Revenue Is Vanity, Profit Is Sanity: Why Your Home Care Agency Feels Busy but Can't Make Money

You know the conversation. A home care owner talks about their revenue number, and it sounds decent. Then there's a pause. Then something like, "But somehow... there's never enough money left."

If you run a home care agency, you already know this feeling. The phone rings. Caregivers are out in the field. Hours are being billed every week. Yet every month feels tight.

This isn't because you're bad at care. It's because home care is brutal on the numbers, and most agencies never slow down enough to really look at them.

The money doesn't disappear in one big mistake. It leaks out quietly, in ways that don't feel dangerous at the time. Let me show you where it goes.

The Caregiver Cost Problem Almost Everyone Gets Wrong

Most owners do a quick mental calculation. Client pays $32 an hour. Caregiver gets $18. So that leaves $14 for the business.

Almost everyone believes this at first. It makes intuitive sense.

The problem is that the caregiver does not actually cost you $18 an hour. Once they're hired, you're also paying employer taxes, workers' comp, insurance, and training time. Even the hours when they're technically employed but not fully placed yet cost you money.

This is what finance people call the "burden rate," and getting it wrong is one of the most expensive mistakes in home care.

When you sit down and do the real math, that $18 caregiver is usually costing somewhere around $21 or $22 per hour. Sometimes more.

That changes everything.

Now your "spread" is not $14. It's closer to $10. Sometimes less.

And out of that $10 you still have to pay your scheduler, your office rent, your software, your phones, your marketing, and all the random expenses that never make it into clean spreadsheets.

This is where a lot of agencies quietly die. Not overnight. Slowly.

What Your Real Numbers Should Look Like

You need to know your real burden rate. Not an estimate. Not a guess. Real numbers.

For most private-pay home care agencies, industry benchmarks show that gross margins typically land between 30% and 40%. If your gross margin is running below 30%, you're in trouble, and growth will feel painful no matter how hard you work.

But here's the number that really matters: net profit.

Many agencies look healthy on revenue but are actually running 6% net margins. The owner is exhausted, taking almost nothing home, and can't figure out why.

The culprits are almost always the same: burden rate underestimated by 8-10 points, too many short shifts, and turnover quietly bleeding money.

Short Shifts Feel Harmless Until You Add Them Up

You've probably seen it yourself: schedules stacked full of three-hour and four-hour shifts, and somehow the agency is still exhausted and broke.

On paper, short shifts feel easy. In reality, they are heavy.

A three-hour shift takes almost the same office effort as a twelve-hour shift. Scheduling, billing, managing call-outs, none of that shrinks just because the shift is shorter. But the revenue does shrink. A lot.

There's also the caregiver side of this that people underestimate. Most caregivers do not want to drive across town for a few hours of work. They take it at first, then they start calling out, then they leave.

That creates more chaos, which creates more overtime, which costs you more money. It's all connected.

If you accept short shifts, the rate has to reflect the extra work they create. Otherwise, you're subsidizing them without realizing it.

Overtime Doesn't Look Dangerous Until the Week Is Over

This is one of the fastest ways to lose profit.

A caregiver calls out at the last minute. The client is upset. The scheduler scrambles. Someone reliable gets called, usually someone already close to forty hours.

The shift gets covered. Crisis avoided.

But now you're paying time-and-a-half while billing the same rate. And in many cases, that entire shift is a loss.

Most agencies don't notice this until they look at the week as a whole and wonder how a "busy" week produced almost nothing.

You need backup caregivers. Always. Recruiting can't be something you only do when you're desperate. You need part-time and on-call caregivers who want flexible hours.

They're not always your stars. That's fine. Their job is to protect your margins when things go sideways.

The Hidden Cost Nobody Talks About: Turnover

Turnover rarely shows up as one scary line item. It hides.

Between job ads, interviews, background checks, training, and missed shifts, replacing one caregiver can quietly cost thousands of dollars.

Some agencies lose several caregivers a month without realizing how much money that alone is draining. (Speed in responding to applicants makes a huge difference - read about the 48-hour hiring rule to see why.)

What surprises most owners is this: caregivers don't always leave for higher pay. They leave because their hours are inconsistent. When people can't rely on their schedule, they look elsewhere.

The math is counterintuitive but true: fewer caregivers with more hours is usually healthier than more caregivers fighting for scraps. (If you're growing and need to expand recruitment, here's when to build a dedicated careers site.)

An agency with twenty caregivers working close to full time is usually more profitable than one with fifty caregivers working part-time. Scheduling gets easier. Relationships get stronger. People stay longer. And profit stops feeling like a mystery.

The Uncomfortable Bottom Line

If your agency isn't making money, more marketing probably isn't the answer.

More clients won't fix broken math. It just hides it for a while.

At some point, you have to slow down and really look at what each hour of care costs you, and what it actually earns. That might mean raising rates. It might mean letting go of cases you're emotionally attached to. It might mean walking away from short-hour clients who seemed like easy wins.

Those are hard calls. Every owner struggles with them.

But you didn't start this business just to move money from clients to caregivers. You started it to build something stable.

When the numbers make sense, everything else gets easier.