Start a home health care business 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 guide to starting your home health care business. 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 startup and ongoing 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.
What are the costs involved in opening a home health care business?
A home care business can be started with very little capital and hassle. Other than any licensing fees that a state requires, there are few startup costs. The two essential elements are a reliable vehicle and a cell phone, but most business owners use their personal vehicle and phone. Many business owners also use a computer, which they usually already have as well. According to Senior Service Business, these startup costs can be kept under $900.
To keep startup costs low, many business owners begin by offering only non-medical assistance. This helps ensure they don’t have to pay for classes and reduces how much red tape they must go through.
Businesses are typically run from a home office, so there aren’t any startup costs for office space.
What are the ongoing expenses for a home health care business?
The ongoing expenses for a home care business are maintenance and fuel for a vehicle, a phone bill and any internet access costs. These expenses should be considered when determining a business’ hourly rate.
Who is the target market?
A home care business’ ideal client is someone who wants to continue living on their own but needs help with basic tasks. This may be:
- An elderly senior who wants to remain in their home rather than assisted living
- A patient who recently had surgery and would like to recover in their own house
- Someone who has a medical condition and needs someone who can help with basic tasks (possibly while another service provides medical assistance)
Additionally, clients sometimes also need some savings, because home care isn’t always covered by medical insurance.
How does a home health care business make money?
A home care business makes money by charging clients an hourly rate on a fixed weekly schedule. Some businesses also offer clients a live-in service for a fixed monthly fee.
How much can you charge customers?
How much home care businesses charge varies a lot depending on where they’re located. Businesses in rural areas typically charge around $18 per hour, while those in major cities may charge as much as $40 per hour. The national average, Senior Service Business says, is $24 per hour.
How much profit can a home health care business make?
According to a report cited by USA Today, home health care franchises are among the five most profitable franchises. In the report that USA Today noted, some franchises grossed over $1 million -- and had gross margins between 30 and 40 percent. New businesses make an average of $248,000 in their first year, with 12 to 15 percent of that being net profit.
How can you make your business more profitable?
Home care businesses can charge more by offering medical services. Getting set up to provide medical services takes work, though, as aides must be certified and the business must be set up to accept health insurance (especially Medicare). Additionally, in order to accept Medicare, all of the medical services a business provides must be overseen by a physician -- which requires establishing relationships with physicians. For these reasons, many business owners don’t pursue these opportunities until they’re ready to purchase a franchise.
What will you name your business?
Choosing the right name is very important. Read our detailed guide on how to name your business. 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.
After registering a domain name, consider setting up a professional email account (@yourcompany.com). Google's G Suite offers a business email service that comes with other useful tools, including word processing, spreadsheets, and more. Try it for free
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC prevents you from being personally liable if your home health care business is sued. There are many business structures to choose from including: Corporations, LLC's, and DBA's.
Form Your LLC
Read our Guide to Form Your Own LLC
Check out the Top Business Formation Services from our friends at StartupSavant.
You should also 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.
In order to register for taxes you will need to apply for an EIN. It's really easy and free!
You can acquire your EIN for free through the IRS website, via fax, or by mail. If you would like to learn more about EINs and how they can benefit your LLC, read our article, What is an EIN?.
STEP 4: Open a business bank account & credit card
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.
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.
Recommended: Find the right bank for you, read our review of the Top 5 Banks for Your Small Business
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.
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.
State & Local Business Licensing Requirements
Certain state permits and licenses may be needed to operate Home Care Business:
- Home Health Aid Licensing (HHA): An HHA license is required for a person working for a home health agency or hospice that performs home health services ordered by a licensed physician, chiropractor, podiatrist, or optometrist.
- Certified Nurse Assistant (CNA): A CNA license is required for an individual that is operating a personal health care business that is not prescribed by a doctor. In addition to assisting clients with normal day-to-day activities, a CNA can also bathe clients and remind them to take prescribed medication.
In addition to these state requirements, certain local licensing or regulatory requirements may apply. For more information about local licenses and permits:
- Check with your town, city or county clerk’s office
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources.
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.
Home care businesses should require clients to sign a services agreement before taking on a new client. This agreement should clarify client expectations and minimize risk of legal disputes by setting out payment terms and conditions, service level expectations.
STEP 7: Get Business Insurance
Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully. Business Insurance protects your company’s financial wellbeing in the event of a covered loss.
There are several types of insurance policies created for different types of businesses with different risks. If you’re unsure of the types of risks that your business may face, begin with General Liability Insurance. This is the most common coverage that small businesses need, so it’s a great place to start for your business.
Learn more about General Liability Insurance.
Another notable insurance policy that many businesses need is Workers’ Compensation Insurance. If your business will have employees, it’s a good chance that your state will require you to carry Workers' Compensation Coverage.
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.
How to promote & market a home health care business
Just as a home care business can often be started through word of mouth, this is also the most effective way to promote and market a business. Most clients know other people in similar situations who may also want assistance. A referral from a current client will often be more effective than a traditional advertisement.
How to keep customers coming back
To set itself apart from similar businesses, a home care business must establish its reliability. Being flexible enough to adjust to a client’s change in schedule can go a long way in establishing trust. For instance, taking a client to an unscheduled medical appointment if a health-related issue arises will make life much easier for family and friends, and they’ll be more likely to continue requesting help and more willing to provide recommendations.
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.
Start A Home Health Care Business In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
Is this Business Right For You?
Anyone who is interested in helping others may be well-suited for starting a home care business. Business owners often spend a lot of time with their clients, and being able to build relationships is important. Patience and compassion are also vital, as some clients may be difficult to work with at times.
Additionally, business owners should be self-disciplined and organized. They’re often expected to help with multiple tasks that have to be prioritized.
What happens during a typical day at a home health care business?
Home care business owners spend much of their time with clients. A single visit may entail any of the following:
- Preparing meals
- Basic cleaning
- Running errands
- Taking your client to appointments and social engagements
Some business owners also help with basic hygiene and/or provide simple medical services. Doing this type of work usually requires specialized certifications.
As a home care business grows, the owner’s responsibilities typically transition to more administrative tasks. They’ll spend more time finding and managing assistants and aides, and less time working directly with clients.
What are some skills and experiences that will help you build a successful home health care business?
Home care business owners typically don’t need specialized training unless they offer medical services. In some states, non-medical home care businesses need a license, but this is more of a legal process than a training program. Good people, communication and business skills are usually all that’s required to get started in this industry. Business owners that are lacking in any of these areas may want to take a class at a local community college or attend a seminar on the area they’re weak in.
Business owners that want to offer medical services will need specific training. There are two licenses that aides can get: certified nursing assistant (CNA) certification, which is a basic certification, and home health aide (HHA) certification, which is more advanced. The American Red Cross offers CNA classes in several states, and All Nursing Schools lists classes throughout the country. Learn.org lists several schools that provide HHA training.
What is the growth potential for a home health care business?
A home care business may be a small, one-person operation, or it can have several aides serving a city or geographic region.
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Take the Next Step
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.
Resources to Help Women in Business
There are many resources out there specifically for women entrepreneurs. We’ve gathered necessary and useful information to help you succeed both professionally and personally:
If you’re a woman looking for some guidance in entrepreneurship, check out this great new series Women in Business created by the women of our partner Startup Savant.
What are some insider tips for jump starting a home health care business?
Home care business owners are sometimes able to secure their first client or two without any marketing campaign. Simply letting friends and family know you’re going to start a home care business could lead to a client. Many people know at least one person who could use assistance, and they’d gladly recommend a business owner they know and trust.
How and when to build a team
Many home care business owners hire their first employees after they personally aren’t able to take on any additional clients. At this point, it often makes sense to purchase a franchise. Franchises usually have hiring processes in place and pre-existing relationships with medical providers, which makes it easier to take on both new employees and new clients. A strong franchise brand can also provide a business with credibility.
Franchise Direct lists a number of home care business franchises. The franchises’ minimum startup costs range from $975 to $250,000, with most falling between $20,000 and $100,000.