March 16, 2021 en_US Are you considering starting a home health care business? Read the QuickBooks guide to find out what steps you can take to get started. https://quickbooks.intuit.com/cas/dam/IMAGE/A3GfxS22x/how-to-start-a-health-care-business-feature-us.jpg https://quickbooks.intuit.com/r/starting-a-business/how-to-start-a-health-care-business/ Complete guide: How to start a health care business

Complete guide: How to start a health care business

By QuickBooks March 16, 2021
Starting a health care business: Step-by-step guide

Home health care is increasingly important to the U.S. economy and society as the American population ages and people continue to live longer. In fact, the U.S. Bureau of Labor Statistics predicts that the health care industry will create more jobs than any other this decade.

This line of work comes with many perks: a growing market, stable customer need and, best of all, the ability to make a difference to people’s lives. It’s no wonder that in a recent Future of Small Business survey, QuickBooks found that 46% of health care professionals are considering starting their own business. But the question that many people have next is: How exactly do I get started?

QuickBooks is here to help. Starting any business can be challenging. From filing the right legal paperwork to hiring the right talent for your team, there are numerous action items you’ll need to keep an eye on. That’s why we’ve put together this guide to walk you through how to start a health care business, step by step.

Continue reading for a full guide on how to open your own health care business. Or, jump around using the links on the left if you’re looking for information on a specific topic.

Up next: Step-by-step guide to starting a health care business

Step 1. Create a business plan for your home care business

Step 1. Create a business plan for your home care business

Health care businesses are, at the end of the day, businesses. That means that you’ll need a business plan to get started. Business plans are roadmaps to your success. They outline how your business will function, including details like your customer base, startup costs, mission, competitors, and how you plan to grow. The U.S. Small Business Administration outlines these areas for building a business plan:

Executive summary

In this portion, you’ll include important information about the purpose of your business, your business name, and what services or products you plan to offer. Also include what professionals you’ll hire and how you’ll finance the operation. It’s also an important place to include your mission statement, which is especially critical for mission-driven health care businesses.

Company description

Here, you’ll describe details about your business model. How do you plan on meeting the needs of your target customer base? If you are considering home health care, will this be a medical or non-medical home care business? Will you hire nurses as well as home caretakers? When do you expect to start turning a profit, and what KPIs (key performance indicators) will show you your business is heading in the right direction? Answer these fundamental questions in this portion of your business plan.

Market analysis

Market analyses are important for a few reasons. First, they show that you’re familiar with the kind of business you’re entering into. Second, they show that you have a plan for entering into the market and meeting a need that you know exists. And third, they show that you’re aware of the competition. Be sure to include as many relevant statistics in this section as possible. For instance, if we return to our home health care example again, be sure to include demographic information about the age of the population or how many home health care businesses are already operating in the same location.

Organization and management

Is your business a worker-owned cooperative, or will you have a team of caretakers working under the supervision of a manager? How do employees advance in your organization? And how will you ensure that you hire every position that you need? This section will answer questions like this and more. It’s also important that you talk about how you’ll satisfy all legal and ethical requirements in this section. We’ll cover that in more detail in a later section.

Service or product line

As a health care business, it’s important to cover all your bases when it comes to choosing what services—or products—you offer. For instance, maybe your focus is on senior mobility, and you hire physical and occupational therapists, as well as home-care professionals, while also selling medical devices like walkers and wheelchairs. Or perhaps your company aids those with terminal illnesses who are bedridden, and your team specializes in that population’s needs. Outline those specifics in this section of your business plan.

Marketing and sales

Like any other business, you want your home health care business to stand out from the pack. The best way to do this is by having a plan for how you’ll market yourself and increase sales over time. Do you offer an innovative solution that your competitors don’t? Is your financing system more helpful and intuitive than anyone else’s? In this section, figure out how you’ll communicate your mission and message to your customers.

Funding request

Founding a home health care business can come with many startup costs, which is why you may need to seek funding. In this section of your business plan, clearly explain the way you’ll secure financing and how you plan on using it—and repaying it. Whether you seek investor funding or use a small business loan, investors and lenders will want to ensure their money is being used wisely. So, specify if the funds will be used for health care equipment, payroll, bills, legal fees, and any other expenses.

Financial projections

In this portion of your business plan, explain how you will earn revenue, pay back loans or reward investors, compensate employees, and turn a profit. There should be a detailed budget and spending plan that outlines how your business will handle money, too. This is useful both for your own sake as you plan your business, and for investors, who want to know where their money will be going.

Appendix

The appendix is the portion of your business plan that includes other relevant materials that don’t fit in any of the previous sections. Here, you can include your logos, resume, contact information for other important professionals working for your business, legal documents, permits, licenses, patents, and insurance information.

Why business plans matter

Too many business owners and entrepreneurs don’t prioritize their business plans. However, this can be a huge mistake. Your business plan is your roadmap to the success of your business. It’s important for you because it’ll help you keep things headed in the right direction. It’s important for outside sources too, such as lenders or investors, who want to evaluate whether your business is worth putting their money into. The better (and more detailed) the business plan, the more likely you are to secure the funding you need.

For a more detailed look at business plans, be sure to check out the full QuickBooks guide to building a business plan.

Up next: Select your legal structure

Step 2. Select your legal structure

Step 2. Select your legal structure

Different businesses have different legal structures, depending on how—and where—they plan to operate. As you start your business, there are a few legal structure options to be aware of:

Sole proprietorship

If your business is a sole proprietorship, your business and personal finances are lumped together. That means if your business falls into debt, you are personally responsible for repaying it. This is a common structure for small or self-employment-based businesses.

Partnership

A partnership is a useful business structure for those going into business with one other person, like a spouse or friend. There are two types of partnerships: limited partnerships (LPs) and limited liability partnerships (LLPs). LPs maintain one partner with unlimited liability (who’s responsible for the company’s debts). All other partners have limited liability, and they typically have limited control over the company. Profits pass through personal tax returns, and the partner with unlimited liability pays self-employment taxes. LLPs, on the other hand, give limited liability to every owner.

C corporation

A C corp shields individual owners from the business’s debts and liability, as C corps are legally established as their own entity. That means, however, that their income is taxed, which can be costly on top of the individual taxes that the business owner also faces. It can also be expensive to establish a new C corp. C corps make good options when you expect to have multiple investors involved with your business.

S corporation

S corps are similar to C corps in that they allow for multiple investors, but they’re limited to a maximum of 100. This is because S corps avoid the double-taxation that occurs with C corps, as the owner’s income is taxed directly rather than being taxed through the corporation.

Limited liability company (LLC)

LLCs are similar to C corps, but like S corps, they include only one form of taxation: the earnings of the owner (and shareholders’ profits). LLCs allow for multiple investors and are well-suited for bringing on investors due to the limited liability investors face if the company goes into debt.

How to choose the right legal structure

Many factors can be in play when you choose how to structure your business. For example, some business types—like sole proprietorships or partnerships—can be better suited for small operations. However, if you’re considering growing your business, one of the three corporate options above might be better suited to your plans.

For more information, read our guide to 3 different types of business structures you need to know.

Up next: Register for state and local taxes

Step 3. Register for state and local taxes and get Medicare certified

Step 3. Register for state and local taxes and get Medicare certified

Both individuals and businesses must register with state, local, and federal tax authorities to ensure that they’re operating legally and paying taxes that they owe.

You’ll first need to obtain an Employer Identification Number (EIN) from the IRS to register for state and local taxes. Once you have your EIN, you’ll use it on your state application when registering your new businesses—whether it is a home health care agency or another kind of health care startup—for state and local taxation. Bear in mind that different states, cities, and counties have different taxes to be aware of. Everything from sales tax to property tax may apply to your small business, depending on the location and services that you offer.

Remember: Different states have different licensing requirements. Research your state’s requirements while developing your business plan.

For information on figuring out your business’s tax obligations, check the SBA website.

Another choice you’ll have to make as you establish your business is whether you want to be Medicare certified. Medicare-certified home health care businesses can accept Medicare insurance, which covers a range of home health care services, including physical therapy and speech and language therapy. Many seniors are covered through Medicare, so it’s likely a smart idea to ensure that your home health care business is certified. You’ll likely have to contact your state’s department of health to apply for Medicare certification.

Up next: Secure necessary licenses, insurance, and permits for medical home care

Step 4. Secure necessary licenses, insurance, and permits for medical home care

Step 4. Secure necessary licenses, insurance, and permits for medical home care

As you can probably imagine, businesses in the health care industry have many additional legal and ethical responsibilities to fulfill. Caregivers deal with the health and wellbeing of their clients and are responsible for administering critical services to them. And, depending on the specific services you plan to offer and where you plan to operate, you’ll need to satisfy certain licensing requirements.

Each state has its own laws that govern how home health care providers receive accreditation and are permitted to operate, along with what licenses they’ll need. It’s often a good idea to call city or county officials to find out what permits you’ll need specifically.

Some home health care services, such as grocery shopping, companionship, and check-ins, may not need as many permits. However, if you plan to offer nursing or other medical services, you’ll likely need special licenses to do so.

If you choose to set up a home health care business, you’ll need insurance.

Insurance for your business

Every business needs insurance to protect against possible accidents, burglary, and other incidental disasters. Health care businesses must also be insured against liabilities because part of your business will include direct contact with clients and management of their health care routines. Be sure to shop around for the right professional liability insurance as you start setting up your business.

Insurance you will accept from clients

Depending on the kinds of services you offer to your clients, you may accept insurance. For instance, if you offer at-home nursing care, you’ll likely need to register with your state’s Medicare authority. This will let you accept payment from them and ensure that you qualify as a covered service provider. It’s a good idea to look into common insurance providers in your area so you know which ones are the most helpful for your business to accept.

Next up: Set up your accounting processes

Step 5. Set up your accounting processes

Step 5. Set up your accounting processes

No matter what line of business you work in, having reliable accounting software and processes is essential for success. Your accounting system should manage payroll and HR for employees, recurring and incidental expenses, the ability to generate invoices and accept payments, and simple but effective financial reports.

There are two standard accounting processes that many small businesses use: the cash method and the accrual method.

Cash basis accounting

When using the cash basis accounting system, income is reported as it’s received and expenses are reported as they’re paid. This method is often preferred by businesses that make less than $25 million per year and is often used by sole proprietorships and partnerships.

Accrual accounting

Accrual accounting allows you to mark off expenses and income when they’re billed rather than when they’re actually received. This is the standard accounting method for high-revenue businesses. It’s often more accurate for longer-term projections because money likely won’t all come in (or go out) right away.

If you’re unsure how to get started, don’t worry—there’s a simpler way. With QuickBooks, you can easily track income, expenses, payroll, invoices, and more. QuickBooks accounting software also allows you to organize receipts and other documents to stay tax compliant and maximize deductions come tax time. No matter whether you choose a cash or accrual system, QuickBooks can help you keep your books balanced and organized. And if you ever need help from an expert, you can add QuickBooks Live to get an online bookkeeper to manage and maintain your books for you.

Step 6. Select your payment system

Step 6. Select your payment system

No matter your line of business, getting consistent, on-time payments from clients and customers is critical to keeping up with expenses, payroll, and turning a profit. Depending on the various services your home health care business offers, you might need a few different payment systems.

For example, say you have a brick-and-mortar location where you also sell home care supplies. A point of sale (POS) system—like QuickBooks Payments—can be a great way to accept and manage different payment methods to keep cash flow consistent.

However, for consistent services, like at-home care or wellness checks, you may want to send clients bills by email or mail, or through an online portal. In fact, according to QuintilesIMS, 93% of health care professionals believe that health care apps can improve patient experience.

You also need to set up a system for processing payments from Medicare, Medicaid, and insurance companies—and matching client copays with payments received from their insurance.

Up next: Understand your tax obligations

Step 7. Understand your tax obligations

Step 7. Understand your tax obligations

Like every small business, you’ll have a number of tax obligations to stay on top of. As mentioned in the section on selecting your business structure, there are several ways you might be taxed, depending on the structure you choose.

Income tax

In most cases, you’ll be charged income tax on the earnings you, as the business owner, take away from the total profits of your business.

Self-employment tax

If your business is smaller and you’re considered self-employed, there are specific taxes that apply to this situation. You’ll likely have to pay estimated tax quarterly as a self-employed individual.

Corporate tax

If you select one of the corporate business structures mentioned above, you’ll likely also owe taxes through that corporation. If you’re a C corp, you’ll owe both income tax and corporate tax.

Employment taxes

Payroll taxes are assessed on businesses with employees. If your health care business hires on employees, you’ll likely owe payroll taxes. Consider using a payroll provider that offers tax penalty protection.

Managing your taxes as a small business owner can be a headache. That’s why QuickBooks makes managing your taxes simple, no matter your business tax situation—with seamless support for your CPA through professional tax software. QuickBooks helps to keep essential documents and records organized to make it easier to file when tax season rolls around.

For more information, read 5 signs your books aren’t ready for tax time.

Up next: Find the right staff

Step 8. Find the right staff

Step 8. Find the right staff

Lastly, it’s important that you find the right staff for your health care business. For home health care, for example, you may need personal care and medical professionals, including:

  • Nurses and CNAs
  • Physicians
  • Physical therapists
  • Occupational therapists
  • Caregivers
  • Meal preparation staff
  • Mobility assistance staff

You may also need other staff, like administrators and secretaries, to manage referrals, make appointments, and manage upkeep for your home health care business. Ensure that your budget plans for all the necessary professionals and office space that you’ll require as you start your organization.

In QuickBooks’ recent Future of Small Business survey of 400 health care professionals, 78% said they are satisfied with their career and more than two-thirds said they would recommend their career choice to others.

“The key to long-term, sustainable growth as a business is employer brand,” said recruitment expert Marja Verbon, founder of Jump.

“Recruiting the right staff at scale can be extremely costly and time-consuming. But, with strong employer branding, the car practically drives itself. Employees and even unsuccessful applicants become promoters of your brand…Next time you hire someone, ask yourself why some people would love to work here and why others would hate to work here. Be honest. Don’t sugarcoat it…It’s all about authenticity, honesty, relatability. Think TikTok, not Photoshop.”

Note that you may also have to perform background checks on potential hires, as they’ll likely be dealing with sensitive medical information while on the job.

Up next: Frequently asked questions about opening a health care business

Opening a health care business: Frequently asked questions

Opening a health care business: Frequently asked questions

How much does it cost to start a health care business?

According to Ankota, a home health care software provider, the startup cost of opening a home health care business can be between $80,000 and $350,000. This depends on the licensing in the state where you start your agency and whether you are Medicare certified, which can cost more.

How do I start a health care business with no experience?

Starting out in the home health care industry with no experience of the industry is a challenge—but it’s not impossible. If you have good business experience, are a great leader, and understand the importance of giving customers what they want, your next step should be to find a mentor or experienced professional who knows the ins and outs of the home health care field. Then seek their guidance when starting your business.

For more advice on how to succeed in health care, with insights from 400 people who work in the industry today, read QuickBooks’ Future of Small Business report.


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