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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 June 16, 2022
Updated on March 13, 2024
Investment range
$401,550 - $804,100
Revenue potential
$450,000 - $1.44 million p.a.
Time to build
6 – 12 months
Profit potential
$135,000 - $432,000 p.a.
Industry trend
Growing
Commitment
Full-time
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.
Looking to register your business? A limited liability company (LLC) is the best legal structure for new businesses because it is fast and simple.
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Starting an assisted living community has pros and cons to consider before deciding if it’s right for you.
Trends in the assisted living facility industry include:
Challenges in the assisted living facility industry include:
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:
| Start-up Costs | Ballpark Range | Average |
|---|---|---|
| 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 |
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.
The only barrier to entry for an assisted living facility is the high startup costs of constructing the facility.
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.
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.
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.
Your services will include:
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.
Your target market is likely to be elderly people or their families. You can market to them on Facebook or LinkedIn.
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:
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.
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:
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’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.
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:
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’re 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 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.
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.
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.
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:
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.
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.
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 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.
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 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:
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.
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:
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.
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 facilities are very profitable. But more importantly, they serve an essential need in any community by providing a safe home for people in need.
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.
According to the National Center for Assisted Living, as of 2021, California has the most assisted living facilities with approximately 7,600, followed by Florida with approximately 4,000 and Texas with approximately 3,900.
Developing a personalized care plan for each resident in an assisted living facility requires a thorough assessment of their individual needs, preferences, and medical history. This assessment should involve input from the resident, family members, and healthcare providers, and should consider factors such as the resident’s physical and cognitive abilities, medication requirements, dietary needs, social preferences, and personal goals.
The staffing requirements for operating an assisted living facility vary depending on the size and level of care provided. Generally, facilities are required to have a licensed administrator, as well as sufficient nursing and caregiving staff to meet the needs of the residents. Staffing requirements may be regulated by state or local licensing agencies, and may include minimum staffing ratios, training and certification requirements, and background checks.
Protocols and procedures for emergencies or medical incidents in an assisted living facility should be developed in accordance with state and local regulations, as well as industry best practices. This may include developing an emergency response plan that outlines specific procedures for handling medical emergencies, natural disasters, and other critical incidents.
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