foremost, it helps people find you when they are shopping for a home care service. Second, it gives you a chance to communicate your unique value proposition. Once people know about your agency, they will look through your website to learn why you are in the business and to think about whether they should choose you versus a competitor. Lastly, your website is a two-way communication tool. In addition to letting you share information about your agency, your site should allow potential clients to express interest in your agency and also allow caregivers to apply to be on your team.
Home Care Agency Management Software: This is the software that you use to manage your operations. It tracks your client demographic, plans of care, schedules, caregiver demographics, skills, and availability, and enables timekeeping (generally via a GPS enabled mobile app of via voice telephony where the caregivers dial in or via a mobile app) plus tracking of the completion of care plan items. Lastly, it creates your bills and payroll. Another feature offered by some of the software vendors is an app for family members to stay engaged in the care of their loved ones (so they can track schedules, see updates and communicate with you).
Here are some more details about home care Software:
Accounting Software: Accounting software tracks your "receivables" (keeps track of when your bills are paid), and your expenses. Plus some accounting software also cuts the checks to pay your caregivers and other expenses. Most agencies use Quickbooks for their accounting software and although Quickbooks has payroll management, a lot of agencies use a different software system for their payroll.
Now that you're ready to start your business, you need a staff. Here's the recipe for success:
Important note: Your caregivers are your business. You need to recruit well and treat your caregivers well.
Without caregivers you don't have a product to sell, but without clients you don't have a business. The best home care start-up entrepreneurs have a heart for care, a great personal story and the ability to sell.
Some best practices for getting started are as follows:
The home care industry has many sources of income (payers). Depending on your geography (demographics and wealth), you need to target the payer sources that fit.
Here's a chart of percentage of revenue by payer source from Home Care Pulse (note that this survey mostly represents home care agencies in affluent communities):
Here are some of the key payers:
Earlier in this guide we encouraged you to Google the requirements to open a home care agency in your state and we suggested that you look for an official government answer. If you did this you likely found that the first results and paid advertisements were from home care franchises and home care consultants. Purchasing a franchise or working with a consultant can be exactly the right move for your agency and it can accelerate your time to market. DIY (do it yourself) is harder for sure. Below are some things to consider to decide whether a franchise or a consultant is right for you.
Opening a franchise will get you started quickly and equip you with a brand, advertising, procedures, training and tools that you need to get a quick start. Here's a link to an article on the best-liked home care franchises. Some of the benefits and concerns of going the franchise route are as follows:
There are many great home care consultants who have "been there and done that." They've been through it before and can accelerate your start-up with their training and products (Operating Policy and Procedures manuals, that are state specific, forms and solid caregiver recruiting strategies).
Some cautions regarding consultants are as follows:
If you elect to do it yourself, it will likely take longer and you'll make mistakes along the way. This guide has been designed with the intention of giving you a realistic picture of the work needed to start a home care agency. If this industry is brand new to you, getting help is strongly recommended.
Here are some industry players we trust and recommend. One reason is that they all share ample information to help you on your journey.