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How to Start a Home Health Agency

Written by:

Edited by:

Reviewed by: Daniel Javor

Published on November 18, 2021

Updated on September 22, 2022

How to Start a Home Health Agency

Disclaimer: Step by Step Business’ content is for informational and educational purposes only. It’s not intended to be a substitute for professional legal or tax advice. All of our articles are thoroughly reviewed and fact-checked by our editorial team. Read our editorial guidelines for more details.

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Fast Facts

Investment range

$2,250 - $11,500

Revenue potential

$52,000 - $260,000 p.a.

Time to build

0 – 3 Months

Profit potential

$47,000 - $78,000 p.a.

Industry trend

Growing

Commitment

Flexible

How to Start a Home Health Agency

If you’re a nurse or professional caregiver, you know how rewarding it can be to care for people and possibly nurture them back to health. As the Baby Boomer generation ages into retirement and beyond, the number of elderly Americans is growing fast, increasing demand for home health care services. Starting your own home health care agency will give you the opportunity to care for people on a daily basis — and potentially make a comfortable living.

Starting your own agency won’t be easy, but the rewards will likely be worth all the work you put in. This step-by-step guide will educate you on the steps involved in starting your own agency and beginning your entrepreneurial journey in health care!

Step 1: Decide if the Business Is Right for You

Pros and cons

Starting a home health agency, just like starting any business, has its pros and cons. You’ll need to evaluate these to decide if a home health agency is the right path for you.

Pros

  • Fulfilling work – Few jobs are more rewarding than helping people feel better
  • Flexibility – Choose your clients and set your own schedule
  • Steady work – Aging Boomer generation means sustained demand

Cons

  • Travel time – Visiting multiple clients daily can mean a lot of driving
  • Fatigue – Caregiving is often demanding, high-stress work
  • Isolation – Solitary work, mostly one-on-one with clients

Home health care industry trends

The home health care industry refers to both medical care provided in the patient’s home, and the more simple home care of helping people with daily tasks, like washing and getting dressed. The latter is the most common type of home health care.

Industry size and growth

home health industry size and growth

Trends and challenges

Trends in the home health care industry include:

  • An aging population and rising cases of chronic diseases in the US are driving demand for home health care services
  • Growing preference for telehealth services also boosts demand 
  • High cost of health care makes home care a less expensive alternative

Challenges in the home health care industry include:

  • High level of competition due to low barriers to entry
  • Lack of qualified workers
home health industry Trends and Challenges

What kind of people work in home health care?

home health care industry demographics

How much does it cost to start a home health care agency?

Startup costs can range from just $2,000 to more than $11,000, with the average cost around $7,000. The high end is for a Medicare-licensed health care agency, due to the expensive licensing process.

You’ll need a handful of different items to successfully launch your home health care agency. Here’s a list to help you get started:

  • Medical equipment: blood pressure monitor, thermometer, latex gloves
  • First aid kit
  • Cleaning supplies
Startup CostsBallpark RangeAverage
Setting up a business name and corporation$150 - $200$175
Licenses and permits$200 - $1,000$600
Insurance $100 - $500$300
Business cards and brochures$200 - $300$250
Website setup$1,000 - $3,000$2,000
Initial marketing budget$100 - $500$300
Computer$500 - $1,000$750
Medical home care licensing$0 - $5,000$2,500
Total$2,250 - $11,500$6,875

How much can you earn from a home health care agency?

If you’re a registered nurse or licensed caregiver, you could start your agency on your own and potentially have a profit margin as high as 90%.

Home health care services cost about $25 per hour. Thus, if you’re able to work 8 daily hours 260 workdays per year, you’ll bring in $52,000 in revenue and around $47,000 in profit, assuming a 90% margin. As you grow and hire more workers, sales could climb to 40 billable hours per day, but due to increased costs your margin might drop to 30%. This would give you annual revenue of $260,000 and a nifty $78,000 in profit.

home health agency earnings forecast

What barriers to entry are there?

There are a few barriers to entry for a home health care agency. Your biggest challenges will be:

  • Licensing – Your agency may need licenses depending on state and services
  • Client acquisition – It takes time to build a track record and client base

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Step 2: Hone Your Idea

Now that you know what’s involved in starting a home health agency, it’s a good idea to hone your idea in preparation to enter a competitive market.

Why? Identify an opportunity

First, you should look at the home health care agencies in your area to see what they are offering and what areas they cover. Is there an area that is not being serviced or are there particular services that are missing? Look for market gaps that you can fill.

What? Determine your products or services

Determine what services you may be able to offer your clients, particularly ones that may differentiate you from the competition. In addition to medical services (if you will be a medical agency) and daily tasks, you could offer:

  • Prepared meals
  • Grocery delivery
  • Companionship
  • Pet care
  • Cleaning and laundry

How much should you charge for home health care services?

The average rate for home health care services is around $25 per hour. If you are a nurse offering medical services, you could charge several times that. Your agency might offer different levels of care at different rates. For example, you could offer a package of full-day services and charge a daily rate.

Once you know your costs, you can use this Step By Step profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.

Who? Identify your target market

Your target market will generally be an older population, but it may be their children or other younger relatives who engage you for services.

It’s a good idea to ask yourself, based on your service offerings, who is most likely to be the relevant decision-maker?

If your clients are over 70, the decision-maker will likely be the client’s child, so you should target your marketing accordingly. For example, when choosing a social media site for marketing, Facebook might be a good bet for the 30-50 demographic.

Where? Choose your business premises

In the early stages, you may want to operate your business from home to keep expenses low. But as your business grows and operations intensify, you will likely need to hire workers and may need to rent out an office. You can find commercial space to rent in your area on Craigslist, Crexi, and Commercial Cafe.

When choosing a commercial space, you may want to follow these rules of thumb:

  • Central location accessible via public transport
  • Ventilated and spacious, with good natural light
  • Flexible lease that can be extended as your business grows
  • Ready-to-use space with no major renovations or repairs needed
home health agency business idea rating

Step 3: Brainstorm a Business Name

Your business name is your business identity, so choose one that encapsulates your objectives, services, and mission in just a few words. You probably want a name that’s short and easy to remember, since much of your business, and your initial business in particular, will come from word-of-mouth referrals.

Here are some ideas for brainstorming your business name:

  • Short, unique, and catchy names tend to stand out
  • Names that are easy to say and spell tend to do better
  • The name should be relevant to your product or service offerings
  • Ask around — family, friends, colleagues, social media — for suggestions
  • Including keywords, such as “home health” or “home care”, boosts SEO
  • Choose a name that allows for expansion: “Jim’s Bakery” over “Jim’s Cookies”
  • Avoid location-based names that might hinder future expansion
  • Use online tools like the Step by Step business name generator. Just type in a few keywords and hit “generate” and you’ll have dozens of suggestions at your fingertips.

Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these. 

Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. Your business name is one of the key differentiators that sets your business apart. Once you pick your company name, and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.

Step 4: Create a Business Plan

Every business needs a plan. This will function as a guidebook to take your startup through the launch process and maintain focus on your key goals. A business plan also enables potential partners and investors to better understand your company and its vision:

  • Executive Summary: Brief overview of the entire business plan; should be written after the plan is complete.
  • Business Overview: Overview of the company, vision, mission, ownership, and corporate goals.
  • Product and Services: Describe your home health care services in detail.
  • Market Analysis: Assess market trends such as variations in demand and prospects for growth, and do a SWOT analysis.
  • Competitive Analysis: Analyze main competitors, assess their strengths and weaknesses, and create a list of the advantages of your services.
  • Sales and Marketing: Examine your companies’ unique selling propositions (USPs) and develop sales, marketing, and promotional strategies.
  • Management Team: Overview of management team, detailing their roles and professional background, along with a corporate hierarchy.
  • Operations Plan: Your company’s operational plan includes procurement, office location, key assets and equipment, and other logistical details.
  • Financial Plan: Three years of financial planning, including startup costs, break-even analysis, profit and loss estimates, cash flow, and balance sheet.
  • Appendix: Include any additional financial or business-related documents.

If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist at Fiverr to create a top-notch business plan for you.

what to include in a business plan

Step 5: Register Your Business

Registering your business is an absolutely crucial step — it’s the prerequisite to paying taxes, raising capital, opening a bank account, and other guideposts on the road to getting a business up and running.

Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business!

Choose where to register your company

Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you are planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to home health care services. 

If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state.

Choose your business structure

Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your home health care agency will shape your taxes, personal liability, and business registration requirements, so choose wisely.

Here are the main options:

  • Sole Proprietorship – The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
  • General Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
  • Limited Liability Company (LLC) – Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts.
  • C Corp – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation.
  • S Corp – An S-Corporation refers to the tax classification of the business but is not a business entity. An S-Corp can be either a corporation or an LLC, which just needs to elect to be an S-Corp for tax status. In an S-Corp, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.

We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using ZenBusiness’s online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have.

types of business structures

Step 6: Register for Taxes

The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN.

Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.

The IRS website also offers a tax-payers checklist, and taxes can be filed online.

It is important to consult an accountant or other professional to help you with your taxes to ensure you are completing them correctly.

Step 7: Fund your Business

Securing financing is your next step and there are plenty of ways to raise capital:

  • Bank loans: This is the most common method, but getting approved requires a rock-solid business plan and strong credit history.
  • SBA-guaranteed loans: The Small Business Administration can act as guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan.
  • Government grants: A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
  • Venture capital: Offer potential investors an ownership stake in exchange for funds, keeping in mind that you would be sacrificing some control over your business.
  • Friends and Family: Reach out to friends and family to provide a business loan or investment in your concept. It’s a good idea to have legal advice when doing so because SEC regulations apply.
  • Crowdfunding: Websites like Kickstarter and Indiegogo offer an increasingly popular low-risk option, in which donors fund your vision. Entrepreneurial crowdfunding sites like Fundable and WeFunder enable multiple investors to fund your business.
  • Personal: Self-fund your business via your savings or the sale of property or other assets.

Bank and SBA loans are probably the best options, other than friends and family, for funding a home health care business. You might also try crowdfunding if you have an innovative concept.

Step 8: Apply for Licenses/Permits

Starting a home health care agency requires obtaining a number of licenses and permits from local, state, and federal governments.

Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits. 

You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more. 

You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.

This is not a step to be taken lightly, as failing to comply with legal requirements can result in hefty penalties.

If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.

Step 9: Open a Business Bank Account

Before you start making money, you will need a place to keep it, and that requires opening a bank account.

Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your home health care agency as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.

Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account.

Step 10: Get Business Insurance

Business insurance is an area that often gets overlooked yet is vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.

Here are some types of insurance to consider:

  • General liability: The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
  • Business Property: Provides coverage for your equipment and supplies.
  • Equipment Breakdown Insurance: Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
  • Worker’s compensation: Provides compensation to employees injured on the job.
  • Property: Covers your physical space, whether it is a cart, storefront, or office.
  • Commercial auto: Protection for your company-owned vehicle.
  • Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
  • Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of any of the above insurance types.
types of business insurance

Step 11: Prepare to Launch

As opening day nears, prepare for launch by reviewing and improving some key elements of your business.

Essential software and tools

Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks. We examine several of them below.

You may want to use industry-specific software, such as Alora, WellSky, and AxisCare, to manage schedules, billing, regulations, and more.

Accounting

  • Popular web-based accounting programs for smaller businesses include Quickbooks, Freshbooks, and Xero.
  • If you’re unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences for filing incorrect tax documents can be harsh, so accuracy is crucial.

Marketing

Some of your business will come from online visitors, but still, you should invest in digital marketing! Getting the word out is especially important for new businesses, as it’ll boost customer and brand awareness.

Once your website is up and running, make sure you link to your social media accounts and vice versa. Social media is a particularly good way of promoting your business because you can create engaging posts that advertise your products:

  • Facebook: Great platform for paid advertising, allows you to target specific demographics, like men under age 50 in the Cleveland area. 
  • Instagram: Same benefits as Facebook but with different target audiences.
  • Website: SEO will help your website appear closer to the top in relevant search results, a crucial element for increasing sales. Make sure that you optimize calls to action on your website. Experiment with text, color, size, and position of calls to action such as “Contact Us Now”. This can sharply expand your client base.
  • Google and Yelp: For businesses that rely on local clientele, getting listed on Yelp and Google My Business can be crucial to generating awareness and customers.

Kickstart Marketing

Take advantage of your website, social media presence, and real-life activities to increase awareness of your offerings and build your brand. Some suggestions include:

  • Competitions and giveaways – Generate interest by offering prizes for customers who complete a certain action, such as a one-time 10% discount for a successful referral.
  • Signage – Put up eye-catching signage at your office and on your website.
  • Flyering – Distribute flyers in your neighborhood and at industry events.
  • In-Person Sales – Offer your products/services at physician’s offices or hospitals to get referrals.
  • Email marketing/newsletter – Send regular emails to customers and prospects. Make them personal. 
  • Start a blog – Start a blog and post regularly. Change up your content and share on multiple sites.
  • Seek out referrals – Offer incentives to generate customer referrals to new clients. 
  • Press releases – Do press releases about new services.
  • Paid ads on social media – Choose sites that will reach your target market and do targeted ads.
  • Pay-per-click marketing – Use Google AdWords to perform better in searches. Research your keywords first.
  • Do a webinar – Share your health care expertise online with a video seminar.
  • Testimonials – Share customer testimonials about how your services helped them.
  • Create infographics – Post infographics and include them in your content.

Develop your website

Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism. They are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. These are steps that help pages rank higher in the results of top search engines like Google.

You can create your own website using services like WordPress, Wix, or Squarespace. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.

Focus on USPs

Unique selling propositions, or USPs, are the unique characteristics of a product or service that sets it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your home health care meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire.

Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your home health care business could be:

  • Caring for clients like they’re family
  • The most experienced professionals
  • 24-hour on call availability
unique selling proposition

Networking

You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a home health care business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in home care for years and can offer invaluable insight and industry connections. 

The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in home health care. You’ll probably generate new customers or find companies with which you could establish a partnership. Online businesses might also consider affiliate marketing as a way to build relationships with potential partners and boost business.

Step 12: Build Your Team

If you’re starting out small from a home-based office, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for a home health care agency would include:

  • Home Health Care Workers – Basic home health tasks
  • Nurses – Provide home medical care
  • Office Manager – Scheduling, billing, staff management
  • Marketing Lead – SEO strategies, social media

At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need.

Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn or Facebook. You can also use free classified sites like Jobs and AngelList. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent.

Step 13: Start Making Money!

Caring for others is one of the most rewarding jobs, and home health care is a service most people will need at some point. Today it’s a growing industry due to the aging US population, high cost of hospital care, and increasing chronic illnesses, such as dementia, diabetes, and cardiovascular disease. 

You could create a niche market for yourself by specializing in certain services to jumpstart your word-of-mouth marketing. Now that you have the knowledge to start a business, you can start your agency for a relatively small investment and be on your way to helping others and making a good living! 

Home Health Care Agency FAQs

How profitable is a home health care agency?

As a one-person agency, you can expect to charge $25 and make around $45,000 each of the first few years. If you add care workers, your business has the potential to grow into a highly profitable company.

Do I need a special license to have a non-medical home health care agency?

Most states require a license even if you don’t offer medical services. You may also be required to have your facilities inspected periodically to keep your license active. Certification of the home health care workers is not required but would add to your agency’s credibility.

How do home health care agencies get paid?

If you are a medical home health care agency, in some cases you may be paid by insurance companies. Otherwise, you will be paid directly by the client. You can charge an hourly, daily, or even weekly rate and bill clients weekly, bi-weekly, or monthly.

How will I get clients if I start a home health care agency?

Market yourself online on leading social media platforms like Facebook and LinkedIn, and visit nearby hospitals, nursing homes, and doctors’ offices to let them know about your services and encourage referrals.