How to Start an Assisted Living Facility

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Our guide on starting an assisted living facility covers all the essential information to help you decide if this business is a good match for you. Learn about the day-to-day activities of an assisted living facility owner, the typical target market, growth potential, startup costs, legal considerations, and more!

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Start an assisted living facility by following these 9 steps:

You have found the perfect business idea, and now you are ready to take the next step. There is more to starting a business than just registering it with the state. We have put together this simple step guide to starting your assisted living facility. These steps will ensure that your new business is well planned out, registered properly and legally compliant.

STEP 1: Plan your Business

A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:

  • What are the initial costs?
  • Who is your target market?
  • How long it will take you to break even?
  • What will you name your business?

Luckily we have done a lot of this research for you. Skip on ahead to the Business Overview for more detailed answers to all your questions.

Choosing the right name is very important. We recommend checking if the business name you choose is available as a web domain and securing it early so no one else can take it.

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STEP 2: Form a legal entity

Establishing a legal business entity such as an LLC prevents you from being personally liable if your assisted living facility is sued. Consider using a registered agent service to help protect your privacy and stay compliant.

STEP 3: Register for taxes

You will need to register for a variety of state and federal taxes before you can open for business.

STEP 4: Open a business bank account

Using dedicated business banking and credit accounts is essential for personal asset protection.

When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.

STEP 5: Set up business accounting

Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.

STEP 6: Obtain necessary permits and licenses

Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.

STEP 7: Get Business Insurance

Insurance is highly recommended for all business owners. If you hire employees, workers compensation insurance may be a legal requirement in your state.

STEP 8: Define your brand.

Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.

STEP 9: Establish your Web Presence

A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.

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Select your state below for an in-depth guide on completing each of these steps in your home state.

Business Overview

Assisted living centers play a vital role in caring for the elderly and the disabled. These facilities house senior citizens and others in need of help due to mental or physical problems. Assisted living facilities provide a communal environment for patients to live in and enjoy. In many instances, such patients are unable to take care of themselves at home so they choose to live in an assisted living facility where they can obtain assistance from professional caregivers around the clock.

Who is this business right for?

This business is ideal for those who are interested in medicine, caregiving, and generally improving the human condition. If you are especially compassionate toward the disabled and elderly, opening and operating an assisted living facility will prove to be quite rewarding.

What happens during a typical day at an assisted living facility?

Assisted living facility owners perform a wide range of duties each day. They do everything from ordering medical supplies to ensuring compliance standards are met, interviewing job candidates, and reviewing applications for residency.

What is the target market?

Most assisted living facilities house as many in need as they can reasonably accommodate.  However, younger patients can be ideal, as younger patients are more likely to remain in the facility for years to come. The passing of a patient can be extremely difficult emotionally, and an extended stay in the facility is a consistent source of income.

How does an assisted living facility make money?

Assisted living facilities make money by charging residents a fee for staying in the facility. This cost is applied on a per-month or per-year basis.

What is the growth potential for an assisted living facility?

The growth potential depends on the quality of the assisted living facility's condition and level of care. Another critically important factor in terms of growth potential is location. An assisted living facility located in an area with a large population of senior citizens will have considerable growth potential.

What are some skills and experiences that will help you build a successful assisted living facility?

The entrepreneur should be able to assess the potential of a market. He should have a firm grasp on local demography as well as the medical industry. Furthermore, the entrepreneur should have excellent interpersonal skills. Owning an assisted living facility requires regular interaction with employees, residents, and medical equipment suppliers.

What are the costs involved in opening an assisted living facility?

The facility must be constructed. Though some facilities can be rented, the majority are either purchased or built by the entrepreneur. Additional costs include employee wages, utilities, internet, nurse call buttons, security cameras, computer hardware, food and drink for patients, bedding, and medical equipment. You might also decide it is prudent to purchase software designed to ameliorate the challenges of assisted living facility businesses.

Where can I find a business mentor?

One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.

Having a support network in place to turn to during tough times is a major factor of success for new business owners.

What are some insider tips for jump starting an assisted living facility?

A thorough understanding of patient care will ameliorate the challenge of this business. The entrepreneur should key in on hiring savvy medical professionals who genuinely care about patients and their well-being. An assisted living facility with modern accommodations in an area with an abundance of senior citizens will likely succeed. Furthermore, do not delay applying with your state's health department for the permit required to operate an assisted living facility. It is possible the state will require that your facility be modified before approval is provided. It will also take some time to schedule and perform a safety inspection. A county or city business license will also be necessary. So don't assume a state license will suffice. The local government will likely require a permit in addition to the state license.

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Growing Your Business

How to promote & market an assisted living facility

The best way to build this business is to please current residents. They will spread the word to fellow seniors and disabled individuals. It also helps to market the assisted living facility in local newspapers, magazines, radio spots, and TV ads. Get the facility's name in the spotlight and customers will seek out more information. A strong web presence will also help. Though many seniors do not use the internet at a high frequency, their family members likely do. Bolster your website's search engine optimization (SEO) and it will be that much easier for prospective customers and their family members to find your business on the first page or two of search engine results.

Recommended: Get started with local advertising for your business with a $300 credit from Yelp.

How to keep customers coming back

One of the best ways to attract customers is to offer a competitive price for a room at the facility. Match or beat competitors' prices and you will enjoy a steady stream of customers. Please your customers and they will inevitably recommend your facility to fellow seniors and disabled individuals who are looking for an assisted living facility. Employ true medical professionals who would not dare abuse or neglect residents and your customer retention rate will be more than acceptable.

How and when to build a team

It is imperative that you build your team right away. Your assisted living facility will require an office manager, nurses, aides, kitchen staff and a cleaning staff. Each of these positions must be filled when the facility is launched. If you do not want to handle marketing and accounting duties, these roles must be filled by professionals.

Legal Considerations

State & Local Business Licensing Requirements

Certain state permits and licenses may be needed to operate an assisted living home. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.

Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.

Maintain Personal Asset Protection

Don’t think that just forming an LLC, or any other type of business, will save your personal assets in case of a lawsuit or other matter by itself.

When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your LLC is sued. In business law, this is referred to as piercing your corporate veil.

Two of the simplest steps that will protect your business, and yourself, are to:

Open a business bank account

  • This separates your personal assets from your company's assets, which is necessary for personal asset protection.
  • It also makes accounting and tax filing easier.

Get a business credit card

  • This helps you separate personal and business expenses by putting your business' expenses all in one place.
  • It also builds your company's credit history, which can be useful to raise money and investment later on.
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To learn more about maintaining your LLC's corporate veil, read our guide and protect your personal assets.

Certificate of Occupancy

An assisted living home is usually run out of a large, hotel-like space. Businesses operating out of a physical location typically require a Certificate of Occupancy (CO).  A CO confirms that all building codes, zoning laws and government regulations have been met.

  • If you plan to lease a space:
    • It is generally the landlord’s responsibility to obtain a CO.
    • Before leasing, confirm that your landlord has or can obtain a valid CO that is applicable to an assisted living home.
    • After a major renovation, a new CO often needs to be issued. If your place of business will be renovated before opening, it is recommended to include language in your lease agreement stating that lease payments will not commence until a valid CO is issued.
  • If you plan to purchase or build a space:
    • You will be responsible for obtaining a valid CO from a local government authority.
    • Review all building codes and zoning requirements for you business’ location to ensure your assisted living home will be in compliance and able to obtain a CO.

Earning Potential

How much can you charge customers?

In general, assisted living facilities can charge between $2,000 and $4,000 per resident per month. However, the exact cost depends on the location and the quality of the facility.

What are the ongoing expenses for an assisted living facility?

Ongoing expenses include overhead costs like employee wages, utilities, high-speed Internet, insurance, medical supplies, and rent/payments toward debt owed on the property. A state licensed assisted living facility manager will likely command a salary between $35,000 and $75,000 or more. If you do not want to handle advertising efforts, a marketing director will be necessary. Expect to pay such a professional between $40,000 and $70,000 per year. Nursing staff will likely demand a salary in the range of $30,000 to $50,000. Administrative staff will cost between $10 and $15 per hour. Kitchen/food prep staff will cost between $10 and $12 per hour. The cost of food and beverages hinges on quality. Expect to spend several thousand dollars per month on sustenance for your residents. The cost of utilities depends on the size of the facility. In general, utilities cost a couple hundred dollars per month. Medical supplies and bedding must be replenished/replaced as time progresses. Plan to spend at least $500-$1,000 per month for these supplies and adjust your budget accordingly as you get a better gauge of your clientele's needs and demands.

How much profit can an assisted living facility make?

Profit level depends on the size of the facility as well as its amenities. If you have a large facility with top-notch amenities and maintain full capacity, profits have the potential to reach the six figure mark or higher. If you build a true brand and open additional assisted living facilities at new locations, it is possible to make millions of dollars in profit.

How can you make your business more profitable?

You can boost profitability by offering auxiliary services on-site. It is possible to charge residents additional fees for optional niceties like cable TV packages, nuanced dining options, on-site entertainment events, specialized care, and so on. If your facility reaches full capacity, it might be possible to receive financial kick-backs for referring prospective residents to other facilities with available space.

Next Steps

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