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Opening a Home Care Agency
Things to Consider Before Starting a Home Care Agency

Home Care is the fastest growing segment of senior healthcare in America. If you're truly interested in entering this fast-paced business, there are few steps to take before making the jump.

Before you get started, know that you'll invest thousands of dollars and many hours of time and energy building your home care business. Get a clear understanding of non-medical home care as an industry.

Because private pay healthcare is the fastest growing healthcare sector, one of the most common and popular questions we hear is, "how do I start a home care agency?"

First, know the facts: There are about 11,000 non-medical home care agencies in the United States. It's the first step that current home care owners take before offering home and community based services to the care retirement communities, independent living and assisted living facilities. Retirement communities offer home care as a means to help residents age in place.

They types of services offered are concierge type service, homemaker, companion, and personal care.

Opening a Home Care Agency

Home Care Business Options
Home Care Business Options

You don't need experience in the medical industry, but If you have passion for providing care, marketing savvy, an understanding of business know-how, and integrity, then a home care agency is a great choice for you.

Define the Business Organization

Choose how you want the home care agency structured and operated.

Here are your options:

  • Buy a franchise
  • Start an independent home care company
  • Buy an existing agency

Determine the resources and skills you need - do you need a footprint or map to follow or do you feel confident to research and then complete the required steps on your own?

Some entrepreneurs feel a need for guidance and a proven method, so they choose a franchise model.

While others believe they can start a home care agency on their own, without the help of a franchise organization.

The Challenges of Home Care Agencies

Challenges to opening and operating a non-medical home care agency:

  • Extremely competitive
  • Lower profit margins than Medicare Home Health Agencies
  • Increased unions - Ten states have unionized home-care workers.
  • Well trained, well-qualified caregiver shortages

Read about the opportunities of starting a home care agency.

Home Care Franchise

When considering a franchise, here are some things to consider in your research and while evaluating a few organizations.

  • The start-up fees - each franchise organization has an upfront fee that immediately goes to them. It covers, cost training and materials, operations manuals, location assistance, marketing materials, mentorship, and access to their corporate team. Ask what the fee covers and what you get in return.
  • Revenue sharing or royalties - franchises charge royalty fees based on the revenue the agency brings in. Find out what the ongoing fees are for support? Look for a franchise that extends support beyond the startup phase.
  • Support and training - look at your skills and ask: do I need experience and expertise in recruiting and marketing? Do I need help in finance? Does the franchise offer training in the skills area you need help in? What is the format of the training. Does it match well to your learning style?
  • Local regions - Is the franchise nationwide? Select one whose brand is national, with no competing (same brand) agencies in your area.
  • Territory - find out which territories are available? Are they divided by zip code or population? Ask: do they sell multiple franchises in the same community? Will they allow you to buy several franchises within a specific territory? Does one currently exist? What are the expansion fees, if you choose to open a second or third location?
  • Revenue - How will you get paid? There are several sources of revenue generators: Medicaid Waivers, government programs, private pay, and long-term care insurance. Home Health Care Agencies or medical home care gets revenue Medicare, Medicaid or health insurance companies. Ask if the franchise has relationships with insurance companies?
  • Brand - Some organizations pay great attention to building brand. Many want national recognition, but few have gained that entitlement. Check out their national advertising, cooperative referrals, and the way they promote brand awareness.

Other considerations when looking at franchises:

  • Is their name well-known and recognized as the Apple of home care?
  • Is the name recognition, training and ongoing support worth the upfront license fee and ongoing franchise fees?
  • What happens down the road in 3-5 years when you've grown out of your territory?
  • Will another franchise owner be in the neighboring territory that you want to expand into? What if you get a lead in that area, how is that handled?
  • How many other of your franchise purchasers have tried to open in this market?
  • How many didn't succeed? Get specifics.

Independent Home Care Agency

Starting a business varies in each state. Be aware of the business registration and licensing requirements for your state. Check with your state home care association for licensing information.

Business Entity

Choose the type of business you're operating. Obtain a Federal Employer Identification number. Consult an attorney or CPA on which type of company works best for your situation.

Other requirements:

  • Register your business name
  • Acquire a general business license
  • Register to collect sales tax
  • Register as an employer
  • Purchase workers compensation and/or bonding insurance

Set up Policies and Procedures

Develop written policies and procedures that define your approach to the business practices. Your manual outlines the standards and practices that your staff will follow. It should include safety for your clients and legal protections for your organization.

Policies and procedures in the manual:

  • Clinical practices
  • Clinical documentation
  • Client rights and responsibilities
  • Intake procedures
  • Job descriptions
  • Hiring practices
  • Risk management

** A franchise offers a policies and procedures manual in their startup package. It's part of the franchise fees.

If you're independent, you'll create your own or find one online, customizable manual.

Financial Aspects

  • Set up a business checking account
  • Set up a business savings account
  • Set aside 3 months operating capital to pay your bills while you are getting the business started
  • Set up a credit card merchant account with your bank
  • Set up a pre-paid deposit process for new client accounts
  • Set up a computerized accounting system
  • Set up a chart of accounts for your financial statements
  • Determine your billing rates, gross margins, and expense percentages
  • Set up your payroll systems

Office Staff

They're at the heart of your business. Good talent is hard to find but it's possible with work. At the onset, consider the following organizational chart.

  • Write out the different positions and job descriptions
  • List how each is accountable
  • What positions can carry added roles and responsibility

Recruitment and Retention

Recruitment and orientation are the costly expense because turnover is heavy in non-medical home care. Be smart and link your profitability directly to recruiting and retaining talent.

Office Set-up

To set up the office to run smoothly, here are a few basics to follow:

  • Scheduling
  • Billing to clients
  • Billing to government agencies and other payors
  • Bookkeeping Systems
  • Time Keeping Systems
  • Customer Relationship Management Systems
  • Client Record Keeping
  • Payroll
  • Benefits Administration
  • Continuing Education
  • Record Keeping

Billing and Time Keeping Systems

Automate your office operations with computerized scheduling, billing, time keeping and financial software. Learn steps to evaluate systems, go to the Private Duty's Evaluating Systems.

Marketing Your Home Care Business

To be a success in the non-medical home care market, you'll need clients. How you obtain them is the cornerstone of your business.

Promote your business by connecting with these referral sources:

  • Hospital discharge planners.
  • Support groups, including caregiver groups, Alzheimer's groups, Multiple Sclerosis (MS) groups, Parkinson's groups, etc.
  • AAA and Aging and Disability Resource Center (ADRC) staff.
  • Adult Protective Services (APS) staff.
  • Community groups.
  • Religious leaders in the community; parish nurses.
  • Physicians and office managers.
  • Clinic staff.
  • Elder care attorneys.
  • Senior center and congregate meal site participants and staff.
  • Nursing home social workers.
  • CCRC care coordinators.
  • Congregate housing (including Section 202s and low-income housing tax credit) service coordinators and/or building managers.
  • Long-term care insurance companies.
  • Union benefit plan intermediaries.
  • Medicare-certified home health agencies.
  • Present at local health fairs.
  • Write and distribute press releases.
  • Write news stories for local newspapers.
  • Develop a Web site.
  • Conduct social networking.

In marketing and promotions, do more than simply ask for referrals. That's not building collaborative relationships. Instead, engage your leadership team to solve problems. It's not about you. It's about what your referral market needs and wants. Focus on what's in it for them.

Train your staff to improve clinical competencies like proactive observation skills to help identify patients at risk for readmission and then report outcomes to the referral. They'll gain confidence in your staff's skills and your communication strategies.

Most health care referral sources know little about senior care and living services. Make sure you feed them useful education on your quality of care strategies.

Continue to improve and always look for ways to improve.

Carol Marak
Carol Marak

After seven years of helping her aging parents, Carol Marak has become a dedicated senior care writer. Since 2007, she has been doing the research to find answers to common concerns: housing, aging and health, staying safe and independent, and planning long-term.