A former nurse opens a home care agency with three clients and four caregivers. By month six, she has twelve clients, but two caregivers quit in the same week, and she spends three nights covering shifts herself. Demand was never the problem. Staffing and margins were.
Non-medical home care is one of the fastest-growing small business fields in the US, driven by an aging population that wants to stay at home. It is also a business where the gap between what families pay and what caregivers earn is thinner than it looks. This guide runs the actual numbers before getting to licenses and paperwork.
The Market in Numbers
| Measure | Figure | Source |
|---|---|---|
| National median price for non-medical in-home care | $35 per hour, up 3% in a year | CareScout Cost of Care Survey, released March 2026 |
| Annual cost at 44 hours a week | $80,080 | CareScout |
| Median pay for home health and personal care aides | $17.21 per hour, $35,800 per year | US Bureau of Labor Statistics |
| Number of aide jobs | About 4.68 million | US Bureau of Labor Statistics |
| Projected job growth over the next decade | 18%, with about 760,500 openings a year | US Bureau of Labor Statistics |
| Caregiver turnover in home care | Around 75% to 79% a year | PHI and Activated Insights |
The demand side is clear. The supply side, caregivers, is where most agencies struggle. Hundreds of thousands of new aides are needed every year, and most agencies replace three out of four of their staff annually.
Medical or Non-Medical: Decide First
This choice decides your licenses, staff, payers and startup cost.
| Type | Services | Staff | Who pays | Typical licensing |
|---|---|---|---|---|
| Non-medical home care (personal care, companion care) | Bathing, dressing, meals, housekeeping, transport, companionship | Caregivers and personal care aides | Private pay, long-term care insurance, Medicaid waivers, VA programs | Varies widely; some states require a license, others only registration |
| Home health (skilled care) | Nursing, physical therapy, wound care, medication management | Registered nurses, therapists, certified home health aides | Medicare, Medicaid, private insurance | State license, plus Medicare certification and usually accreditation |
Medicare pays for home health only when it is medically necessary, ordered by a doctor and the patient is homebound. It does not pay for non-medical personal care on its own. That is why most new agencies start non-medical and private pay, which has lower barriers and faster revenue.
The Unit Economics
This worked example covers one hour of non-medical care at the national median price.
| Item | Per hour |
|---|---|
| Bill rate charged to family | $35.00 |
| Caregiver wage | $18.00 |
| Payroll taxes, workers’ compensation and benefits (about 15%) | $2.70 |
| Gross margin | $14.30, about 41% |
That $14.30 must cover everything else: office rent, a scheduler, the owner’s salary, liability insurance, software, background checks, training, marketing and recruiting.
Break-Even Math
Say monthly overhead is $12,000, a lean setup with a small office, one scheduler and basic marketing.
- Hours needed per month: $12,000 ÷ $14.30 = about 840 billable hours.
- If an average client buys 25 hours a week, that is about 108 hours a month per client.
- Break-even: roughly 8 steady clients.
Two levers move this the most. Raising the bill rate by $2 adds $2 straight to margin. Losing a caregiver mid-shift and paying overtime to cover can wipe out a week of profit on that client. Many agencies also set a minimum shift, often three or four hours, because short visits cost nearly as much to staff as long ones.
Licensing and Setup
Requirements differ a lot by state, so check with your state health department first. Most agencies need some or all of the following:
- Business entity and EIN: Most agencies form an LLC or corporation for liability protection.
- State license or registration: Many states license non-medical agencies, require caregiver training hours and set rules on supervision. Some require nothing beyond a business license.
- Background checks: Most states require criminal background checks for caregivers, and many check abuse and sex offender registries.
- Insurance: General and professional liability, workers’ compensation, non-owned auto coverage and a fidelity or crime bond to cover theft claims.
- Employment setup: Caregivers should normally be W-2 employees. Treating them as contractors is a common source of Department of Labor claims, and the federal Fair Labor Standards Act generally requires overtime for home care workers employed by agencies.
- Policies and client agreements: Service agreements, care plans, incident reporting and privacy policies.
- Medicaid or VA enrollment, if you want those clients: Medicaid home and community-based services waivers and VA programs open more clients, but they pay set rates and come with more paperwork.
Independent Agency or Franchise?
| Path | Upfront cost | What you get | Ongoing cost |
|---|---|---|---|
| Independent agency | Often $50,000 to $150,000 including working capital | Full control, no royalties | Building your own systems and brand |
| Franchise, example: Home Instead | $91,040 to $269,750 total initial investment, including a $54,000 franchise fee, per its most recent disclosure document | Brand, training, software, protected territory | 5% of gross sales in royalties, plus marketing fees |
The franchise route costs more but brings a recognized name, which matters when families are choosing who to trust with a parent. If you go independent, set aside at least three to six months of payroll as working capital. Caregivers are paid every week or two, while some long-term care insurers and Medicaid programs take 30 to 60 days to pay.
The Real Challenge: Keeping Caregivers
With turnover around 75%, an agency with 20 caregivers may need to hire 15 new ones every year just to stand still. Activated Insights estimates each departure costs about $2,600 in recruiting, screening and training.
What tends to help:
- Pay above the local median: Even $1 to $2 an hour above competitors makes a difference in recruiting.
- Guarantee hours: Inconsistent schedules are a top reason caregivers leave. Offer a minimum weekly hours guarantee where you can.
- Match carefully: Pair caregivers and clients on personality, language and location, which cuts drive time and early quits.
- Focus on the first 90 days: A buddy shift, a call after the first week and a quick check-in after the first month catch problems early.
- Recognize good work: Small bonuses for perfect attendance or positive family feedback cost little and are noticed.
Finding Your First Clients
- Hospital and rehab discharge planners: They need trusted agencies for patients going home.
- Senior living communities and adult day centers: Residents often need extra help.
- Elder law attorneys, financial planners and geriatric care managers: They advise families making care decisions.
- Local search: Families search “home care near me,” so a complete Google Business Profile and genuine reviews matter.
- Long-term care insurance: Learn how claims work so you can help families use benefits they already pay for.
Frequently Asked Questions
How much does it cost to start a home care business?
An independent non-medical agency often needs $50,000 to $150,000, much of it working capital to cover payroll before payments arrive. Franchises cost more; Home Instead lists a total initial investment of $91,040 to $269,750.
Do I need a nursing license to open a home care agency?
Not for non-medical care in most states, though some states require a nurse to supervise care plans. Skilled home health agencies need licensed clinicians and an administrator who meets state rules.
How profitable is a home care business?
Gross margins of about 35% to 45% are common for non-medical care, but net profit after overhead is usually much thinner. Profit depends heavily on bill rates, caregiver retention and keeping office costs lean.
Can I accept Medicare for non-medical home care?
No. Medicare covers skilled home health that is medically necessary for homebound patients. Non-medical personal care is usually private pay, long-term care insurance, Medicaid waivers or VA benefits.
