Starting a home care agency is one of the most attractive small business opportunities for entrepreneurs today.
As more and more Baby Boomers need help to age in place, the U.S. home care market is projected for rapid growth. In terms of potential profit, a home care business is one of the most attractive options for small business owners. Home care agencies also come with affordable startup costs. This allows first-time entrepreneurs to start a business with a relatively low capital investment.
Startup costs for a home care business can depend on a number of factors. These include how you structure your business, how quickly you plan to scale your client base, and where you start your business. They also depend on whether you choose to start an independent agency or buy a home care franchise.
In this post, we’ll explain the basics of home care agency startup costs, including:
- What types of startup expenses you can expect with a home care business
- How these costs can vary depending on your business model and location
- Cost differences between home care franchises and independent businesses
Startup Costs for Home Care Agencies
Home care agency startup costs can be divided into seven main categories:
- Staffing and recruitment
- Office space and equipment
- Marketing and advertising
- Licensing and permits
- Legal and professional fees
- Additional funds for opening the business.
Below, you’ll find an explanation of each category, including typical expenses and how costs for the category may vary. For each category, we’ve also included Senior Helpers estimates for what a new home care business can expect to spend in each of these areas.
Note: The estimates in this post are based on typical startup costs for a Senior Helpers home care franchise, using data from our Franchise Disclosure Document (FDD). As such, these figures may not be reflective of startup costs for agencies with other business models.
Staffing and recruitment
The most significant startup cost for most senior care agencies is staffing and recruitment.
A successful agency needs qualified caregivers to deliver its services. With the U.S. in the middle of a caregiver shortage, recruiting caregivers can be more time consuming and cost intensive than staffing in other industries.
In addition to care providers, your agency may need office staff for administration, marketing, and sales. Office staff will be essential for agencies that are looking to scale their business quickly.
Senior Helpers estimates that a new home care business will spend $23,000 to $27,000 on staffing and recruitment startup costs. This estimate includes at least one office staff member.
Office space and equipment
When starting a home care agency, you’ll need an office to serve as your base of operations. This means securing a commercial lease and furnishing the space with equipment and supplies.
Office space and equipment covers a wide range of line items. Items in this category commonly include lease, security, and utility deposits, leasehold improvements, furnishings, computer systems, software, office supplies, promotional items, and business signage.
Senior Helpers estimates that a new home care business will spend $13,200 to $21,000 in startup funds on office space and equipment.
Marketing and advertising
Marketing and advertising costs may depend on how quickly you intend to build your business.
A slower rollout may allow for word-of-mouth advertising and promotion, but could require a longer runway as your business builds an income stream. If you’re planning to build your client base and gross revenue more quickly, you’ll need to make a significant investment in marketing and advertising before you open.
Senior Helpers estimates that a new home care business will spend $3,000 to $6,000 on marketing and advertising before opening in order to develop an initial client base.
Before opening, you’ll need to secure property and public liability insurance for your home care business. You may also need to secure other types of insurance, including coverage for workers’ compensation.
Senior Helpers estimates that a new home care business will spend $3,500 to $5,000 in startup funds on property insurance and public liability insurance. This does not cover other types of insurance, including worker’s compensation, since these costs vary too widely for an accurate estimate.
Licensing and permits
Licensing and permit requirements for home care agencies vary widely from one state/municipality to another. As a result, the amount of time, money, and effort you’ll need to invest in licensing and permits will depend on your market.
In some areas, you may be able to open a home care agency without investing additional funds in licenses and permits. In other areas, you may need to spend several thousand dollars.
Senior Helpers estimates that a new home care business will spend $0 to $12,500 to secure necessary licensing and permits.
Legal and professional fees
Before opening a business, you may need to consult with an attorney or paralegal. You may also need to speak with a financial advisor, business advisor, or risk management consultant.
Senior Helpers estimates that a new home care business will spend $100 to $1,300 on legal and professional services prior to opening.
Startup costs for a new home care business should also include operating costs for the first months of operations. As you develop a revenue stream, you’ll need reserve funds to pay for staffing, office space, vendor contracts, and other ongoing expenses.
The amount of additional funds required will depend on two factors. First is the footprint of your business and your estimated operating costs once your agency is open. Second is how quickly you plan to build your client base and revenue stream. This will allow you to estimate how long it will take before your business breaks even, and how much additional capital you will need to reach that point.
Senior Helpers estimates that a new home care business will need between $26,500 and $37,000 in additional funds, which accounts for three months of operating expenses.
Home Care Franchise vs. Independent Agency
One of the most popular ways of starting a home care business is with a franchise system, like Senior Helpers.
Buying a home care franchise will come with additional startup costs compared to an independent agency. The largest added cost is typically the franchise fee. With Senior Helpers, new owners can expect to spend $55,000 on the franchise fee, plus an additional $72,800 to $116,800 on other startup costs.
Beyond the franchise fee, buying a franchise may require additional startup funds compared to an independent agency. For example, you may need to spend money on travel and accommodations for in-person training.
At the same time, a franchise may offer economies of scale in certain areas. For example, a franchisor may have relationships with approved vendors that allows them to offer resources or services at a reduced rate to franchisees.
Why Invest in a Home Care Franchise?
While a home care franchise will typically require a larger investment than an independent agency, the tradeoff is well worth it for many entrepreneurs. That’s because operating a home care franchise offers a number of important advantages compared to starting your own agency.
- Proven business model. Franchising allows you to build your business with a proven model, rather than developing a business from scratch.
- One-on-one support. As a franchise owner, you can get one-on-one support from industry experts while building your business.
- Training and education. If you’re new to senior care, a franchisor can give you the training, education, and resources you need to navigate the industry.
- Branding and marketing. A recognized brand with national marketing efforts can make local advertising and lead generation much easier for franchise owners.
- Time savings. While starting a franchise may cost more money, it can also save you time, allowing you to open your business and achieve profitability much more quickly.
If you’re unsure whether a franchise or an independent agency is the best fit for your goals, you can learn more about the benefits of home care franchises vs. starting your own business here.
If you’re interested in starting a home care franchise, we encourage you to contact the team at Senior Helpers for more information.
Our franchise development specialists can discuss your business goals, answer questions about the Senior Helpers franchise system, and give you detailed information about franchise opportunities in your target market.