How to Start an Adult Day Care Center
If you’ve ever cared for a loved one with a physical or mental health condition, you know how demanding the job can be. Caregiving can alter their lives and be emotionally draining for families with adult family members who need continuous care or supervision. That’s where adult day care centers come in. These businesses are gaining in popularity. By opening a daycare of your own, you can help relieve families of their caregiving duties while also improving adult clients’ quality of life. It’s a rewarding business venture to explore and, with the increased need for senior care, it could be a profitable venture, too.
Adult day cares serve multiple purposes, and with the increasing senior population in the United States, these businesses are growing in popularity. Day care centers provide adults with a safe place to go during the day. These centers may offer a variety of services, but generally, a day’s activities will include some sort of exercise, a chance for participants to interact socially, physical or speech therapy, and mental interaction, too. Centers may assist adults with personal care as needed, and they may provide nutritious meals or snacks tailored to each attendee’s dietary needs. Transportation can be a challenge for adults, so many day cares offer transportation services, too.
Adult day cares may also specialize in a certain field. Some have a health basis, focusing on therapeutic services. Others may specialize in providing care to adults with specific conditions, like those who are deaf or hard of hearing or those with Alzheimer’s or dementia.
Day cares provide their participants with many benefits, and they can help combat some of the isolation and loneliness that adults may feel when living at home. At the same time, day cares give their attendees’ caregivers a much-needed break, helping to transfer some of the caregiving burdens off of family members during the day.
According to IBIS World, from 2014 through 2019, the adult day care industry experienced 5.3 percent annual growth. During that time, the number of businesses grew to 16,407, and industry employment increased to 211,600. The industry was expected to bring in $9 billion in total revenue in 2019 alone.
A number of factors drive this growth. The aging population means more adult care services are needed. Many adults cannot afford the expensive cost of nursing homes and assisted living centers, driving them to seek alternative options like an adult day care center. Additionally, since per capita disposable income increased from 2014 through 2019, adults and caregivers who couldn’t have previously afforded day care may now have the income available to make this possible.
Multiple trends are shaping the adult day care industry. According to Home Health Care News, as more seniors wish to remain in their homes as they age, there’s an increased demand for these day care services. The number of day care businesses has increased, but the industry is still largely fragmented.
Traditionally, adult day care facilities were largely non-profit operations, but that is now shifting more toward the for-profit model; you’ll find both models in operation today. Because there isn’t an official federal definition of what adult day care consists of, different states regulate this industry differently. Some states have no licensure, while others have licensure and certification requirements. Some states also require a day care have a certain number of caretakers to every day care participant; 1:6 and 1:8 ratios are common requirements.
An adult day care’s market will depend on its specialization and business model. An adult day care program that provides general supportive care for adults may market to caretakers of adults with physical or mental conditions that prohibit them from being left at home alone. If a day care specializes in a certain area, like providing specialized services to adults with Alzheimer’s, the business’ target market will be more specific.
While family members acting as caretakers are generally the primary target market for day cares, a business may also market to doctors, nurses, social services, and other professionals who might refer families back to the day care.
Checklist for Starting an Adult Day Care Center
Starting an adult day care program can be an incredibly rewarding experience, but it’s important to make sure you’re prepared for the challenges ahead. Use this checklist to help get your business off on the right foot.
Step 1: Write a Business Plan
After coming up with the idea, the next step in starting your business should be to write a business plan. Not only will a bank require you to have a business plan, but multiple studies have shown that a business plan helps increase the odds of starting a successful business.
Related: How to write a business plan
Step 2: Choose a Business Entity
A business entity (also referred to as a business structure) refers to how a business is legally organized to operate. There are four primary business structures to choose from, which include the sole proprietorship, partnership, corporation, and Limited Liability Company (LLC). Each type of entity has its own pros and cons, such as liability exposure, costs, and administrative requirements.
When deciding on which business entity is best for an adult day care, it normally comes down to the sole proprietorship and Limited Liability Company.
A partnership opens the owners up to unnecessary personal liability because if a partner does something to get the business sued, or runs off with cash from the business, the other partners are personally liable to repay.
The corporation can be a good choice to minimize liability risk because it separates the business assets from the owner’s assets. If the corporation is sued or certain business debts can’t be paid back, the owners aren’t personally responsible to repay them. The downside to the corporation is that it is more complicated than all the other entities and requires more administration than the LLC. If you plan on raising a lot of investment though, the corporation is usually the better choice.
That leaves the sole proprietorship and LLC.
The sole proprietorship is the least expensive and easiest entity to start which is appealing. The downside is the owner is personally liable should anything happen to the business, which is an important consideration. The LLC offers the ability to operate as a sole proprietorship with the liability protection of a corporation. Depending on the state, the cost to form an LLC runs from $40 – $500, which is pretty inexpensive for protecting the owners from business-related lawsuits and certain debts.
Related: Guide to forming your LLC
Forming an LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.
Some popular LLC formation services include:
IncFile - $0 plus state fees & free registered agent for 1 year!
IncAuthority - $0 plus state fees & free registered agent the first year!
ZenBusiness - $49 plus state fees & free registered agent for 1 year!
Step 3: Name the Business
Finding the perfect business name can be challenging. Not only does the name have to resonate with your customers, but it also has to be available to use.
Step 4: Select your Location
Adult day cares need very specific types of spaces, and finding or modifying an appropriate space can take both time and money. Handicap accessibility, multiple bathrooms, and the presence of a kitchen space are all necessary. A large space with these amenities can cost more than a traditional retail space, and the building’s location will also affect its rental cost.
Related: Choosing a business location
Step 5: Register for Business Licenses and Permits
Licensing requirements vary from state to state for opening and running an adult day care service, so check with your state’s Department of Human Services to learn about the specific state requirements. The U.S. Department of Health and Human Services has compiled a helpful document entitled Regulatory Review of Adult Day Services.
In addition, there are general business registrations that an adult day care might need, such as a business license, Employer Identification Number and Occupancy Permit, among others.
Step 6: Find Financing
Coming up with a good business idea and having the skills to run it are one thing, but getting the funding to start an adult day care is another. Funding to start an adult day care can be difficult as many start-up expenses go towards remodeling and working capital for wages, which don’t have collateral value. In order to get a loan, the borrower(s) will need to have good credit and be able to personally invest 15-25% towards the total start-up costs.
Step 7: Open a Business Bank Account
Keeping your small business and personal finances in separate bank accounts is important to track the income and expenses of your business and identify trends.
Many banks offer free business checking accounts, so be sure to find a cost-effective option for your business.
Step 8: Get your Marketing Plan in Place
Marketing is an essential ongoing expense for an adult day care. Marketing activities may consist of paid online and print advertising, direct mail marketing, establishing and maintaining a social media presence, and even advertising on the radio or television. Marketing costs will depend on the type and volume of the activity performed.
There’s still a lot of confusion and lack of awareness around adult day center availability and benefits, so business owners need to be prepared to market the business and educate local medical service providers, assisted living centers, senior centers, and family caregivers. While adult day cares are gaining in popularity, they’re still somewhat limited in their availability. While this means that businesses will need to work harder to establish themselves, it also works as an advantage. A new adult day care could be the first in the area, establishing itself as a reputable, quality facility before others develop in the area.
Step 9: Get Business Insurance
There are several types of insurance to consider when starting an adult day care. A few of these include:
– General liability insurance protects the business if a client or their family members are ever injured while on the business’ property. This insurance can cover costs like legal fees.
– Commercial property insurance protects the day care against the loss of property and supplies after an event, like a fire.
– Worker’s compensation insurance helps to cover potential expenses like medical bills or lost wages if a staff member is ever hurt while at work.
The cost to insure an adult day care will vary depending on factors like the day care’s location, the value of the building and the equipment inside, and even the number of employees on staff. Because of these variables, policy costs can differ. To get an accurate idea of what insurance may cost, request quotes from multiple providers. When comparing the quotes, pay attention to factors like coverage limits and exclusions, premiums, and deductibles.
Step 10: Hire Employees
Any adult day care will need multiple employees. According to Indeed, expect to pay these average hourly rates for standard adult day care staff positions
– Licensed Vocational Nurse: $19.16
– Registered Nurse: $31.47
– Nursing Assistant: $15.43
– Social Worker: $21.60
– Activity Aide: $9.81
– Van Driver: $14.59
– Caregiver: $10.98
In addition to employee salaries, a day care also needs to budget for expenses like worker’s compensation insurance, paid time off, and health insurance contributions.
Related: Hiring your first employee
Step 11: Set up an Accounting System
Setting up an accounting system is critical to the long-term success of your business.
Staying on top of taxes not only keeps the business out of trouble with the government, but the numbers can be used to track and monitor trends and cash flow in the business and maximize profits.
The thought of accounting can be intimidating for a lot of new entrepreneurs. There are a number of ways of handling bookkeeping, from DIY to hiring a bookkeeper. These include:
- Pen and paper - Low expense, but difficult to track.
- Spreadsheet - Low expense, but easy to make errors.
- Accounting software - Medium expense, but owner typically inputs expenses. Some great accounting software programs include Freshbooks or Wave Accounting.
- Hire a bookkeeper - Higher expense, though very affordable at $100-$200 per month in most cases. A dedicated bookkeeper will probably save money because, in addition to handling all of the bookkeeping (so you can focus on the business), they also provide personalized tax advice and ensure the business is in compliance.
Find bookkeepers in your local area or use a service like 800Accountant.
How much does it cost to start an adult day care?
The cost to start an adult day care will vary widely, and it will partially depend on whether the day care offers social services or if it takes a medical healthcare focus. Startup costs for a smaller day care designed to provide social interaction and general care can start at $50,000 or more. A day care with a medical focus can cost $75,000 or more to start, mainly because of the required medical equipment and the facility.
Some common startup costs for an adult day care include:
– Medical equipment
– Remodeling expenses
– Supplies like food
How much can an adult day care owner make?
A day care’s income will depend on many factors, including the number of clients, the day care’s rates, and even the particular services that it offers. For instance, day cares with health specializations can charge higher rates than similar businesses that don’t offer the same health care focus. According to Genworth Financial’s most recent Cost of Care Survey, adult day health care costs an average of $72 per day. Most days range between 8 and 10 hours of care.
Are there grants to start an adult day care?
It’s extremely rare to find a grant to start an adult day care. If you search for business grants, you will come across a lot of scams and misinformation. Occasionally an organization will offer grants to start a business, however, be skeptical and don’t provide any sensitive personal information or pay money to get more information.
Legitimate federal grants can be found at Grants.gov, and you can check on your state’s economic development office to see if they have any grants available.
What skills are needed to run an adult day care?
Starting and running an adult day care doesn’t require a business degree, but certain skills and experiences can increase the chances of success.
Caregiving experience. Experience in caring for adults with mental or physical conditions is highly valuable in this industry. A day care owner who has this caregiving experience will have a better understanding of the challenges and nuances that come with this type of business.
Medical knowledge. A day care owner doesn’t necessarily need a medical degree, but experience working in or knowledge of the medical industry will be helpful.
Management experience. Experience in hiring, training, and managing staff is important in this industry since any day care will need multiple employees.
Interpersonal skills. Strong customer service and interpersonal skills are a must, and they’ll allow a business owner to establish relationships with both clients and their families.
Attention to detail. Small details can make big differences in this industry regarding caregiving, scheduling, monitoring clients’ health, and more. A business owner needs to be focused on details to be successful.
Marketing skills. While adult day cares are growing in popularity, many people are still unaware that they exist and need to be informed of their benefits. Marketing will be an ongoing activity, so a business owner will need to be involved in marketing efforts.
What is the NAICS code for an adult day care?
The NAICS code for an adult day care is 624120.
The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.
Related: What is a NAICS code?