How Profitable are Home Care Providers in 2023?
With a market size of $136.2 billion in 2023, the US Home Care providers industry is among the fastest-growing healthcare industries. Yet despite strong growth, industry profit has been under pressure, how profitable are home care businesses today?
Indeed, consolidation is forecast to continue over the next five years amid continued reimbursement cuts and a shortage of skilled personnel. These factors will likely continue to constrain profit growth, causing industry profit to decline further over the next five years.
But with over 427,000 home care service providers vying for a piece of the pie, what does this mean for home care providers? How much can a home care provider expect to earn, and what are the costs involved in setting one up?
In this article, we’ll break down the market segments, average revenues, startup costs, and profitability metrics for home care providers.
Using data from industry sources and insights from over 260 franchised home care providers, we provide a comprehensive financial overview of the Home Care providers industry in 2023. Dive in to discover the potential of running a home care provider and the factors that influence its profitability.
Home Care Providers Industry Overview
As per IBIS, the Home Care provider industry in the US represented revenue of $136.2 billion in 2023 and is expected to grow to $180 billion over the next five years.
Traditional home healthcare and home nursing care represent the largest share ($75.2 billion), followed by home hospice ($39.8 billion), homemaker and personal services ($8.7 billion), and home therapy services ($4.2 billion). Yet, with over 427,000 home care service providers across the country, the competition is also fierce.
What is the average revenue of a Home Care Provider?
Using the same source as earlier, it’s safe to assume that the average turnover for the home care service providers industry is around $319,000. Indeed, the home care service providers industry was worth $136.2 billion in 2023, and there are about 427,000 home care service providers across the US.
Now, using data from more than 260 franchised home care service providers, a home care franchise earns $2,302,000 in gross revenue per year on average.
The southeast region is a key location for the home healthcare industry. The large size of the local population and the regional age distribution, with a significant share of older customers, makes the Southeast the leading home for service providers. The Southeast contains the highest concentration of home care service providers, at 26%. A large number of home care operators in Florida, with an estimated 8.3% of all industry home care service providers.
Yet, not all home healthcare has the same yearly revenue. Logically, some will earn more than others because of many factors like location, popularity, per capita disposable income, number of people with private health insurance, number of adults aged 65 and older, federal funding for Medicare and Medicaid, etc.
The average Home Care Provider salary in the US is $38,207, but the salary range typically falls between $33,461 and $44,517. Salary ranges can vary widely depending on many important factors, including education, certifications, and the number of years you have spent in the profession.
How much does it cost to open a home care service provider?
On average, it costs between $102,000 and $186,000 to open a home care service provider.
This includes various costs such as leasehold improvements/buildout, lease deposit, furniture, fixtures and equipment, computer & office, leasehold improvements, architectural and engineering services, retail and promotional inventory, signage, insurance, permits and licenses, professional fees, etc.
- Rent and Rent Deposits (9%)
- Leasehold improvements (2%): construction and/or remodeling costs to build or renovate the facilities.
- Insurance (11%)
- Equipment (18%): office equipment, furniture, fixtures.
- Opening Marketing (3%): grand opening marketing expenses as well as local advertising.
- Signage (3%)
- Permits and Licenses (1%)
- Working capital (13%): funds needed to operate the business to pay for operating costs (such as insurance, and salaries)
- Additional Funds (39%): additional fund for 3-months is required.
How profitable is a Home Care Provider?
There are various recurring costs involved in running a home care service provider. The major expenses include wages and office payroll costs. Brief details of expenses are as below:
- COGS (50%-60% sales): wages, worker compensation insurance, crime-fidelity employee dishonesty coverage, and other professional and general liability insurance.
- Office Payroll Cost (10%-15% sales): wages for office staff employees.
- Marketing cost (2%-4%): advertising and local advertising costs.
- Facility lease (1%-2% sales): includes rent.
| Profit and loss | Amount ($) | As % of Sales |
|---|---|---|
| Revenue | 2,302,071 | 100% |
| COGS | (1,221,709) | 53% |
| Gross Profit | 1,080,362 | 47% |
| Labor expense | (238,264) | 10% |
| Facility Lease | (14,600) | 1% |
| Marketing | (59,163) | 3% |
| EBITDA | 768,335 | 33.4% |
