1.0 Executive Summary
The purpose of this business plan is to raise $125,000 for the continued development of an in-home healthcare service based in Houston, Texas. Sage’s Care, LLC (“the Company”) was founded by Jane Jones. The business will provide comprehensive in-home care via registered nurses and in-home care aides. In most instances, the Company will have these retained personnel as independent contractors. The business will provide services for elderly people, people with developmental disabilities, and people that are in need of temporary care.
1.1 The Services
The primary revenue center for the business will come from the ongoing in-home care services that will be rendered by registered nurses and properly qualified aides. The business will provide both skilled care and general in-home help services to its client base. The Company will typically charge $25 to $50 per hour depending on the level of care needed.
In regards to billing, the Company anticipates that it will receive about 30% of its fees directly from patients. The remaining revenue will come from publicly funded healthcare systems (Medicare and Medicaid) as well as private insurance.
The third section of the business plan will further document the in-home care services offered by Sage’s Care, LLC.
1.2 Financing
Management is seeking to raise $125,000 via a loan from a financial institution. This document assumes that the Company will receive a ten-year loan carrying a 9.25% interest rate on the principal. The funding will be used for the following:
• Location development in Houston, Texas
• Initial marketing
• General working capital
• Furniture, fixtures, and equipment
Given the highly predictable streams of revenue generated on a monthly basis, the Company is in a strong position to acquire additional rounds of funding as necessary. This additional capital would allow the Company to expand its operational infrastructure while potentially acquiring home healthcare services that can be acquired.
1.3 Sales Forecasts
1.4 Expansion Plan
The Company will continue to expand the geographical scope in the greater Houston area in which the business conducts its operations. Management may acquire existing home healthcare agencies that can be integrated into the Company’s ecosystem. A potential acquisition would not occur until after the fifth year of operation. The Company will also continue to expand the scope of its marketing with a focus on targeted social media, pay per click advertising, and search engine optimization. The business will make sustained investments into these marketing channels on a yearly basis.
2.0 Financing Summary
2.1 Required Funds
Ms. Jones is currently seeking $125,000 of capital via a loan in order to commence full scale operations. The funding will be used as follows:
2.2 Investor Equity
Ms. Jones is not seeking equity capital at this time, The business is a strong candidate for private investor financing in the future.
2.3 Management Equity
Jane Jones is the sole owner of Sage’s Care, LLC.
2.4 Exit Strategy
As home healthcare agencies are wholly immune from negative changes in the economy, these businesses are able to receive a substantial price to earnings multiple. Generally, these companies can be sold for up to four times their previous year’s net income. Ms. Jones has no plans on selling to the business for at least five to seven years.
3.0 Home Healthcare Services
As stated in the executive summary, Sage’s Care will provide a broad range of in-home care that covers the entire spectrum of what a client could possibly need. As it relates to skilled care, these services will be rendered by retained registered nurses. These individuals will be able to directly administer medicines while taking vital signs. It is expected that these individuals will help people that have recently undergone surgery or are in need of round-the-clock support as it relates to their day-to-day care which involves medical intervention. Skilled care services will be billed at $50 per hour. These fees may be higher if the nurse requires specialized education.
As it relates to aides that will provide support for clients, these individuals will assist with dressing, provide companionship, prepare meals, and provide incidental transportation as needed. The fees for these services will be approximately $25 per hour.
It should be noted that all provider retained by Sage’s Care will be required to undergo both a comprehensive background check as well as a drug test. The Company will use a third-party service to verify the information that each candidate provides on their application.
The business will carry all necessary insurance policies that will protect the business in the event that an injury occurs. The business will retain legal counsel that will ensure that the business remains within the letter of the law at all times.
4.0 Overview of the Organization
4.1 Registered Name
Sage’s Care LLC. The business is registered as a limited liability company in the State of Texas.
4.2 Commencement of Operations
Management anticipates that full scale revenue generating operations will commence in the fourth quarter of this year.
4.3 Mission Statement
The Company’s mission is to provide comprehensive care at an affordable rate for its clients.
4.4 Vision Statement
By the fifth year of operation, the Company will generate $1.49 million of revenue while employing nine healthcare staff.
4.5 Organizational Objectives
• Use targeted advertisements that will bring the attention of families with senior members to Sage’s Care.
• Establish ongoing relationships with referring healthcare professionals in Houston.
• Hire a regional search engine optimization firm that will increase the online awareness of the business organically.
• Provide gainful employment opportunities for the Company’s healthcare and administrative staff.
• Remain within the letter of the law regarding all services rendered.
• Expand the scope of the types of care that can be rendered through Sage’s Care.
• Implement proper fiscal controls so that the business remains profitable in any economic climate.
5.0 Strategic and Market Analysis
5.1 Economic Outlook
Currently, the economic outlook for the United States is moderate. There has been significant market volatility over the past quarter as a result of changes in global trade policy. Interest rates are continuing to remain steady, and the US Federal Reserve continues to implement appropriate fiscal policy to ensure that the economy continues to grow.
It should be noted that any ongoing issues with the economy will not impact the Company’s ability to generate revenue and remain profitable. Home healthcare agencies and services remain in demand during all economic climates. Additionally, in many cases – private insurance and publicly funded healthcare systems will pay the services rendered to clients.
5.2 Industry Analysis
There are over 507,000 in home care service companies in the United States. Each year, the industry generates over $155 billion in billable revenue. The industry employs 2.1 million people (with 1.6 million directly rendering care). The compounded annual growth rate of the industry will remain near 8.6% over the next ten years.
As the Baby Boomer generation moves into their older age years, Management expects that the increase in demand will skyrocket. According to the American Society of Aging, more than 70% of Americans over the age of 65 will require some form of in-home assistance during their later years. By 2025, the number of Americans over the age of 65 will comprise 17% of the US population.
The revenues of the industry have substantially expanded over the past 25 years. By 2034, it is expected that the number of people over the age of 65 will outnumber of the number of people that are under the age of 18. This will be the first time in American history where the older segment of the population is larger than the youngest segment. As a result of this matter, many government agencies are taking a proactive approach to ensure that proper apparatuses are in place in order to effectively render care to the ongoing aging population. The complexity of this matter will increase as at least 60% of this population segment will have at least one chronic disease that needs to be managed.
5.3 Customer Profile
Any person that requires ongoing care within their home is a potential client of Sage’s Care, LLC. The Company’s client base will include elderly people, people recovering from major surgery, and people with special needs that need ongoing support through their daily lives. Management anticipates that the average client will have a median household income of $75,000 to $125,000 per year. The business will provide its services throughout the entirety of the Houston metropolitan area.
5.4 Competition
The ongoing competition that most home healthcare agencies and services face in their respective markets is substantial. This is due to the fact that these enterprises produce highly recurring streams of revenue and they remain economically viable at all times. As this business plan is only a sample, no formal analysis was conducted. If this was an actual plan for a real company, a full analysis regarding every competitor would be completed.
6.0 Key Strategic Issues
6.1 Sustainable Operations
The Company will be able to maintain successful business operations because of the following:
• Immense demand for in-home care in the Houston market.
• Low operating costs will allow Sage’s Care to become profitable quickly.
• The business will be able to remain profitable in any economic climate.
• The Company can scale its operations to include other markets in Texas.
• For specific services, the Company will receive reimbursement from private insurance companies and publicly funded healthcare systems.
6.2 Basis for Growth
Sage’s Care will grow through four avenues:
• Continued expansion of the Company’s marketing campaigns.
• Hiring of additional skilled care staff which will boost revenue in the coming years.
• Expansion into other markets that have substantial wealth and population density.
• Expansion through acquisition.
7.0 Marketing Plan
7.1 Marketing Objectives
• Develop ongoing relationships with referring hospitals, medical practices, and among allied healthcare practitioners.
• Maintain a content-rich website that will showcase the operations of Sage’s Care, LLC.
• Create direct outreach programs among social workers that may recommend in home care for their respective clients.
7.2 Revenue Generation
7.3 Marketing Strategies
First, the Company intends to inform medical and allied healthcare practitioners of the services that are offered. In many cases, a physician or related practitioner must prescribe in home care for the patient if they want to be able to receive insurance reimbursement. The Company, via its staff, will directly reach out to medical practice offices, social workers, psychologists, psychiatrists, and other professionals that will be supportive when these types of services are needed.
The Company’s website will showcase all of the skilled and in-home aide care services that can be provided by the business. Most importantly, the Company will hire a firm that specializes in regional search engine optimization. Most likely, this firm will be based in the greater Houston metropolitan area. This business will ensure that when searches for home healthcare agencies or home healthcare services are completed for this market – the business will appear frequently in the body of the search results.
Sage’s Care, LLC will also maintain a moderate presence among social media platforms. This is important for two reasons. First, it will further increase the brand name visibility of the business. It will also allow the Company to more easily recruit nurses and in-home care aides that can render services on behalf of the business.
The Company will also engage specialized print advertisements that circulate throughout the greater Houston metropolitan area.
8.0 Organizational Plan and Personnel Summary
8.1 Corporate Organization
8.2 Organizational Budget
9.0 Financial Plan
9.1 Underlying Assumptions
The Company has based its proforma financial statements on the following:
• The Owner will acquire $125,000 of capital via an SBA loan.
• Jane Jones will contribute $50,000 towards the venture.
• The business will settle all short-term payables on a monthly basis.
• The business will use a third-party billing agent when processing its accounts receivables.
9.2 Sensitivity Analysis
Sage’s Care’s revenues are not sensitive to negative changes in the economy. People that have specialized medical needs will continue to use the Company’s services in all economic climates. The business will have highly controllable operating costs that will further ensure that the Company remains economically viable while servicing all underlying financial obligations.
9.3 Source of Funds
9.4 Profit and Loss Statement
9.5 Cash Flow Analysis
9.6 Balance Sheet
9.7 Expanded Sensitivity Analysis
9.8 Breakeven Analysis
9.9 Business Ratios
Appendix A – SWOT Analysis
Strengths
• Controllable operating costs will allow for rapid expansion throughout Houston.
• Immense demand given the larger number of older people in the Houston market.
• The operations of Sage’s Care are highly scalable, and the Company will be able to reach hundreds of thousands of people in the coming years.
• The ability to provide all types of care depending on the needs of the client will provide the Company with a major differentiating factor.
Weaknesses
• Operational complexity given the scale and scope of the Company’s operations.
• Ongoing competition from established home healthcare agencies in the market.
Opportunities
• Continued expansion of the Company’s regional marketing efforts.
• Organic growth through continued increases in the number of people that need in-home care.
• Expansion into other markets in Texas.
• Expansion of the scope of services offered.
• Acquire existing home healthcare agencies.
Threats
• Inflation could cause the operating costs of the business to increase.
• Changes in reimbursement schedules could impact revenue.
Starting a Home Healthcare Business
Starting a home health care agency can be a complex undertaking. However, with the right guidance, these businesses can be easily established and brought to profitability very quickly.
Home Healthcare Business Incorporation (LLC or Corporation)
The first step in starting a home health care agency is to determine the name and the corporate structure that will be used during the course of operations. In most instances entrepreneurs that are starting these types of businesses will typically create a limited liability company (LLC) so that they can have their operations conducted through this entity. This prevents potential liabilities from directly affecting the owner. It should be noted that in some circumstances a certified public accountant may recommend that an S- corporation is established as opposed to a limited liability company. This is a determination that you should coordinate with your CPA.
Once the corporate entity is established, the entrepreneur who is starting a home health care agency can now establish their corporate bank account. This will serve as the treasury account related to all operations of the business. When establishing the corporate bank account, you will need your articles of incorporation, limited liability company operating agreement, as well as numerous forms of identification. This process typically takes about an hour at any local bank. It should be noted that you will also need a federal employee identification number that is issued by the IRS (called an EIN or FEIN).
Home Healthcare Business Marketing
Once these matters are attended, you will need to coordinate with your retained attorney in order to acquire the necessary licensure to operate in a home health care capacity. These regulations vary widely by state, and is it imperative that you work with a qualified lawyer to ensure that your business obtains the necessary licensure. It should be noted that in some states services that are considered non-medical in-home care do not require specialized licensure. Your attorney can also assist you with sourcing the necessary insurance and surety bonds that are required in order to prevent liability.
As this is completed, you will be able to now market your services to the general public. Most importantly, is important that a home health care agency has ongoing referral relationships with medical and mental health care professionals within its targeted market. This allows for far more rapid onboarding of clients that need comprehensive care. The business can also work with social workers who can provide recommendations among their clients and their families when ongoing care is needed on a daily basis.
Beyond establishing relationships with referring professionals, a highly engaging website is an absolute necessity for the success of any home health care business. This platform should be mobile device friendly so that people that are using any type of Internet enabled system can quickly find the business. One of the other ways that you can ensure that the website is quickly found when searches for home health care in your market are conducted is by engaging in search engine optimization. This is a complex practice that requires a substantial amount of content to be produced on an ongoing basis so that the business maintains its rankings among all major search engines. This is also a time intensive process, and many entrepreneurs feel that it is economically advantageous to outsource these services to a regional search engine optimization firm. Although this can come at a significant upfront cost, the results from a well-developed search engine optimization campaign can be long ranging. Generally speaking, for every dollar that is spent on search engine optimization a return of ten dollars should be recognized over a long-term period.
To immediately establish online visibility, many home health care agencies will use pay per click marketing. This brings the website to the front page of the search as a sponsored result. It should be noted that this type of marketing can be quite expensive. However, given that home health care clients provide highly recurring streams of revenue – this can be a highly lucrative and effective way of onboarding clients. In many cases, new home health care agencies will rely heavily on pay per click marketing (PPC) while their search engine optimization campaigns take hold.
Social media is also of significant importance for marketing a home health care agency. Many local communities maintain pages among all major social media platforms, and referrals can be acquired by marketing your business through these online sales channels. Additionally, many social networking sites allow for ongoing reviews to be placed on business pages. This can allow a home health care agency to build a substantial degree of trust with potential clients if they see a number of very positive reviews. To complement these operations, it is very important that proper profiles on all search engines are also maintained. This will further contribute to the economic viability of the business.
Home Healthcare Agency Employee Recruitment
Recruitment is a very complicated aspect of developing a home health care agency. This is primarily due to the fact that registered nurses as well as licensed practical nurses are typically the people that render services to clients. Given the immense demand for in home care, there are a shortage of nurses and other supportive personnel that can become part of any home health care agency’s ecosystem. One of the best ways to conduct initial recruitment is to work with local colleges and universities that have specialized nursing programs including those that work with individuals that are becoming certified nursing assistants. Among newly graduated individuals, they may be seeking a less intensive work environment as compared to that of a hospital. This is especially true among individuals that have entered this profession as a second career and may have substantial family obligations that prevent them from working 12-hour shifts.
Beyond this direct method of recruitment, many home health care agencies will work with employment firms in order to source vetted and qualified candidates for these positions. It should be noted that this can come at a significant cost as many employee placement firms often charge a fee equal to three times the annual salary of the employee. However, these individuals are highly effective at placing qualified nursing and in home care personnel given this substantial fee.
Outside of these methodologies, multiple online platforms can also be used to effectively onboard potential employees. There are numerous national level companies that maintain extensive listings for every type of position imaginable. This is a more cost-effective approach than working directly with an employee placement firm given that the commissions that are associated with that type of service are not applied in an online setting.
Home Healthcare Startup Costs
The startup cost for a home health care agency can vary widely depending on where the business is located and how big the business will be at the onset of operations. Most importantly, an entrepreneur in this field will need to have a substantial amount of working capital on hand in order to fund the early operations of the business while also recruiting a large network of registered nurses and licensed practical nurses that can render services to clients. For many people that are starting these types of companies, there is often a tendency to underestimate the need for a substantial amount of working capital. Generally speaking, you should have at least six months of all expenses on hand plus additional capital specific for recruitment.
In regards to facility costs, these businesses typically do not require fancy offices or a large-scale facility. In many instances, these businesses are established as home-based enterprises before moving into a more formal office setting. However, a more formal office may be required in the event that families are going to come to your location to meet you and your team face to face in regards to their loved one’s home health care needs. In these instances, it may be beneficial to acquire a smaller office which typically has a monthly rental cost of $500 to $1,000 per month depending on the location. In highly population dense areas especially those that are very wealthy, these expenses may be higher.
The initial marketing business is also a very substantial cost. For even a smaller scale home health care agency, you can anticipate that your upfront cost will be $5,000 to $7,500 depending on how much online marketing you can to undertake. One of the ways that this can be abated is by conducting a substantial amount of direct outreach with healthcare professionals that will provide ongoing referrals. As noted earlier, having referrals from assisted living facilities that are discharging patients as well as nursing homes that are discharging patients among individuals that still may need in home care is a fantastic way of driving early revenue. Furthermore, in regards to online marketing an entrepreneur that is establishing a home health care business can easily conduct a substantial amount of their own social media posts and early search engine optimization. Most importantly, a significant amount of content needs to be produced on an ongoing basis which can be produced by anyone that’s an expert in the field of in-home care.
Licensing and accreditation are also a very expensive part of establishing a in home care business. If you intend to operate as a skilled care organization, then you will need a substantial amount of licensure not only from your state but also from the federal government if you intend to receive remuneration via Medicaid and Medicare. These fees typically range anywhere from $2000 to $10,000 depending on whether or not an attorney is assisting with this process.
Staff training is also an expense that needs to be accounted for in the initial startup budget. This is especially true if you are going to onboard a number of newly licensed in-home care professionals that may need substantial training in this regard. On a per employee basis, it is prudent to allocate approximately $1,500 to $3,000 for initial training and onboarding. It should be noted, that these fees are outside of the costs related to employee recruitment. On an ongoing basis, you will also need to invest in continuing education in accordance with state law to ensure that all registered nurses, licensed practical nurses, and other support staff are aware of all best practices, procedures, and protocols regarding in home care.
Vehicle costs should also be included in the startup cost determination. In many instances, when employees use their own vehicles, home health care agencies will provide ongoing reimbursement for the number of miles traveled to and from the client’s location. The business on its own can also invest in a vehicle either via leasing or by direct acquisition. Generally speaking, a vehicle that’s appropriate for the operations of a home health care agency is going to cost between $25,000 to $50,000 depending on the make and model. It should be noted that the vehicle may need to have additional space in the event that the in-home care agency will provide incidental transportation as part of its overall services.
Home Healthcare Agency SBA Loans
There are numerous ways to finance the startup costs of a home health care business. As noted above, the costs associated with establishing either a skilled care agency or non-medical agency can vary widely depending on the initial scale and scope of the business. For much smaller startups, these businesses can generally be financed with the savings of the owner. In many cases, these businesses can be established as one person operations where the owner actually engages in providing in home care prior to onboarding additional employees that can further the growth of the business.
The most common methodology for establishing a home health care agency is using a SBA loan or working capital line of credit. As this is a capital-intensive business, many entrepreneurs that are starting their own health care agency is specifically on acquiring a line of credit so that they can draw down capital when needed and not incur interest on the entirety of a business loan. This allows for substantial flexibility as the home health care agency ramps up its operations within any given market. It should be noted that there is a common misconception that these Small Business Administration directly lends funds to small business owners. However, this is not correct. When you acquire funding in tandem with the Small Business Administration, they provide a guarantee for the capital so that the lending bank has full security when issuing the credit. Obtaining an SBA loan is a complex process that typically takes two months to three months. There are numerous applications that need to be completed and you will be required to submit a business plan which has a three-year financial model at minimum. There is also a requirement that you submit numerous personal financial statements that showcase all of your current assets and liabilities.
Beyond using a SBA loan, you can also acquire a traditional business loan or line of credit that is not backed by any government agency. This will typically come at a slightly higher interest rate given that there is an additional risk for the lending bank. This process often goes quicker than obtaining an SBA loan given that paperwork does not need to be submitted to the Small Business Administration.
It should be noted that nearly all financial institutions have a strong proclivity for providing financing specific for health care related businesses including home health care agencies. This is primarily due to the fact that these businesses are highly stable enterprises that are able to generate substantial revenue in any economic climate. The demand for these types of services remains strong especially in major metropolitan areas that have significant population density and substantial wealth.
Home Healthcare Agency Investors
There is also the possibility that you can work with private investors in order to obtain the funding you need. It should be noted that unlike a bank loan the capital that comes from a private investor typically provides them with an ownership interest in the business. These individuals are more concerned with receiving shares that will ultimately appreciate in value as the business expands its operations. Working with investors can be challenging as a result of this given that they may want to have a direct say in the ongoing expansion of the business. If you are going work with private investors then you may need to consider all these aspects when seeking specialized funding arrangements for your home health care agency.