Guides
The break-even point for a home care agency, and how to reach it sooner
Break-even for a home care agency is the billed care hours that cover fixed costs, caregiver wages, payroll taxes and on-costs before any margin appears.
What to take away
- Break-even for a home care agency is the number of billed care hours per month where revenue equals fixed costs plus caregiver wages and their on-costs. Below it, every visit loses money.
- Billable hours are not paid hours. Travel between clients, documentation and unfilled shifts are paid time no family is billed for.
- In Canada, caregiver on-costs include CPP and EI contributions and WSIB or WCB premiums. Rates vary by province and by classification.
- Four levers move break-even soonerfill rate, hourly rate, on-cost control and billing speed. Give each lever an owner.
- Use the BLS Occupational Employment and Wage Statistics tables for your metro to set caregiver pay, then add your own on-cost percentage on top.
The break-even formula, in your own numbers
Break-even hours per month equals fixed costs divided by the contribution each billed hour makes. Contribution is your hourly rate minus the direct cost of that hour. Direct cost covers the caregiver wage, payroll on-costs, mileage and any unpaid travel you absorb.
Replace the variables with your own figures. Fixed costs (F) cover office rent, scheduling software and insurance. The coordinator's salary and your own draw belong in F as well.
Direct cost per billed hour (D) is the caregiver wage plus the on-cost percentage plus mileage. Rate (R) is what the family pays. Break-even hours equal F divided by (R minus D).
Scheduling and billing software is a fixed cost. Agencies often choose between AxisCare, WellSky Personal Care and AlayaCare, quoted per client or as a flat monthly fee. Small agencies in most US markets pay roughly $200 to $600 a month.
Break-even worked example
- 18000Fixed costs (F) per month
- 38Hourly rate (R)
- 26Direct cost per billed hour (D)
- 1500Break-even billed hours
At 40 hours a week per full-time caregiver, that is about nine caregivers running full schedules with no gaps. Fill rate decides whether you get there.
Where the hours leak
A caregiver paid for 40 hours who bills 32 has an 80% fill rate. The other eight hours are travel between clients, charting, or a cancelled shift the family did not replace.
Fill rate raises break-even
- 1500hours100% fill
- 2400hours80% fill
Every point of fill rate below 100% raises your effective direct cost per billed hour. At 80% fill, a $26 direct cost becomes $32.50 per billed hour. Break-even climbs from 1,500 hours to 2,400 or more on the same fixed costs.
Track fill rate weekly by caregiver instead of monthly by agency. One chronic gap on a Tuesday morning route is a scheduling problem you can fix. A falling agency average is a recruitment problem you cannot.
The five pricing models, and where each fits
Pricing models at a glance
Pricing model
- Hourly with minimum
- Personal care visits
- Tiered by credential
- PSW and unregulated mix
- Shift or block rate
- Overnight and live-in
- Monthly retainer
- Predictable invoices
- Assessment plus hourly
- Complex nurse intake
Where it fits
- Hourly with minimum
- Short visits run long
- Tiered by credential
- Rate comparison confusion
- Shift or block rate
- Two-caregiver absences
- Monthly retainer
- Unused paid hours
- Assessment plus hourly
- Multi-visit assessments
What it hides
- Hourly with minimum
- Tiered by credential
- Shift or block rate
- Monthly retainer
- Assessment plus hourly
The five pricing models
Where it fits a home care agency
- Hourly rate with a minimum visit
- Personal care and companionship visits of two hours or more, typically $28 to $40 an hour in US metros
- Tiered hourly by credential
- Agencies mixing PSWs with unregulated caregivers, with the PSW tier typically $3 to $6 an hour higher
- Shift or block rate
- Overnight and live-in coverage, commonly quoted at $180 to $280 a night
- Monthly retainer for a set block of hours
- Clients who want a predictable invoice
- Assessment fee plus hourly
- Complex intake needing a nurse or case manager, with assessments commonly $75 to $200
What it hides
- Hourly rate with a minimum visit
- Short visits that run long eat the margin
- Tiered hourly by credential
- Families comparing your PSW rate to a competitor's companion rate
- Shift or block rate
- The shift that needs two caregivers to cover one absence
- Monthly retainer for a set block of hours
- Unused hours the family feels they paid for
- Assessment fee plus hourly
- The assessment that takes three visits to complete
Reaching break-even sooner
- Raise fill rate before you raise rates.Match caregivers to routes by geography rather than by seniority. A caregiver who lives ten minutes from the first client bills more of her paid day than one crossing the city.
- Price the minimum visit above cost.A one-hour visit with 30 minutes of travel is a 90-minute cost. Set the minimum where the visit still contributes.
- Invoice weekly instead of monthly.Cash collected in week one funds payroll in week two. Monthly invoicing means you float a month of wages on your own credit.
- Review on-costs each quarter.WSIB or WCB premium rates change with your claims experience. A bad quarter of injuries raises every future hour's direct cost.
- Watch caregiver turnover as a cost line.Recruitment, onboarding and the unfilled shifts during a vacancy are real money. A stable roster is the cheapest capacity you have.
- Reset pay bands from BLS OES once a year.Use the home health and personal care aide median for your metro. If it rises 5%, your direct cost per billed hour rises with it.
A five-point gain in fill rate on 2,000 paid hours adds 100 billed hours. At the 12 dollar contribution from the worked example, that is $1,200 a month against fixed costs.
Facts to confirm before acting
Internal Revenue Service: What kind of records should I keep? sets out what a business record system must show: income and expenses, and the documents behind purchases, sales, payroll and assets. Your break-even model is only as good as the payroll and mileage records feeding it.
Federal Trade Commission: Advertising FAQs: A Guide for Small Business covers claims about your rates and credentials. If you advertise a rate, it must be the rate you charge. Testimonials must reflect real experience.
U.S. Bureau of Labor Statistics: Occupational Employment and Wage Statistics Tables publishes wage estimates by occupation, state and metro area. Start caregiver pay from the home health and personal care aide figure for your metro, then add your own on-costs.
Common questions
What counts as a fixed cost for break-even?
Rent, insurance, scheduling and billing software, and the coordinator's salary. Licensing fees and your own draw sit there too. Fixed costs are anything you pay whether or not a caregiver is in a client's home. Caregiver wages, on-costs and mileage are variable and belong in the direct cost per hour.
What does a small agency's break-even look like?
At a $38 hourly rate, a $26 direct cost per billed hour and $18,000 of monthly fixed costs, break-even is 1,500 billed hours. That is about nine full-time caregivers at 40 hours a week.
How often should I recalculate break-even?
Monthly, using the prior month's actual fill rate and on-costs. A quarterly recalc is too slow when a WSIB rate change or a lost contract moves your direct cost by several dollars an hour.
Does break-even differ by province or state?
Yes. Payroll taxes, workers' compensation premiums, licensing fees and mileage rules all vary. Confirm your obligations with the Canada Revenue Agency, your provincial workers' compensation board, or a CPA before you fix the numbers in your model.
