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What is a Care Home Business?
There are currently more than 17,000 care homes in the UK and nearly half a million care home residents. As life expectancy increases and the population of the UK continues to age, the demand for care and the number of care homes in the UK will continue to increase.
The Office for National Statistics (ONS) reported that in 50 years, there will be an additional 8.6 million people in the UK who are aged 65 and older. An ageing population is likely to result in a significant increase in the demand for care homes.
The total value of the adult social care sector in the UK was estimated at £46.2 billion in 2021. The majority of care homes in the UK are privately owned. Although council-owned and charity funded care homes do exist, approximately 84% of care home beds are provided by the private sector.
Care homes provide accommodation, care and support to individuals who need help with various aspects of their daily lives. Care homes usually provide 24-hour care to their residents.
Some responsibilities of a care home and care home workers may include:
- Providing accommodation.
- Helping with personal care, such as washing, dressing, going to the toilet, eating and drinking.
- Administering medications.
- Providing nursing care.
- Helping with mobility.
- Providing healthy and safe food and drinks, including meal planning, preparation and serving food.
- Helping with getting in and out of bed or sitting and standing up from chairs.
- Providing social activities, such as daily activities, days out and excursions.
- Encouraging mental and physical activities and exercise. This could include games, entertainment and other stimulation.
Care homes can have short-term or long-term residents, with some care homes also offering emergency or palliative care. The majority of care home residents are elderly, although any adult over the age of 18 can utilise a care home. Most care home residents are those who have difficulties managing daily life as a result of old age, poor mobility, a physical or learning disability, a health condition, such as dementia or a stroke, or another condition that impacts their independence.
Care home residents will be supported by a variety of staff members, including care assistants, senior care workers, care home managers, registered nurses, activity coordinators, chefs, kitchen assistants and cleaners.
Care homes can vary significantly in size, with some care homes only having a few residents and others having more than 100 residents.
The care home industry is a hugely important sector, as the nature and quality of care can have a huge impact on the mental and physical health of residents, their overall wellbeing and their happiness. Opening a care home can be a rewarding business venture, both financially and emotionally.
Although starting up a care home business requires a large initial financial output and can be both time consuming and, at times, stressful, the advantages can be significant enough to make it worth it.
If you have a flair for business, care about the health and wellbeing of vulnerable individuals, have a strong business model, a high level of commitment, and a desire to help, starting up a care home business could be the perfect business venture for you.
Types of Customers
Before you determine the types of customers you should target, you first need to decide the type of care home business you are going to set up.
There are two main types of care homes:
A residential home provides accommodation and helps with personal care, such as washing, dressing, going to the toilet and taking medications. They also offer daily activities, entertainment and trips out. A residential home will provide meals, housekeeping and laundry.
A residential care home can provide long-term, short-term, emergency, respite and palliative care. They are recommended for those who are unable to live independently or manage their day-to-day lives but do not require 24 hours a day nursing care. Residential care homes are not considered medical facilities. However, medical professionals such as GPs, physiotherapists and occupational therapists may visit a residential care home.
As well as providing accommodation and personal care, a nursing home also has at least one qualified nurse on duty 24 hours a day to provide any nursing care that is required. Residents of nursing homes may need nursing care, such as colostomy care, support with a feeding tube, administered oxygen, or intravenous infusions. Nursing homes can also manage health care plans and provide palliative care.
Nursing homes are recommended for people who require continual support, especially if they have a health condition or disability. A nursing home resident will have significant difficulties coping with day-to-day life and may need intensive rehabilitative care or supportive care.
Nursing home residents will also have access to social activities, entertainment and hobbies. Residents may also receive regular visits from healthcare professionals.
Once you have decided the type of care home you are going to set up, you can then consider the type of client your business is likely to attract. In some cases, the resident themselves will choose the care home they are going to live in, whereas in other cases, the resident’s families or healthcare professionals will choose the best care home to suit their needs.
When considering who your potential residents will be, some of the considerations you need to make include:
- Are you opening a residential care home or a nursing home?
- What level of care will you be offering?
- Will you have a 24/7 nurse or other healthcare professionals?
- What will your care home’s capacity be?
- What equipment will you have in the care home?
- How many members of staff do you intend to employ?
- How much will the care home fees be?
You must ensure your care home can meet the needs of potential residents. If you cannot meet the individual’s assessed needs, you should not accept them as a resident, as you may not be able to ensure their health and safety and encourage their physical, mental and emotional wellbeing.
The Care Standards Act (2000) states that a care home must be fit for its purpose and able to meet the needs of residents. Under the Act, care homes cannot offer care and support to any individuals whose needs they cannot meet.
Equipment You Will Need
The equipment needed as part of your care home business must support the residents’ health and wellbeing. The equipment should encourage occupational engagement and independence. Equipment should also contribute to the safety, quality of life, and dignity of care home residents.
Equipment should also help to maintain or improve the resident’s physical health, for example, by facilitating movement and optimising the use of body systems, such as the musculoskeletal system and the digestive system.
The type of equipment you will need in your care home will vary depending on the type of residents you are catering for. Some equipment may be provided or funded by the government or Community Health Services, and some will need to be funded by the care home and will need to be budgeted for accordingly.
Care home businesses will need to provide equipment and specific adaptations to the care home environment to suit the needs of the residents.
Some examples of care home equipment you may need are:
- Moving and handling equipment.
- Lifting equipment, such as hoists and transfer boards.
- Walking equipment, such as walking frames, walking sticks and standing frames.
- Mobility equipment, such as wheelchairs and wheelchair ramps.
- Personal Protective Equipment (PPE), such as gloves, aprons and masks.
- Equipment for monitoring the weight of residents.
- Mobility aids, such as grab aids, toilet aids and commodes.
- Nursing equipment, such as nebulisers, syringe drivers and drip stands.
- Continence products.
- Suitable beds and accessories to meet the differing needs of residents. This could include medical beds, bed raisers and extendable or adjustable beds.
- Specialist mattresses, such as static foam or static air mattresses, and alternating pressure mattresses.
- Specialist chairs and raising equipment.
- Repositioning equipment such as slings, ceiling track hoists and slide sheets.
- Specialist food-related equipment, such as specialist cutlery, mugs, cups and bowls.
- Toileting equipment, such as raised toilet seats, bedpans and toilet frames.
- Bathing equipment, such as bath seats and shower chairs.
- Specialist plus-sized equipment for residents that exceed a certain weight.
Under the Health and Social Care Act (2008), a care home has a legal responsibility to ensure that any equipment is suitable for the purpose for which it is being used. To ensure that they fulfil their responsibilities, care homes can request an assessment and receive recommendations from a relevant person, such as an Occupational Therapist.
There are many different costs associated with setting up and running a care home business. Your costs can vary depending on several factors including the type of care home you run, the number of residents you have and the type of equipment you purchase.
Some typical costs associated with a care home business include:
The cost of paying your employees usually takes up 45%–60% of your care home’s budget. The type of staff you will likely need to employ includes a care home manager, senior care assistants, care workers, catering staff, cleaning staff, maintenance staff, receptionists and administration staff. You will also likely need to employ a Human Resources department. When calculating the costs associated with your staff you should consider the number of staff you will employ and their hourly wage. You will also need to account for holiday pay, sick pay, National Insurance and any company pension contributions.
Equipment costs can vary significantly, depending on how much of the costs are covered by your local council or Community Health Services. Contact your local council directly to find out what equipment costs you will be responsible for.
The care home building
The cost of purchasing or renting the building and doing any renovations, reconfigurations or installations that are required can be substantial. If you are purchasing the building, the costs can vary significantly, depending on the size and location of the building. You could also choose to purchase an already existing care home. Costs can vary from £500,000 to £5 million.
Maintenance costs when running a care home include ground and building maintenance and equipment maintenance. The cost of repairs and replacements should also be incorporated into your maintenance costs.
Care homes are responsible for providing all meals, snacks and drinks to their residents. When you receive an inspection from the Care Quality Commission (CQC), they will check whether the food you provide meets the residents’ needs, that the residents’ preferences, religions and cultural backgrounds are taken into account, and that meals are safe and nutritious. The food costs you will incur will depend on the size of your care home and the number of residents you have. Food costs per resident can range from £100 to £800 per month.
Your overhead costs are the costs associated with running the care home. This could include electricity, gas, water and council tax.
Care homes will need at least one vehicle in order to take residents on days out or excursions, to visit places of worship, and to transport them to any appointments. Depending on the size of your care home, you may need to invest in multiple vehicles. You will also need to factor in the vehicle’s running costs, such as petrol, insurance, tax and MOTs.
Branding and advertising
A care home is a business and in order to ensure they are making a profit, they must spend money on branding, advertising and marketing the care home. It is recommended that you spend between 1% and 3% of your annual turnover on marketing. For example, if your annual turnover is £500,000, it is recommended you spend between £5,000 and £15,000 per year on marketing. The more beds you need to fill, the more money you will need to spend on marketing.
Typical Pricing for Residents
Deciding what fees to set for your care home residents can be difficult. The fees you charge should reflect the standard and quality of care that you will provide, the facilities and equipment that will be available, and the number of staff you will employ.
The care home industry is extremely competitive, meaning it is vital that your pricing is set at the correct level.
When considering your pricing, there are several factors you should take into account:
Your operating costs
Calculate how much your operating costs are likely to be weekly, monthly and annually. When considering your operating costs, take into account the cost of equipment, maintenance, the cost of paying staff, and your overhead costs.
The typical pricing of other care homes in your local area
Focus particularly on care homes that offer the same standard of care and facilities as you. Compare their facilities and equipment to yours and research if there are any charges that are not included in the fees of local care homes.
The maximum amount your local authority pays towards care fees for residents
This will usually reflect your fees. Local authorities often pay different amounts for different levels of care. Consider the type of care you will offer and what your local authority will pay for this care to help you set your pricing. Consider the area where your care home will be based and the percentage of your residents that are likely to be funded by the local council. If the majority of your residents will be council funded, this will need to be reflected in your pricing.
How much you will need in order to meet your acceptable profit margin
This is the amount of profit you will make after all the expenses and costs have been paid. You can work out your profit margin by subtracting the overall costs from the net earnings of the care home, dividing this figure by the net earnings and then multiplying this by 100.
When setting up your pricing, it is important to ensure the fees are transparent so that residents and their families are aware of exactly how much their care will cost.
Nursing home fees are typically more expensive than residential care homes. This is because nursing homes usually have higher operating costs, more expensive equipment and specialist staff.
On average in 2021, residential care homes fees were £704 per week, whilst nursing home fees were £888 per week. The monthly costs on average were £2,816 for residential homes and £3,552 for nursing homes. Care homes that provide specialist care usually charge higher fees.
Safely Running a Care Home Business
Safely running your care home business is imperative to ensuring the health and safety of the residents. Care home residents are usually more vulnerable and may rely on staff for important tasks, such as eating, drinking, washing and taking medications.
There are several safety protocols a care home business must follow:
Risk assessments in a care home should cover:
- Identifying hazards.
- Determining who could be at risk.
- Evaluating the potential risks.
- Implementing safety measures.
- Recording the results of the risk assessment.
- Reviewing the risk assessment on a regular basis.
The risk assessments should also cover any additional risks related to individual residents, for example, mobility difficulties in the event of an evacuation.
Cleaning procedures should include a schedule for cleaning, the management of cleaning materials and equipment and the cleaning processes all staff will follow. Cleaning procedures should apply to all areas of the care home.
Hazard Analysis and Critical Control Point (HACCP)
HACCP helps kitchen staff and other food handlers to manage food safety hazards that could arise when storing, preparing and cooking food. Any potential risks can be identified, and measures implemented to ensure the risks are reduced or removed. You should also keep records of any actions you have taken in line with HACCP.
Ensure the building and any equipment are effectively maintained
It is imperative that any care home equipment is well maintained, as using faulty equipment could result in serious injury to residents. This is because many residents rely on equipment for mobility. Implementing procedures for checking equipment and a schedule for regular maintenance can help protect the safety of residents. You should also keep a written record of maintenance checks.
Ensure the personal hygiene of all staff
All employees must ensure a high level of personal hygiene. This includes wearing the correct Personal Protective Equipment (PPE) and following handwashing procedures at all times. Correct handwashing procedures can help prevent the spread of bacteria and viruses that could affect the health and safety of vulnerable residents.
Whilst setting up your care home business, it is essential to ensure that you adhere to all legal requirements. Failure to follow legal requirements could result in delays opening your care home, a fine, the forced closure of your care home or, in serious circumstances, a prison sentence.
Some legal requirements you should be aware of include:
Register with the relevant registering authority
You will need to apply to register with the correct registering authority in your country. You must register as a sole trader, a partnership, or an organisation. You will need to pay an annual fee for your registration and will receive inspections periodically. Care homes in England need to register with the Care Quality Commission (CQC), in Scotland you will need to register with the Care Inspectorate, in Wales care homes should register with the Care Inspectorate Wales (CIW), and in Northern Ireland it is the Regulation and Quality Improvement Authority (RQIA).
Appoint a registered care home manager
If you do not have the correct qualifications or don’t intend to be in charge of the day-to-day running of the care home, you will need to appoint a registered care home manager. This individual must register with the CQC and will share the legal responsibility of meeting legal requirements.
Obtain food hygiene certificates
The majority of care home staff will require a Level 2 Food Hygiene Certificate. Staff members who are involved in food handling, preparation, serving or another aspect of the food process, will require a Level 2 certificate. Level 2 is also required if staff supervise any activities where residents will be handling food, such as cooking or baking activities. Chefs, kitchen staff, and the care home manager will need a Level 3 Food Hygiene Certificate.
Ensure all staff have a Disclosure Barring Service (DBS) check
All staff and volunteers are legally required to undergo a DBS check. All staff will need a clear DBS in order to be employed by the care home.
Care homes are required to have several different types of insurance. This includes employers’ liability insurance, buildings and contents insurance, medical malpractice insurance, professional indemnity insurance, legal expenses insurance, and public liability cover.
Obtain TV licences
If there are any TVs in the care home, including in communal areas, you will need to apply for TV licences. If residents have TVs in their bedrooms, you will need to apply for accommodation for residential care (ARC) concessionary licences.
Positives of Owning a Care Home Business
There are many positives to owning a care home business:
Unlimited income potential
The earning potential of a care home business is a major advantage. A well-run care home with high occupancy can have a high annual income, which can still result in huge profits once you deduct your costs and expenses.
With an increasingly ageing population, the care industry is one of the fastest-growing industries in the world. This gives you the opportunity for further growth, either by extending your care home to accommodate more residents or opening another care home. Your business is always going to be in demand, which is a huge advantage for business owners.
It is rewarding work
The care industry is extremely rewarding, and you can make a huge difference to people’s lives. You can offer care, support and medical help to elderly people and ensure they maintain their dignity and have the best possible quality of life. You will also have a lot of face-to-face interaction.
Choose your own clientele
You can choose the type of care home you are going to run, meaning you can choose the type of residents you hope to cater for. You can base your decision on your own experience and the local competition.
Become integrated into the local community
A care home is a staple of the local community, with many people in the community having friends or relatives living in the care home. Care homes often have local volunteers helping out or will run charity days where the community can get involved.
You can control your own workload
You can be directly or indirectly involved in the care home and work as much or as little as you want. You could choose to manage the care home yourself or hire a care home manager and reduce your own involvement and workload.
Your income is predictable
As care homes are constantly in demand and are not busier at different times of the year, your income is likely to be predictable. The outgoings and costs associated with running the care home are also usually consistent, making it easier to plan and predict your profits.
Negatives of Owning a Care Home Business
However, there are several disadvantages of setting up a care home business that you should be aware of:
High start-up costs
The start-up costs associated with setting up a care home can be substantial. Your initial outgoings could include the cost of the building, renovations, advertisements and staffing. These outgoings could be upwards of £1 million, meaning you may need to source outside investments.
High time commitment
A care home is a 24/7 establishment and requires a high level of time and physical and emotional commitment. This is particularly true when you are first setting up your care home business.
Owning and working in a care home can be physically, mentally and emotionally demanding. Starting up a care home and successfully running the business can also be stressful. If you are looking to set up a business simply to make a profit, a care home business may not be the best option for you.
Care home residents are usually extremely vulnerable, and many everyday activities can be a risk to their health and safety. Care home residents are at high risk of injury, illness, dehydration and other health issues. This means that care homes have high liability.
Occupancy rates may sometimes be low
Occupancy can fluctuate throughout the year. If you have empty beds, this can have financial implications and negatively impact your profits. In particular, when your care home is newly opened, you may find that you have a high number of empty beds.
Planning Your Care Home Business
An effective well-designed business plan is essential to ensure the success of your care home business.
When planning your business, there are several important considerations you will need to make:
What type of care home are you planning to set up?
You will need to decide if your care home will be a residential care home or a nursing home. You also have the option to set up a specialist care home, for example, a specialist dementia care home. It is important to make a decision about the type of care home you are setting up first, as this will influence many other factors, such as the staff you require, the type of equipment you will need and the fees you will charge.
What are your business objectives?
Planning the future of the care home and creating a one-, three- and five-year plan can be pivotal to the success and growth of your business. Having clear business objectives and a business plan can help to attract prospective investors and help you to identify which aspects of the care home require particular investment.
Your business objectives should be SMART:
- S = Specific
- M = Measurable
- A = Achievable
- R = Realistic
- T = Time-bound
What is the market like in your local area?
Being aware of your local market can help you to identify any gaps in the market and see what demand is likely to be. If there are already several nursing homes in your area, and none of them are at maximum capacity, it may not be financially rewarding to open another nursing home. You should be aware of local competition, local demand, finances provided by the local council and the fees that local care homes charge.
What is your occupancy capability?
The size of the building and the number of staff you employ will influence your occupancy capability. Determining how many residents you can care for can help you determine your marketing strategies and your pricing.
What are your equipment requirements?
Your equipment requirements should also include the care home building. You will need to decide what equipment you require and research which equipment will be provided or funded by other sources, and which will need to be funded by the care home directly.
What level of service will be available?
The services available can vary significantly. You could offer services such as physiotherapy, intensive nursing care, or 24/7 medical care. You could also offer different types of activities and entertainment, communal areas, hairdressing and beauty care.
What are your costs forecasts?
Calculating your start-up costs, your estimated costs monthly and annually, staff wages, overhead costs and operating costs can help you to calculate how much money your care home needs to make per month and what fees you need to charge residents.
What is your pricing policy?
Your pricing policy is the fees you will charge your residents per week. Consider your costs forecast and your local area when calculating your fees. Your pricing policy should be transparent and easy to understand.
Ensure you have complied with all legal requirements
Consult the list of legal requirements above to check you have complied with all requirements and regulations and all your paperwork is accurate.