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Written by: Carolyn Young
Carolyn Young is a business writer who focuses on entrepreneurial concepts and the business formation. She has over 25 years of experience in business roles, and has authored several entrepreneurship textbooks.
Edited by: David Lepeska
David has been writing and learning about business, finance and globalization for a quarter-century, starting with a small New York consulting firm in the 1990s.
Published on November 18, 2021
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
Consider these crucial factors when launching your home health agency:
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.
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.
Trends in the home health care industry include:
Challenges in the home health care industry include:
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:
| Startup Costs | Ballpark Range | Average |
|---|---|---|
| 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 |
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.
There are a few barriers to entry for a home health care agency. Your biggest challenges will be:
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.
Market research will give you the upper hand, even if you’re already positive that you have a perfect product or service. Conducting market research is important, because it can help you understand your customers better, who your competitors are, and your business landscape.
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.
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:
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 our 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.
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.
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:
Here are some ideas for brainstorming your business name:
Discover over 230 unique home health agency name ideas here. If you want your business name to include specific keywords, you can also use our 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.
Here are the key components of a home health care business plan:
If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist to create a top-notch business plan for you.
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!
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.
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:
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 an 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.
Choose Your State
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.
Securing financing is your next step and there are plenty of ways to raise capital:
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.
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.
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.
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:
As opening day nears, prepare for launch by reviewing and improving some key elements of your business.
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.
Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism.
You can create your own website using website builders. 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.
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.
Here are some powerful marketing strategies for your future business:
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:
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.
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:
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.
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!
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.
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.
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.
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.
Home health services benefit a variety of clients, including seniors, individuals with chronic illnesses, those recovering from surgeries or injuries, individuals with disabilities, individuals with terminal illnesses, and individuals with mental health conditions.
Start by conducting thorough assessments of your clients’ medical history, abilities, living environment, and support network. Work with healthcare professionals to create coordinated and personalized care plans that meet individual needs and goals. Regularly review and adjust these plans based on changes in the client’s condition. Educate caregivers on care protocols and supervise them to ensure they follow the care plans and maintain high standards. Maintain open communication with clients, their families, and caregivers, and stay updated on the latest best practices in home health care.
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