Starting a homecare business is a rewarding venture that blends compassion with sharp business savvy. The industry is valued in the hundreds of billions of dollars, driven by steady demand for care among seniors, individuals recovering from surgery, and people with chronic conditions.
This guide will take you through the practical steps of validating your business concept, securing funding, obtaining necessary licenses, and hiring the right staff to help you launch a successful homecare business in the U.S.
Step 1: Validate your business idea and plan your finances
Begin by researching your local market. Use the U.S. Census Bureau's data tools to identify zip codes with a high concentration of residents over 65. Also, connect with discharge planners at local hospitals and rehabilitation centers to understand their needs and referral processes.
With that data, analyze your competition. Search your state's licensing board database and the Home Care Association of America (HCAOA) directory for agencies in your area. Note their services, pricing structures, and online reviews to find a gap you can fill.
Map out your startup costs
Initial expenses can range from $10,000 to $80,000, depending on your state's requirements. Budget for licensing and legal fees ($2,000-$5,000), liability and workers' compensation insurance ($3,000-$7,000 annually), and scheduling software ($100-$500 per month).
Many new owners underestimate the cash needed before revenue stabilizes. It is a good idea to have at least six months of operating expenses in reserve. This buffer covers payroll and other costs while you build your client base, a period that can take longer than expected.
Here are 3 immediate steps to take:
- Download demographic data for your top three target zip codes.
- List five local competitors and identify their primary services and pricing.
- Create a preliminary budget with estimated costs for licensing, insurance, and software.
Step 2: Set up your legal structure and get licensed
Choose your business structure
You should consider forming a Limited Liability Company (LLC). This structure protects your personal assets from business debts. An LLC also offers pass-through taxation, meaning profits are taxed on your personal return, which avoids the double taxation found in corporations.
A common mistake is operating as a sole proprietor, which offers no liability shield. While a C Corporation also provides protection, its tax and compliance rules are more demanding and generally unnecessary for a new homecare agency.
Secure the right licenses and permits
Once your business is registered, get an Employer Identification Number (EIN) from the IRS. You need this free number to hire staff and open a business bank account. The online application is quick.
State licensing is the most significant hurdle. Your state's Department of Health is usually the governing body. Application fees can be $2,000 or more, and approval may take 90 to 180 days. Also, check with your city or county for a general business operating permit.
Many applications get delayed because the required policy and procedure manual is incomplete or does not meet state standards. It is wise to review sample manuals or templates specific to your state's regulations before you submit your own.
Here are 4 immediate steps to take:
- File for an LLC with your state's Secretary of State office.
- Apply for a free Employer Identification Number (EIN) on the IRS website.
- Contact your state's Department of Health for its home care license application packet.
- Research your city or county's requirements for a local business permit.
Step 3: Secure your insurance and manage risk
Your LLC protects your personal assets, but business insurance protects the business itself. You will need several policies. These include general liability for accidents, professional liability for care-related errors, and workers’ compensation for employee injuries.
If you or your staff use vehicles for work, you also need a commercial auto policy. A personal auto policy will not cover business-related incidents. This is a detail many new owners miss, which can lead to a denied claim.
Find the right coverage and provider
For liability policies, a good starting point is $1 million per occurrence and $2 million in aggregate. A comprehensive package with liability and workers' compensation can have annual premiums from $4,000 to $10,000, based on your state and payroll.
You should work with an agent who understands homecare. General agents may not grasp the specific risks, like client falls or medication management errors. Consider specialized providers like CNA, Philadelphia Insurance Companies (PHLY), or Lockton for informed advice and appropriate coverage.
Here are 4 immediate steps to take:
- Request quotes for a business owner's policy from two specialized insurers.
- Confirm your professional liability coverage is at least $1 million per occurrence.
- Ask potential insurers about their process for handling claims related to client care.
- Get a workers' compensation quote based on your projected first-year payroll.
Step 4: Set up your office and get equipment
You do not need a large, public-facing office. A small administrative space of 200-400 square feet is often sufficient for interviews and record-keeping. Confirm your chosen location is zoned for commercial office use, which is typically classified as C-1 or C-2.
Negotiate your lease
When you find a space, try to secure a shorter lease term of one to two years. This gives you flexibility as the business grows. Also, ensure the lease permits incidental client or caregiver visits without reclassifying your space as a medical facility, which has stricter rules.
Purchase necessary equipment
With your space sorted, you will need to furnish it. Plan for computers, a multifunction printer, and lockable filing cabinets ($200-$500) to secure paper records. A detail many new owners miss is communication compliance. You should use a HIPAA-compliant phone system to protect client data.
Here are 4 immediate steps to take:
- Check local zoning regulations for a small office space in your target area.
- Request quotes for a HIPAA-compliant phone system from two providers.
- Create a budget for office furniture and lockable file storage.
- Ask potential landlords for a 1-2 year lease term with a renewal option.
Step 5: Set up your payment processing
Most agencies bill private pay clients weekly or bi-weekly. A good practice is to keep a credit card on file for automated billing. This approach helps maintain consistent cash flow and avoids the hassle of chasing late payments. Some agencies also require a deposit equal to one or two weeks of service.
Choose your payment solution
When you review payment solutions, look for low transaction fees and HIPAA compliance. Many new owners get surprised by hidden monthly charges or find their chosen system does not offer a Business Associate Agreement (BAA), which is needed for HIPAA.
For homecare businesses that need to accept payments on-site or on-the-go, JIM offers a streamlined solution. With JIM, you can accept debit, credit and digital wallets directly through your smartphone. Just tap and it is done. At just 1.99% per transaction with no hidden costs or extra hardware needed, it is a strong option.
This rate is much lower than the 2.5% to 3.5% that other payment providers often charge. It is particularly useful for collecting initial service deposits or co-pays directly from a client in their home.
- Get Started: Download the JIM app for iOS.
- Make a Sale: Type the sales amount, hit sell, and ask your customer to tap their card or device on your phone.
- Access Funds: Your money is available right on your JIM card as soon as the sale is done - no waiting for bank transfers.
Here are 3 immediate steps to take:
- Draft your standard payment terms, including your policy on deposits and billing frequency.
- Compare two payment processors on their transaction fees and HIPAA compliance.
- Download the JIM app to see how it works for in-person payments.
Step 6: Secure funding and manage your finances
The Small Business Administration (SBA) is a strong ally for new agencies. Its 7(a) loan program offers funds up to $5 million, though most new owners seek between $50,000 and $150,000. Expect interest rates around the Prime Rate plus 2-5%, with a credit score of 680 or higher often required.
Many applications get rejected due to a weak business plan. Lenders need to see detailed three-year financial projections that prove your path to profitability. Your plan must show you have done the research and understand your numbers inside and out.
Plan your working capital
Beyond a loan, you need a solid cash reserve. You should have at least six months of operating expenses on hand. If your monthly costs for payroll, rent, and insurance are $20,000, you need $120,000 in working capital to operate smoothly while you attract clients.
You might also look into grants on sites like grants.gov, but they are highly competitive. It is better to view them as a potential bonus rather than a core part of your funding strategy. Focus first on securing a loan and building your cash reserve.
Here are 4 immediate steps to take:
- Calculate your total operating expenses for a six-month period.
- Check your personal credit score to see if it meets the typical 680+ requirement.
- Draft a three-year financial projection for your business plan.
- Search grants.gov using keywords like "home health" and "senior care."
Step 7: Hire your team and set up operations
Build your care team
Your caregivers are the face of your business. You will want to hire Home Health Aides (HHAs) or Certified Nursing Assistants (CNAs). Their duties include personal care, light housekeeping, and companionship. Pay typically ranges from $15 to $20 per hour based on your market.
Most states require HHA or CNA certification, plus current CPR and First Aid training. You will also need a Registered Nurse (RN) supervisor for initial client assessments and to create care plans. An RN's salary often falls between $70,000 and $90,000 annually.
A mistake many new owners make is to classify caregivers as independent contractors. You should treat them as W-2 employees to avoid significant IRS penalties. This also ensures you are compliant with labor laws and can provide workers' compensation.
Streamline your daily operations
With your team in place, you need a system to manage them. Homecare software like AxisCare or AlayaCare helps with scheduling, client billing, and caregiver communication. These platforms centralize your administrative tasks and often include a mobile app for staff.
Now, let's talk numbers. Be prepared for payroll to be your largest expense. It will likely consume 60-70% of your total revenue. A solid onboarding process is also important. It should cover your policies, emergency procedures, and how to communicate with clients.
Here are 4 immediate steps to take:
- Write job descriptions for a Caregiver and an RN Supervisor.
- Research your state's certification requirements for Home Health Aides.
- Request demos from two homecare software providers like AxisCare or AlayaCare.
- Consult an accountant about setting up payroll for your W-2 employees.
Step 8: Market your agency and find clients
Your first clients will likely come from professional referrals. Focus on building relationships with discharge planners at hospitals, skilled nursing facilities, and assisted living communities. These connections are your most valuable marketing asset.
A mistake some new owners make is just dropping off brochures. Instead, schedule brief meetings to explain your value. A good referral partner can send you one to three clients per month.
Establish your online presence
You need a professional website that lists your services and service area. Also, claim your free Google Business Profile. This helps you appear in local search results when families look for care.
You might test Google Ads with a small budget of $500-$1,000 per month. Target keywords like "home care in [Your City]". A typical customer acquisition cost (CAC) can range from $400 to $700.
Engage with the community
Sponsor a table at a senior health fair or give a free presentation at a local library. This direct engagement builds trust and name recognition far more effectively than passive advertising.
Here are 4 immediate steps to take:
- Identify five key referral sources, like hospitals or rehabs, to contact.
- Claim and complete your Google Business Profile with photos and service details.
- Outline a simple one-page website listing your services and contact information.
- Research one local community event or health fair to attend in the next quarter.
Step 9: Set your pricing and billing policies
Choose your pricing structure
Most agencies use an hourly rate, typically between $28 and $40, depending on the market and level of care. For 24-hour cases, you might offer a flat daily rate of $350 to $550. This is often more attractive to clients than a straight hourly calculation.
A frequent misstep is to simply match a competitor's price. Instead, calculate your own break-even point. Aim for a gross profit margin of 40-50%. If you bill $35 per hour, your caregiver's total compensation package should not exceed $21.
Establish your billing process
To maintain healthy cash flow, bill your clients weekly or bi-weekly. It is also a good idea to require a deposit equal to one or two weeks of service before you start. This protects you from potential non-payment down the line.
Your service agreement must clearly outline all payment terms. Specify due dates, accepted payment methods, and any late fees. This document prevents misunderstandings and provides legal standing if a payment issue arises.
Here are 4 immediate steps to take:
- Research the hourly and live-in rates of three local competitors.
- Calculate your target gross profit margin based on your projected caregiver wages.
- Decide on your billing frequency and deposit policy.
- Draft the payment terms section for your client service agreement.
Step 10: Maintain quality and scale your business
Establish your quality standards
To ensure consistent service, you should track key performance metrics. Monitor client satisfaction with quarterly surveys, aiming for a score of 9 out of 10. Also, track your caregiver retention rate. A rate above 75% is a strong indicator of a healthy work environment.
Many owners get so focused on growth they neglect caregiver training. You should budget for ongoing education. This not only improves care but also helps with retention. It shows your team you are invested in their professional development.
As you grow, you might consider accreditation from organizations like The Joint Commission or CHAP. This is a significant undertaking, but it signals a high commitment to quality that can attract premium clients and referral partners.
Scale your operations thoughtfully
Growth should be deliberate. A good rule of thumb is to hire a dedicated office staff member, like a scheduler, for every 1,000 hours of weekly service you provide. This prevents your administrative team from becoming overwhelmed.
When you see consistent demand from an adjacent area, you can plan your expansion. Before you open a satellite office, make sure you have an RN supervisor who can cover the new territory and that your software can manage multiple locations.
Here are 4 immediate steps to take:
- Create a simple client satisfaction survey with 3-5 questions.
- Calculate your caregiver retention rate from the last six months.
- Research the accreditation standards on The Joint Commission's website.
- Set a revenue or client benchmark for hiring your first full-time office administrator.
Building a homecare agency is a journey of compassion and careful planning. Remember that trust is your most valuable asset. The relationships you build with clients and their families will define your success. You have the roadmap, now it's time to begin the work.
As you start, simple solutions make a big difference. For payments, JIM lets you accept cards directly on your smartphone for a flat 1.99% fee, no hardware needed. It simplifies collecting deposits and co-pays from day one. Download JIM to get started.
