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How To Start An Adult Day Care Center In 2023

How To Start An Adult Day Care Center In 2023

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How To Start An Adult Day Care Center In 2023

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.

Business Overview

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.

Industry Summary

According to IBIS World, from 2018 through 2023, the adult day care industry experienced a .9 percent annual growth, with a 2.8 percent jump for 2023. There are currently 36,362 businesses and in 2023, the industry is expected to bring in $7 billion in total revenue.

Future growth of the adult daycare center industry will be based on the growing number of people who are getting older and will require community-based solutions such as those offered by daycare centers. The aging population means more adult care services are needed. Also, since 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, 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.

Checklist To Start An Adult Day Care Center

Starting an adult day care service 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: Assess the Market

Starting an adult day care business requires a thoughtful assessment of market potential and customer base. Here are some ways you can research whether there’s a market for an adult day care business:

Census Data: Look at the demographics in your desired area. An older population might mean there is a higher demand for adult day care services. U.S. Census Bureau’s American FactFinder is a valuable resource for demographic data.

Local Government and Community Resources: Reach out to local government agencies or social service departments. They may be able to provide you with statistics about the local population’s needs. Similarly, community centers and hospitals may have data or at least anecdotal evidence about the need for adult day care.

Competitor Analysis: Identify the number and type of existing adult day care centers in your desired area. Look at the services they offer, their pricing, and their occupancy levels if available. This will help you gauge the saturation of the market.

Community Surveys: Conduct a community survey. This will give you firsthand information about the demand and need for an adult day care center. The survey can ask questions about potential users’ needs and wants, preferred pricing, and ideal location.

Professional Organizations: Join professional organizations such as the National Adult Day Services Association (NADSA) or the American Association of Caregiving Youth. They often provide research, networking opportunities, and other resources that can help you understand the market.

Healthcare Providers: Connect with local physicians, nurses, social workers, and other healthcare professionals who work with the elderly or disabled adults. They can provide insights into the potential need for such services in your area.

Area Agencies on Aging (AAA): Reach out to your local AAA. They can provide useful data on the aging population in your area, as well as any existing services that cater to this demographic.

Online Research: Use online tools like Google Trends to analyze the search volume for terms related to adult day care in your area. This can give you an idea of how many people are actively looking for such services.

Real Estate Agents: Local real estate agents may have insights into areas with a higher concentration of senior citizens, which could indicate a potential market for your services.

Remember, market research is only the first step. It’s also important to develop a detailed business plan, secure necessary licenses and certifications, and build a strong team.

Step 2: Write a Business Plan

After coming up with the idea, the next step in starting your business should be to write a business plan. A business plan is useful because it forces you to explain the types of services that will be offered and to think through all aspects of your operations, including staffing, licensing, marketing, and facility needs. In addition, if you are looking for funding, lenders and investors typically require you to have a business plan.

Related: How to write a business plan

Step 3: Search for a Location

Now that we have a good idea that a market exists and the business plan is underway, it’s time to find a suitable adult day care facility.

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. The facility needs to be large enough to accommodate the number of clients you hope to serve, with room for different activities and services. A location that is already compliant with the Americans with Disabilities Act (ADA) can save you a lot of time and money in renovations.

Also, it’s important to verify your finalize is zoned right. Not all areas are zoned for adult day care businesses, so before committing to a location, ensure it is zoned appropriately and understand any restrictions.

It’s also important for the perceived safety of the clients to choose an area that’s safe and quiet, away from heavy traffic or other hazards. Factors like walkability, lighting, and general neighborhood safety can be important when someone is deciding on a facility.

When deciding on your facility, there will be renovation costs to consider. Renovations can significantly add to your start-up costs. If you’re considering a location that requires a lot of renovation, it’s crucial to get an accurate estimate of these costs before making a decision.

Initially, you may do a rough assessment of the property to identify any structural issues, electrical problems, plumbing concerns, etc. Once you are down to the final choice, be sure to have a commercial contractor or a builder with experience in renovating for accessibility and other specific needs of an adult day care center can provide an accurate estimate of renovation costs.

When estimating renovations, remember to factor in the following:

ADA Compliance: If the property isn’t already ADA compliant, modifications may need to be made for accessibility, including ramps, wider doorways, accessible restrooms, etc.

Safety Improvements: You may need to install emergency exits, safety rails, non-slip flooring, fire safety systems, etc.

Space Modifications: You might need to create specific areas like a quiet rest area, activity rooms, dining area, or therapy rooms.

Outdoor Areas: If you plan to have outdoor activities, you may need to factor in landscaping, fencing, and outdoor safety improvements.

Decor and Furnishings: The cost of paint, carpet, furniture, and other decor should also be included in your renovation costs.

Remember, a more expensive location that needs little renovation could end up costing less than a cheaper location that needs extensive work. Always consider the total cost – purchase/lease plus renovations – when comparing potential locations.

Step 4: Secure Funding

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.

Some common ways to obtain funding for a business include personal savings, loans from friends or family, bank loans, Small Business Administration (SBA) loan guarantees, and investors.

It’s normally rare to find grants for a business, but there may be federal, state, and private grants available for businesses serving the elderly or disabled. For instance, the Administration for Community Living (ACL) offers grants that might be applicable. In some cases, setting up your adult day care as a nonprofit organization may open up additional funding opportunities, including more grants and donations.

Related: Finding the money to start a business

Step 5: Register for Business Licenses and Permits

The next step in starting your adult day care business is to make sure it’s properly registered and legal to operate. It’s important to note, however, that the exact process can vary from state to state, so you’ll need to check the specific requirements for your location. Here’s a general guide to the key registrations:

Form a Business Structure: The first thing you’ll need to decide is what business structure is best for your business. This could be a sole proprietorship, a partnership, a limited liability company (LLC), or a corporation. Each of these structures has different implications for liability, taxes, and administrative complexity. Many small business owners opt for an LLC because it provides personal liability protection and has fewer administrative requirements than a corporation.

Related: Comparison of business structures

Register Your Business Name: After registering the business structure, you may need to register your business name. This process will vary depending on what business structure you pick. Sole proprietors and partnerships will often be required to register a “Doing Business As” (DBA), while corporations and LLCs register with the state.

Related: Tips and ideas for naming an adult day care

During this time, it’s also a good idea to check if the name you want is available as a web domain, even if you’re not ready to set up a website yet.

Related: Finding a domain name for your business

Obtain Business Licenses and Permits: 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 for every day care participant; 1:6 and 1:8 ratios are common requirements.

To start researching requirements in your state, 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 general, you’ll typically need to pass health and safety inspections, have a certain amount of space per client, and maintain certain staff-client ratios. Staff may also need to pass background checks and have specific training or certifications.

Also, if you plan to provide any health-related services, you may need to comply with additional regulations, such as the Health Insurance Portability and Accountability Act (HIPAA).

In addition, there are general business registrations that an adult day care might need, such as a business license, Employer Identification Number (EIN), and Occupancy Permit, among others.

Related: State guides for business licensing

Step 6: Acquire the Property

After securing funding and acquiring a location for an adult day care center, the next step to prepare the location for opening:

Renovations and Setup: The facility will need to be renovated and set up to accommodate the specific needs of an adult day care. This might include installing wheelchair ramps and handrails, setting up a kitchen and dining area, creating rest and activity spaces, and ensuring there are ample restroom facilities.

Safety Measures: Safety is paramount in an adult day care setting. All areas of the facility should be free of hazards. This includes securing rugs and carpets to prevent trips and falls, removing any potential choking hazards, and ensuring the facility is well lit. Emergency exits should be clearly marked, and fire extinguishers and first aid kits should be readily accessible.

Regulatory Compliance: Once renovations are complete, the facility will need to pass health and safety inspections. Your local health department or relevant regulatory body will provide you with a list of requirements.

Furnishing: Furnish the facility with comfortable and functional furniture. Ensure there are enough seats, tables, and rest areas for all clients.

Equipment: Depending on the services you offer, you may need to acquire certain equipment. This could include medical equipment, kitchen appliances, entertainment devices, etc.

Signage: Install clear signage, both inside and outside the facility. This can help make the environment more navigable and welcoming for your clients and their families.

Step 7: Get your Marketing Plan in Place

Marketing an adult day care business effectively requires a diverse and multi-pronged approach that emphasizes the unique value proposition of your services while reaching out directly to your target audience.

To start, establish a strong online presence through a professional website that clearly communicates the services you offer, your qualifications, and your commitment to caring for your clients. Including testimonials and success stories can greatly enhance your credibility.

Also, utilize social media platforms to share useful content, interact with your community, and highlight positive aspects of your day care. Platforms like Facebook are particularly effective due to the demographic they cater to.

Next, consider traditional marketing strategies like print and local media advertisements, brochures, and flyers. Host open houses and community events at your facility to allow potential clients and their families to experience your services firsthand.

Partnerships are also vital. Collaborate with local hospitals, clinics, senior centers, churches, and community organizations that can refer potential clients to your center.

Last, remember the power of word-of-mouth marketing. Provide excellent service and encourage satisfied clients and their families to recommend your facility to others. Offering a referral program can incentivize this process.

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.

Each of these strategies can contribute significantly to building your client base and positioning your adult day care center as a trusted and respected resource within your community.

Related: Low-cost ideas to market a new business

Step 8: Hire & Train Employees

Hiring the right staff is crucial for the success of an adult day care business, as they play a significant role in ensuring the health, safety, and overall well-being of the clients. They’re also the ones who create a warm and nurturing environment, making the facility a ‘home away from home’ for many adults.

Your team will likely be composed of various roles, including adult day care directors, nurses or nursing assistants, program coordinators, activity leaders, and administrative staff.

The salary of your staff will depend on their role, experience, and location. On average, adult day care directors may earn between $40,000 and $60,000 per year, while registered nurses can earn from $50,000 to $80,000 annually. Nursing assistants may earn around $20,000 to $30,000 annually. Activity leaders and administrative staff may also fall within a similar range, depending on their responsibilities and experience. Please note these are broad averages and actual salaries can vary.

When hiring for an adult day care center, consider these specific tips:

Skills and Qualifications: Different roles require different qualifications. For example, any medical staff should have appropriate licensure, while activity leaders should ideally have experience in recreation or social work. Ensure all employees meet the state’s training requirements for their role.

Experience in Elder Care: Experience working with seniors or disabled adults is crucial, as this population has unique needs and challenges.

Background Checks: Given the vulnerable population you’re serving, thorough background checks are essential to ensure the safety and trustworthiness of your staff.

Personality Traits: Look for individuals who are patient, empathetic, and have excellent communication skills. Working in an adult day care center can be challenging, and these traits are key to providing high-quality care.

Training: Once you’ve hired your staff, it’s important to provide them with thorough training. This should cover your policies and procedures, emergency protocols, client handling, and any specific care techniques they’ll need to know.

Continuing Education: Encourage and facilitate continuing education for your staff. This could be through workshops, courses, or attending relevant conferences. Keeping up to date with the latest best practices in adult care is crucial for providing the best possible care.

Remember, your staff is the face of your adult day care business, and their skills and demeanor will significantly impact your reputation and the quality of care you provide.

Related: Hiring your first employee

Step 9: Prepare to Launch

Starting an adult day care business is a fulfilling venture that requires thorough preparation and attention to detail. Beyond all the previously discussed steps, there are a few other critical aspects you must consider to ensure smooth operations and financial management.

Insurance: Insurance is essential in this business. You’ll need to secure general liability insurance, worker’s compensation, and property insurance at the least. Consider professional liability insurance too, especially if your center will be providing medical or therapeutic services.

Bookkeeping: Proper bookkeeping is vital for financial management and tax purposes. You can use software like Wave Accounting (FREE) or Quickbooks, or hire a professional bookkeeper or accountant. Keep track of all income and expenses to understand your financial health and simplify tax filing.

Related: Setting up the accounting for your business

Bank account and credit cards: Open a business bank account to separate your personal and business finances. This makes bookkeeping easier and can protect your personal assets. Also, consider getting a business credit card to help manage expenses and potentially earn rewards.

Payment processing: You’ll need a reliable way to accept payments. Many businesses today accept credit cards, which require a merchant services account. Companies like Square or Stripe make it relatively simple to accept card payments, even from mobile devices.

Management software: To keep up with patient care and industry regulations, using adult day care software can help with the management of your center.

Policies and procedures: Draft clear policies and procedures for all aspects of your business, from client intake to handling medical emergencies. This ensures consistency and can protect you legally.

Network: Building relationships with other businesses, community organizations, and healthcare providers can help increase your referrals and make it easier to coordinate care for your clients.

While these are some general guidelines, the needs of every adult day care center will be different based on factors like location, size, and the specific services provided. Therefore, it’s always a good idea to consult with professionals in the field, like a business advisor or lawyer, to ensure all bases are covered. Starting an adult day care business is a significant undertaking, but with careful planning and a commitment to providing quality care, it can be a deeply rewarding endeavor.

Adult Day Care Startup FAQs

How much does it cost to start an adult day care?

Starting an adult day care business requires a significant initial investment. However, the exact cost can vary significantly depending on the size of the center, its location, the range of services provided, and other factors. Here are some of the primary costs you’ll need to consider:

Property Acquisition/Lease: Whether you buy or lease a property, this will likely be one of your largest expenses. The cost can vary greatly depending on your location and the size and condition of the property.

Renovations and Setup: The property will need to be renovated and furnished to serve as an adult day care center. This could include installing ramps and handrails, setting up a kitchen and dining area, creating rest and activity spaces, and ensuring there are ample restroom facilities. The cost of renovations will depend on the current state of the property and the specific modifications needed.

Equipment: You’ll need to purchase various equipment, including medical equipment (if providing health-related services), kitchen appliances, furniture, office equipment, etc.

Insurance: The cost of insurance can vary greatly, but expect to pay several thousand dollars per year for comprehensive coverage. This includes general liability insurance, property insurance, workers’ compensation, and potentially professional liability insurance. The cost will depend on factors like the size of your center, the number of employees, and the types of services provided.

Licenses and Permits: The cost of obtaining the necessary licenses and permits can vary depending on your location, but could be in the range of several hundred to several thousand dollars.

Staff Salaries: You’ll need to pay your staff competitive wages to attract and retain quality employees. The total cost will depend on the number of employees and their respective roles.

Marketing and Advertising: Budget for marketing and advertising expenses to attract clients to your new center. This could include costs for website development, brochures, local advertising, and more.

Operating Expenses: Don’t forget to budget for recurring expenses like utilities, food and supplies for clients, maintenance, etc. It’s generally recommended to keep three to six months of operating expenses on hand as a buffer.

Given the variables involved, it’s difficult to provide an exact estimate without specific details. However, you could expect the start-up costs for an adult day care business to be in the range of $100,000 to $500,000 or even more, especially if purchasing a property. It’s essential to create a detailed business plan with a comprehensive budget to understand your funding needs and ensure the financial viability of your venture.

How much can an adult day care owner make?

The profitability of an adult day care business can vary widely based on factors such as the size of the facility, the number of clients, the fees charged, the services offered, and the operational costs. Generally, the revenue of an adult day care center is calculated by multiplying the number of clients by the daily rate and the number of days the center operates per year.

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. So, for this example, let’s say an adult day care center charges an average daily fee of $70 per client and has an average daily attendance of 20 clients. If the center operates 5 days a week for 50 weeks a year (allowing for holidays), the annual gross revenue would be:

$70 (daily rate) * 20 (clients) * 250 (days) = $350,000.

From this gross revenue, you’ll need to subtract your operational costs, including staff salaries, rent or mortgage payments, utilities, insurance, food and supplies, marketing, maintenance, and more. If your total operating costs are $250,000, for instance, your net income before taxes would be:

$350,000 (gross revenue) – $250,000 (operating costs) = $100,000.

However, these numbers are purely hypothetical and actual earnings can vary significantly. Factors like local market conditions, the reputation of the center, and the quality of care provided can greatly influence profitability. Therefore, it’s critical for potential business owners to create a detailed business plan and financial forecast before starting an adult day care center.

Another profit generator for your facility can be through hosting events while the facility is closed. If you aren’t open on the weekends, consider renting out your space to be used by participant families for baby showers, birthday parties, holiday gatherings, etc

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?

Resources:
Aging Life Care Association
American Health Care Association
National Adult Day Services Association (NADSA)

How To Start An Adult Day Care Center In 2023

How To Start An Adult Day Care Center In 2023

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