Back to All Business Ideas

How to Start an Assisted Living Facility

Written by:

Edited by:

Published on June 16, 2022

Updated on September 16, 2022

How to Start an Assisted Living Facility

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.

Some of our articles include affiliate links. If you buy something through one of these links, we may earn an affiliate commission.

How to Start an Assisted Living Facility

As people get older, many are unable to care for themselves as they once did. An assisted living residence provides a place for the aging to continue to enjoy their lives, yet with 24-hour assistance. 

As the population ages, the US’ $33 billion assisted living industry is projected to grow in the coming years. If you’re a passionate caregiver, you could start an assisted living facility and put your passion to work, helping numerous people every day.

But before you get started, you’ll need to understand what’s involved in launching a business. Fortunately, this step-by-step guide contains everything you need to know to start a successful assisted living facility. 

Fast Facts

Investment range

$401,550 - $804,100

Time to build

6 – 12 months

Industry trend

growing

Revenue potential

$900,000 - $1,440,000 p.a.

Profit potential

$270,000 - $432,000 p.a.

Commitment

full-time

Step 1: Decide if the Business Is Right for You

businessman holding while thinking for a business ideas

Pros and cons

Starting an assisted living community has pros and cons to consider before deciding if it’s right for you. 

Pros

  • Serve Your Community – Help people enjoy their golden years
  • Growing Demand – More ageing people mean increased demand
  • Good Money – Senior housing costs thousands per month

Cons

  • Passing Residents – Sometimes deal with loss
  • Investment Required – Constructing the facility is expensive

Assisted living industry trends

Industry size and growth

  • Industry size and past growth – The U.S. assisted living facility industry was worth $32.6 billion in 2021 after expanding .5% annually for the previous five years.[1]https://www.ibisworld.com/united-states/market-research-reports/assisted-living-facilities-industry/ 
  • Growth forecast – The U.S. senior living industry is projected to grow modestly over the next five years.
  • Number of businesses – In 2021, 20,855 assisted living facility businesses were operating in the U.S. 
  • Number of people employed – In 2021, the U.S. assisted living facility industry employed 506,551 people. 

Trends and challenges

Trends in the assisted living facility industry include:

  • The latest trend is assisted living communities of tiny houses, rather than apartment-style living.
  • The pandemic brought new technology into assisted living facilities, including communication tools so that residents can interact with family members virtually.

Challenges in the assisted living facility industry include:

  • Many assisted living facilities are experiencing a staffing crisis, making it difficult for them to operate effectively. 
  • Inflation is drastically increasing the expenses of assisted living facilities, cutting into profit margins. 

Demand hotspots

  • Most popular states – The most popular states for nursing home administrators are Oregon, Idaho, and New Jersey.[2]https://www.zippia.com/nursing-home-administrator-jobs/best-states/
  • Least popular states – The least popular states for nursing home administrators are Vermont, Florida, and North Carolina. 

What kind of people work in assisted living?

  • Gender –  60.9% of nursing home administrators are female, while 39.1% are male.[3]https://www.zippia.com/nursing-home-administrator-jobs/demographics/
  • Average level of education – The average nursing home administrator has a bachelor’s degree. 
  • Average age –  The average nursing home administrator in the US is 47.2 years old.

How much does it cost to start an assisted living facility business?

Startup costs for an assisted living facility range from $400,000 to $800,000 and could be much more. Costs include at least a 30% down payment on the construction of the facility, furnishings and equipment, and a labor and operating budget. 

You’ll need to have your facility licensed as a residential care facility with your state. Check with your state for requirements. 

You’ll need a handful of items to successfully launch your assisted living facilities business, including: 

  • Furnishings and bedding
  • Security systems and call buttons
  • Basic medical equipment
  • Computer system
  • Kitchen equipment
Start-up CostsBallpark RangeAverage
Setting up a business name and corporation$150 - $200$175
Business licenses and permits$100 - $300$200
Insurance$100-$300$200
Business cards and brochures$200 - $300$250
Website setup$1,000 - $3,000$2,000
Facility construction 30% down payment$150,000 - $300,000$225,000
Furnishings, equipment, computer system$100,000 -$200,000$150,000
Labor and operating budget$150,000 - $300,000$225,000
Total$401,550 - $804,100$602,825

How much can you earn from an assisted living facility business?

The average range of prices for assisted living is $2,000 to $4,000 per resident per month. These calculations will assume that you’ll charge $3,000 and have the capacity for 50 residents. Profit margins of assisted living facilities are typically around 30%. 

In your first year or two, you might have 25% occupancy, bringing in $450,000 in annual revenue. This would mean $135,000 in profit, assuming that 30% margin. As you fill up your facility, you might have 80% occupancy. With annual revenue of $1,440,000, you’d make a remarkable profit of $432,000.

What barriers to entry are there?

The only barrier to entry for an assisted living facility is the high startup costs of constructing the facility. 

Step 2: Hone Your Idea

Now that you know what’s involved in starting an assisted living facility, it’s a good idea to hone your concept in preparation to enter a competitive market. 

Why? Identify an opportunity

Research assisted living facilities in your area and online to examine their services, price points, and customer reviews. You’re looking for a market gap to fill. For instance, maybe the local market is missing a long-term care facility for disabled children or a skilled nursing facility for disabled adults. 

You might consider targeting a niche market by specializing in a certain aspect of your industry, such as operating as a nursing home or a mental health residential care facility. This could jumpstart your word-of-mouth marketing and attract clients right away. 

What? Determine your products or services

Your services will include:

  • Assisting residents with daily activities
  • Basic health care services
  • Provide meals
  • Cleaning 
  • Arranging activities

How much should you charge for assisted living?

Average prices for assisted living range from $2,000 to $4,000 per month. After all costs of labor and overhead, you should aim for a profit margin of about 30%. 

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 is likely to be elderly people or their families. You can market to them on Facebook or LinkedIn. 

Should you start an assisted living facility

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 
  • Name should be relevant to your product or service offerings
  • Ask around — family, friends, colleagues, social media — for suggestions
  • Including keywords, such as “assisted living” or “long-term care”, boosts SEO
  • Name should allow for expansion, for ex: “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 offerings 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, assessing 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.

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’re planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to assisted living facilities. 

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 assisted living facility 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 need 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. 

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’re 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: Venture capital investors take an ownership stake in exchange for funds, so keep in mind that you’d be sacrificing some control over your business. This is generally only available for businesses with high growth potential.
  • Angel investors: Reach out to your entire network in search of people interested in investing in early-stage startups in exchange for a stake. Established angel investors are always looking for good opportunities. 
  • 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 option, other than friends and family, for funding an assisted living facility business. Angel investors and venture capitalists do sometimes invest in assisted living businesses, as they do have high profit potential, particularly if you have multiple facilities. 

Step 8: Apply for Licenses/Permits

Starting an assisted living facility business requires obtaining a number of licenses and permits from local, state, and federal governments. You’ll need to have your facility licensed as a residential care facility with your state. Check with your state for requirements. 

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.

business people discussing the approval of permit

Step 9: Open a Business Bank Account

Before you start making money, you’ll 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 assisted living facility business 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 it can be 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 the above insurance types.

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. 

You may want to use industry-specific software, such as PointClickCare, Celayix, or Yardi, to manage your operations, charts, scheduling, payroll, payments, and HIPPA compliance. 

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 the casual passerby or online visitors, but you should still 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, link it to your social media accounts and vice versa. Social media is a great tool for 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 “Schedule Tour Now”. This can sharply increase purchases. 
  • 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:

  • Signage – Put up eye-catching signage at your facility and website 
  • 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. 
  • Paid ads on social media – Choose sites that will reach your target market and do targeted ads.
  • Payper-click marketing – Use Google AdWords to perform better in searches. Research your keywords first.
  • Testimonials – Share customer testimonials about how your assisted living facility helped them

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 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 assisted living facility 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 assisted living business could be: 

  • Luxury life at our premium assisted living facility
  • Feel at home and cared for in our comfortable apartments
  • Your loved ones will be part of a loving community

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 an assisted living facility, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in assisted living 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 assisted living. You’ll probably generate new customers or find companies with which you could establish a partnership. 

Step 12: Build Your Team

If you’re starting out small from a home 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 assisted living business include:

  • Nurses – provide basic health care
  • Home Care Aides – assist residents with daily living
  • Cooks – prepare meals
  • Housekeepers – clean units and facilities
  • General Manager – scheduling, accounting
  • 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, Facebook, or Jobs.com. 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!

The value that assisted living facilities provide is immeasurable. Many people, particularly the elderly, are unable to care for themselves and need a helping hand. Assisted living facilities change these peoples’ lives — providing a home and the right care and a community of like-minded people. If you’re a passionate caregiver, is there a better way to serve your community and make a great living? 

Now that you understand the business side of things, it’s time to break ground on your successful assisted living facility!

Assisted Living Facility Business FAQs

How much does it cost to start an assisted living facility?

It costs a minimum of $400,000 to start an assisted living facility and could be much more. You’ll need at least a 30% down payment on the construction of the facility, furnishings, equipment, and a significant labor and operating budget.

How profitable is an assisted living facility?

Assisted living facilities are very profitable. But more importantly, they serve an essential need in any community by providing a safe home for people in need.

What licenses do I need to start an assisted living facility?

You’ll need to have your facility licensed as a residential care facility with your state. You may also need other business licenses and permits at the state and local levels. Check with your local governments for requirements or visit MyCorporation’s Business License Compliance page.

How much should I charge for my assisted living facility?

Average prices for assisted living range from $2,000 to $4,000 per month. Check prices in your local area to make sure that you’re competitive.