The adult day care industry brought in over $16.5 billion in revenue in 2022. With over 4,700 licensed adult day care centers nationwide, the industry continues to grow. The projected compound annual growth rate is 5.10% from 2022 to 2030.

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Baby Boomers age into retirement. Demand is ever-increasing for these community-based centers that provide social activities, meals, and health monitoring during daytime hours. For entrepreneurs interested in tapping into this expanding market, an adult day care can offer a rewarding small business opportunity with the chance to make a real difference in the lives of the elderly.

From assisted living activities to monitoring chronic health conditions, adult day cares to fill a vital need for seniors still living at home but requiring some support. This guide will walk you through how to start an adult day care. Topics include market research, competitive analysis, registering an EIN, forming an LLC, and more.

1. Conduct Adult Day Care Market Research

Market research is integral to starting an adult daycare center. It provides insight into needs within the human services industry, trends in products and services, your target market, and local market saturation.

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Some details you might learn through market research include:

• With 10,000 baby boomers turning 65 every day, the target demographic is rapidly growing.
• The adult day care sector sees demand from two primary channels.
• First is elderly individuals still living independently or with family.
• Second is caregivers needing daytime supervision for relatives with disabilities or medical conditions.
• Caregiver statistics show over 43 million Americans currently provide unpaid elder care.
• Adult day cares appeal to caregivers struggling to balance jobs and elderly relatives.
• Industry reports show dementia care is the fastest-growing segment.
• Alzheimer’s diagnoses are projected to triple by 2050.
• Recreational activities are a big part of adult day care centers.
• The increasing elderly population, growth of age-related diseases, and rise of long-distance family caregivers provide a supportive environment.
• Entrepreneurs can capitalize on this forecast by providing quality community-based daytime care.

With low barriers to entry, limited licensure requirements, and durable demand drivers, an adult daycare can offer a sustainable small business model. As you conduct market research you’ll learn more about the needs of local senior centers to bolster your business plan and obtain the required documents to get started.

2. Analyze the Competition

For an adult daycare owner, conducting competitive analysis is vital when entering the local market. This involves evaluating nearby facilities in terms of services, quality of care, staff competency, facilities, and reputation.

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Some ways to learn about local competitors in the adult day care service industry include:

• The first step is identifying existing brick-and-mortar operators around your targeted location.
• Gather key details on each like capacity, years in business, specific population served, and operating hours.
• Visit their website and social media pages to understand their digital footprint.
• Evaluate their web content, online community engagement efforts, customer reviews, photo galleries, and educational resources for potential visitors and referral sources.
• Identify highly rated competitors with strong community connections.
• Conduct anonymous tours of each facility.
• Gauge firsthand their environment, caregiver interactions, amenities, activities, safety protocols, and transportation offerings.
• Take detailed notes on competitive strengths and weaknesses.
• Talk to locals like geriatric doctors, case workers, and support group leaders to learn about their reputations.
• Scout locations and neighborhoods to spot influential feeder organizations. Identify where competitors get referrals and talent.
• Use insights gathered to shape your positioning.
• Offer niche services like dementia or Alzheimer’s care if lacking locally.
• Improve upon weaknesses like limited hours, qualifications, staff turnover, activities, or dated facilities.
• Leverage relationships and referral channels competitors have not tapped.
• Assign resources to match identified strengths.

Staying abreast of competitors through continued research helps quickly respond to changes after launch. Competitor analysis offers additional information into your potential new business. Monitoring the expertise of other eligible local daycares helps you navigate vital regulations and carve out a place for yourself.

3. Costs to Start an Adult Day Care Business

When starting a successful adult daycare service, substantial upfront investment should be planned for. Knowing what your budget is helps you secure funding options for your own set up. Let’s take a look at the costs your adult daycare may encounter as you operate.

Start-up Costs

• The first major start-up costs in health services involve researching state licensure for adult care facilities. Fees range widely but application and approval expenses often total $2,500+.
• Leasing an appropriately zoned building with adequate space for planned capacity requires a commercial real estate agent and legal fees averaging $3,000+.
• Triple net leases with operating expense responsibilities are common, ranging from $8-20+ per square foot monthly.
• Tenant improvements like handicap access upgrades, kitchen fittings, and durable flooring could require an extra $30,000+.
• Hiring an Administrative Director and Caregiver staff will likely be a new owner’s biggest recurring cost. Competitive wages and benefits packages are vital for attracting trained talent with senior care experience.
• A Director earning $65,000+ and a minimum Caregiver-to-client ratio of at least 1:6 will necessitate a payroll budget of $150,000+ annually.
• Outfitting the care environment is equally important. Transport vehicles, commercial kitchen equipment, and laundry machines carry hefty price tags.
• Key safety gear like lift equipment, secure wandering resident technology, and specialized therapeutic accessories can total $75,000+.
• Comfortable, adaptive furniture is central for participant well-being, averaging $15,000+.

Other key start-up costs include computers/software for intake, health tracking, and family communications ($5,000+), phone systems enabling secure community spaces ($3,000+), marketing collateral to attract referrals ($2,500+), and 6 months of general liability coverage ($6,000+).

Ongoing Costs

• While launch costs are daunting, operating an adult day center involves major recurring overhead. Personnel wages often represent 60%+ of monthly outlays.
• Facility rent/maintenance, food, utilities, supplies, and insurance also strain cash reserves until higher enrollment is achieved.
• Payroll overhead remains most facilities’ largest obligation as specialized staff is required to meet care standards.
• Budgeting $250,000+ yearly enables competitive wages, employer taxes, and performance incentives to retain experienced teams.
• Hiring bonuses and training costs from 25% turnover rates also add expenses.
• Feeding clients breakfast, lunch, and snacks requires an average of $12 per person daily. This nutrition outlay for 30 participants tops $65,000+ annually.
• Medical supplies/prescriptions, activity materials, cleaning products, and office items are similarly all recurring costs.
• State licensure and federal reporting mandate documented policies, regular staff development, and detailed record audits.
• Staying compliant through Admin hours and quality oversight helps ensure safety. Continuing education and professional services engagements to strengthen family trust add $15,000+ in annual expenses.

With revenues from private pay and long-term care insurance driving intake, maintaining consistent quality and community focus is imperative. As reputation strengthens and referrals grow over months and years, profit potential follows. Budgeting realistically for launch and operations costs helps ensure stability.

4. Form a Legal Business Entity

When starting an adult daycare, owners must choose a legal structure. The four main options—sole proprietorship, partnership, corporation, or LLC—impact taxation, liability exposure, and operations. For this hands-on senior service, an LLC balances flexibility with protection.

Sole Proprietorship

A sole proprietorship constitutes the simplest framework. This entails owners using their social security number for tax ID purposes and claiming all profits/losses on personal returns. However, proprietors hold unlimited liability for debts and legal claims, placing personal assets at risk. This exposure makes sole proprietorships ill-advised for adult care centers.

Partnership

Partnerships allow multiple owners to share control and split income via pass-through taxation. But similar to sole proprietors, general partners remain personally liable for obligations like accidents, negligence claims, or lawsuits. For a business with health and safety duties, unchecked liability makes partnerships an insecure option.

Corporation

A corporation protects owners’ assets from institutional debts and judgments. Shareholders risk only their invested capital. Corporations also provide the easiest structure for attracting outside investment, conducting interstate activities, and ultimately offering shares publicly. However extensive recordkeeping, tax filings, and legal compliance make this entity costlier.

Limited Liability Company (LLC)

For most adult daycare owners, an LLC combines liability protections with pass-through taxation and flexible management. LLC status shields personal assets from legal actions and containment risks, unlike sole proprietorships and partnerships. Compared to corporations, compliance demands remain fewer while ownership rules stay negotiable.

Tax-wise, income, and deductions flow through to members’ returns, avoiding double taxation. Overall, the LLC structure strikes an optimal balance of protection, flexibility, and affordability for hands-on elder care businesses.

5. Register Your Business For Taxes

Once your adult day care LLC formation documents are filed, securing federal and state registrations legally enables operating. An Employer Identification Number (EIN) from the IRS and state sales tax ID serve vital functions. Both are free and easily obtainable online.

An EIN essentially functions as a social security number for companies, used for tax purposes and employer-related services. LLCs need an EIN to open business bank accounts, legally pay employees, and report income. Sole proprietors can use SSNs but partnerships/corporations require one.

Applying takes just minutes at IRS.gov. Simply confirm your LLC exists, answer basic identification questions, and provide owner/responsible party details. After submitting, your EIN is immediately issued on screen to save or print.

With EIN in hand, registering with your state taxing authority to collect/remit sales tax is also essential. Failing to charge appropriate sales tax on goods/services sold risks financial penalties.

Each state maintains individual procedures but many let businesses apply online. You’ll submit your EIN, business activities category, ownership structure, and contact information. Sales tax IDs are instantly issued digitally in most areas without delay. Minimal application fees may apply in certain locations.

Displaying both EIN and sales tax ID demonstrates credibility with vendors, partners, and clients. Keeping tax licenses current also complies with IRS requirements to deduct business expenses. Setting up necessary registrations early enables the smooth launching of adult daycare operations.

6. Setup Your Accounting

Managing finances appropriately is critical when launching an adult daycare center. From budgeting adequately to separating expenses to retaining accounting help, fiscal diligence early on enables stability.

Accounting Software

After filing formation documents, one of the first steps should be implementing small business accounting software like QuickBooks. Linking bank/credit card accounts allows transactions to automatically download into pre-configured categories. Income and expenses are seamlessly tracked with minimal manual entry. Payroll, invoicing, and reporting functions are also integrated.

Hire an Accountant

Hiring an accountant remains ideal despite technology assistance. Experienced bookkeeping professionals handle needs like monthly closes, cash flow analysis, reconciliations, depreciation, and sales tax calculations for reasonable hourly fees. Simply gathering year-end tax paperwork for filing annual returns can cost $500-1,500.

Open a Business Bank Account

Maintaining strict separation between business and personal finances remains essential for adult care owners. IRS scrutiny triggers easily from mingling expenses or unclear recordkeeping. Opening dedicated small business checking/savings accounts and utilizing a distinct business credit card simplifies delineation.

Apply for a Business Credit Card

Business cards consider company revenues, not owner credit scores when assigning limits. Building independent commercial credit also enables financing in the company’s name for future needs. Providing EIN, legal documents, and projected financials when applying facilitates approval.

7. Obtain Licenses and Permits

Before welcoming the first participants, adult daycare owners must ensure proper permissions are secured. Find federal license information through the U.S. Small Business Administration. The SBA also offers a local search tool for state and city requirements.

The central clearance needed is state licensing as an adult day services program applicant. Requirements like minimum operating days/hours, facility specs, and staff training levels vary by location but all mandate rigorously vetted health and safety procedures.

Additionally, local municipalities require clearance for new businesses through zoning permits and occupancy certificates. Zoning approval ensures appropriately designated building use and land usage for care facilities within that district. Inspector examinations then confirm on-site compliance with fire, construction, accessibility, and electrical safety measures.

Kitchens serving daily meals mandate meeting health department codes as well. Equipment like commercial refrigerators, dishwashers, and food prep must align with state specifications. Staff servicing food must clearance health screens and food safety training.

Transport vehicles operated by the facility also need validation. Beyond regular maintenance, documented driver background checks, license verifications, and safety protocols must be submitted for review. Annual validation stickers visibly reassure families of diligent oversight.

Facilities offering specialized memory care or medical services often require additional clearances too like managed care certifications. Extra staff training and programming permissions help ensure adequate support resources.

8. Get Business Insurance

Operating an adult day care without proper insurance exposes owners to substantial financial risk. For a business responsible for vulnerable seniors’ well-being, coverage provides vital protection that leaders would be remiss to overlook.

The foremost liability to mitigate is injury claims. Despite close supervision, participant falls or accidents can occur. One lawsuit could quickly bankrupt most small companies without liability coverage. Policies covering up to $2 million in legal judgments and settlements provide prudent shields for owners’ assets.

Equally hazardous are employee claims like harassment allegations or wrongful termination suits. Even unfounded cases rack up tens of thousands in legal costs. Employment practices liability insurance fills this gap to fund legal defenses.

Property risks also loom without policies guarding physical assets. Storm damage, vandalism, or kitchen fires could destroy the facility. Business property insurance covers repair and replacement so operations can resume. Some carriers even pay for temporary relocation if needed during the rebuild.

Guarding the business’ future requires four key steps:

1. Inventory assets at risk – building, vehicles, equipment, electronics, data
2. Assess risks like regional weather, aging facility, participant mobility issues
3. Research specialized coverages that mitigate identified threats
4. Compare quotes from highly rated insurers

Protecting years of sweat equity and hard-earned revenue only requires an hour or two upfront selecting tailored policies. Avoiding coverage gaps through a licensed agent’s guidance then lets owners focus on enriching elderly lives rather than worrying over catastrophic liabilities.

9. Create an Office Space

Operating an adult day care center is a hugely involved undertaking. While the prime focus stays on participants and programming, securing office space for administrative needs provides critical infrastructure. Location options balancing convenience, professionalism, and affordability should be thoughtfully weighed.

Home Office

Many new owners initially default to home offices for maximum convenience. However, conducting tours, interviews, and family meetings in personal living spaces risks seeming less established. Prospects may question the seriousness of operations that are fully home-based. Dedicated work areas also simplify separating business and personal worlds to avoid IRS scrutiny.

Since you’re not starting a private home care business, I recommend against making your home your office.

Coworking Office

For under $200 monthly, coworking spaces like WeWork offer professional environments sized for small teams. Accessible conference rooms facilitate meetings and calls without houseguests overhearing. Complimentary amenities like internet, printing, and front desk staffers also elevate credibility when bringing visitors on-site.

Retail Office

Retail space enables customer-facing visibility but can prove costlier. Street access aids marketing efforts to neighborhood seniors but limits privacy for sensitive discussions. Minimum 12-month leases at $25 per square foot also require heavier traffic to justify over shorter-term flex space.

Commercial Office

Once revenue stabilizes, moving into dedicated commercial suites housing all operations in one campus may suit some owners’ quality standards best. Custom buildouts present a polished setting for community events and training too while keeping caregiver teams under one roof. If the budget allows, unified bases inspiring trust and organizational identity prove ideal.

10. Source Your Equipment

Launching an adult day care requires extensive outfitting to serve seniors safely and comfortably. From specialized lift equipment to ergonomic furniture, finding affordable equipment that meets clinical standards takes strategic sourcing across new, used, and rental suppliers.

Buy New

Purchasing brand-new medical tools like vital signs monitors, blood pressure cuffs, and wound therapy devices ensures peak precision for staff caregivers. Hospital liquidators offer deep discounts on current models while dealer demos carry full warranties at 20-30% savings. Finance programs are also commonly available to ease cash flow impacts for owners.

Buy Used

However, costs can stay manageable through secondhand buys too. Marketplaces like Craigslist, Facebook, and eBay connect local sellers to clear surplus wheelchairs, resident beds, or mobility walkers from facility upgrades. Hands-on inspection before transacting verifies items adequately function while peer sourcing builds community connections.

Rent

For short-term needs or replacing aged equipment, renting medical gear also sustains budgets. Online inventory from suppliers like USA Medical Supply enables browsing regional availability of hospital beds, oxygen units, or ambulatory devices by the week/month. Some offer trial periods to assess resident response before long-term leases.

11. Establish Your Brand Assets

Establishing a distinct brand presence elevates an adult daycare’s credibility and memorability within the community. From logo development to web presence, branding signals organizational polish.

Get a Business Phone Number

Claiming a toll-free business line via providers like RingCentral upgrades perceived legitimacy over personal cell numbers. Call routing, voicemail, and built-in texting also systemize communications.

Design a Logo

Creating a visual brand identity starts with a logo evoking organizational spirit. Friendly designs with senior-friendly fonts and accessible color palettes make suitable matches. Sites like Looka offer affordable DIY tools or custom creator connections.

Print Business Cards

Business cards enable effortlessly sharing contact info while reinforcing styling. Cards should display key data like address, phone/email, certifications claimed, and found date. Leading online printer Vistaprint offers durable cardstock options perfect for purse storage.

Buy a Domain Name

Securing a matching domain gives web visibility and email address gravity. Aim for straightforward, professionally relevant URLs purchasable through registrars like Namecheap.

Design a Website

Building out websites fuels digital discovery by families plus organizational transparency. User-friendly site builders like Wix facilitate quick DIY drafting with modern templates. Or specialized developers found on Fiverr affordably create custom, accessibility-focused sites.

12. Join Associations and Groups

Beyond state regulators, a wealth of local networks and peer groups can provide invaluable wisdom for adult daycare entrepreneurs. Tapping this village accelerates success through shared knowledge.

Local Associations

Regionally, longevity-focused business alliances like LeadingAge offer intersections between elder care owners, universities, and affiliated services. Access to trend insights, training discounts, and referral pipelines results from joining.

Local Meetups

Event clearinghouses like Meetup also list lectures, mixers, and conferences relevant to senior services. Building community connections and continuing education there keeps best practices fresh. Exchanging war stories and bouncing ideas off fellow owners creates welcome support too.

Facebook Groups

Industry-specific Facebook Groups open more crowdsourced growth channels. For example, the Adult Daycare Providers Resource Group shares hundreds of peers facing similar opportunities. Getting granular with local offshoot groups around care specialties or regional subtopics produces niche exchanges.

13. How to Market an Adult Day Care Business

Growing an adult daycare relies heavily on effective community outreach. With compassionate service as the core product, spreading awareness of organizational competency and values becomes marketing’s central charge.

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Personal Networking and Referrals

Satisfied families and hospital partners serve as the most resonant advocates. Offering referral bonuses, exclusive participant events or public recognitions for big contributors turbocharges word-of-mouth channel development early on.

Digital Marketing

Digital platforms should also be leveraged to cast wider nets for caregiver attention. Dedicated Google/Facebook ads invite targeted trial sign-ups from local zip code searches for terms like “dementia care options near me”. Promoted social posts boost caregiver testimonials.

Additional digital channels such as:

• Optimizing Google Business Profile with photos, offerings details, and prominent website linkage
• Launching an email newsletter with care tips, new programming highlights, and upcoming community seminars
• Posting weekly programming recap videos to TikTok and Instagram Reels noting recent activities
• Guest blog pitching to senior-focused outlets detailing specialty service offerings
• Partnering with multi-center review sites like Caring to share family endorsements

Traditional Marketing

Traditional opportunities to connect with referral sources persist as well:

• Hospital, clinic, and skilled nursing reps visit marketing with brochures
• Local community center, church, and library talks invite prospective tour sign-ups
• Care manager association meeting exhibits attach care team faces to services
• Chamber of Commerce sponsored mixers to meet business neighbors

With touchpoints spanning both digital and tangible channels, conveying care quality and trustworthiness fuels stabilizing enrollment and revenue.

14. Focus on the Customer

For adult day cares, delivering compassionate customer service represents the core product families are purchasing. Caregivers entrust owners to enrich loved ones’ physical health, cognitive activity, and social connections when they cannot. Some ways to improve customer focus in health services include:

• Staff should exude genuine warmth while assisting attendees.
• Remembering personal details about grandchildren or nostalgic songs builds bonds bolstering engagement.
• Care teams can further customize festivities to individual interests and mobility levels so no one feels excluded.
• Even simple assistance like timely toileting helps maintain dignity.
• Extending heartfelt support to caregivers also earns loyalty.
• Listening empathetically as elders transition from independent living builds trust in an owner’s guidance.
• Checking in consistently with usage feedback makes families feel heard.
• Little customer experience touches like sending handwritten birthday cards to registered seniors nourish community ties.

When personnel exude selfless care rooted in understanding people’s often difficult journey, positive word-of-mouth spreads. Local hospitals instinctively know where to guide new dementia diagnoses. Caseworker appreciation drives recurring contract renewals.