How to Start a Group Home

Co-authored by Dan Bodner and Christopher M. Osborne, PhD

Last Updated: June 15, 2022 References Approved

A group home can refer to many things, but it generally is a site that provides twenty-four hour non-medical care in a structured environment.^{[1]
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Research source} They often focus on the elderly, people with mental or physical disabilities, or those dealing with substance abuse. Starting a group home can lead to a rewarding career helping people in need.

Part 1

Part 1 of 3:

Comparing Your Vision to Reality

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Assess your goals. There is a growing demand for group homes in the U.S., due in large part to the growing elderly population, along with increasing numbers of other adults and youths who can benefit from this setting. Demand, of course, means an opportunity to make money, but don’t expect starting a group home to be your path to fast and easy riches.
- In all honesty, if your primary goal is anything other than to help vulnerable people, running a group home probably isn’t for you. The job requires hard work, long hours, significant expense, and ample frustration, so you need to be able to find your reward in the good you’re doing for others.^{[2]
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- Think about who you want to serve with your group home. Seniors? The disabled? At-risk children? Despite some similarities, each option offers its own unique challenges and rewards. You may want to visit several types of group homes to get a feel for the differences.^{[3]
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2
Analyze the local market. You probably wouldn’t open a pizza shop in a town that already has a half-dozen of them, unless perhaps you had some unique “angle” by which to differentiate yours from the rest. The same principle holds true for group homes — you need to be aware of what the market needs.^{[4]
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- Conduct a “needs assessment” of the local area in which you hope to start your group home. How many similar homes exist in the area? What is their average occupancy level? Is there a need for more? Can you provide a group home setting that will distinguish you from the pack?
- Here, as with numerous other times during this process, you should contact the government agencies that oversee group homes in your area (this will vary by jurisdiction). Ask if there is a need for another group home, and if so, what type is most in demand. You can also contact local social service organizations, hospitals, probation offices, and such for insights into group home needs in the area.
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3
Prepare for opposition. You may assume that everyone supports the idea of group homes, but you’ll find that not to be the case. Some opposition is based on politics, some on concerns about effectiveness, and some can be based on fears of upsetting the local neighborhood dynamic.
- There is, in fact, some political momentum in the U.S. to cut federal funding for group homes for children, based on examples of abuse and exploitation and questions about their effectiveness.^{[5]
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- You may well find opposition among local homeowners when it comes time to locate your group home. Even if you’re looking to serve only senior citizens, some people reflexively oppose the notion of having any sort of group home in their midst, often citing the potential risk to property values. When the time comes, make sure you have all your legal “ducks in a row,” and also work on soothing neighborhood nerves by explaining the purpose and need for the group home and the provisions you will make to be a beneficial neighbor.
4
Create a business plan. Whether you’re starting a group home, a grocery store, or a gardening service, it is always a good idea to draw up a detailed business plan that outlines the goals, needs, opportunities, and obstacles for your new enterprise. A well-constructed business plan will serve as your group home’s guidebook as it gets off the ground — or may even convince you to change your plans.^{[6]
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U.S. Small Business Administration
U.S. government agency focused on supporting small businesses
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- A business plan is often viewed as a sales pitch for potential investors, but serves a useful purpose even if you aren’t seeking financial support. See the detailed article How to Write a Business Plan for information on creating one, including the following listing of common contents:
  - Title Page and Table of Contents.
  - Executive Summary, in which you summarize your vision for the company.
  - General Company Description, in which you provide an overview of your company and the service it provides to its market.
  - Products and Services, in which you describe, in detail, your unique product or service.
  - Marketing Plan, in which you describe how you'll bring your product to its consumers.
  - Operational Plan, in which you describe how the business will be operated on a day-to-day basis.
  - Management and Organization, in which you describe the structure of your organization and the philosophy that governs it.
  - Financial Plan, in which you illustrate your working model for finances and your need from investors.
- The U.S. Small Business Administration (https://www.sba.gov/) and similar small business support entities can also offer guidance on developing a business plan.
5
Examine your finances. As with any other small business, it takes a significant investment to get a new group home off the ground, and you probably don’t have enough money just lying around to fund the enterprise yourself. Use your business plan and a realistic assessment of your personal finances as a starting point for determining your financing needs.
- Along with guidance for your business plan, the U.S. Small Business Administration also offers a wealth of information on the process and expectations for securing small business loans from financial institutions.
- Inquire with the local and state agencies responsible for overseeing group homes in your jurisdiction, to see if there are grants or low-interest loans available.
- Don’t be afraid to get creative in securing start-up funding for your group home. The options can range from crowdfunding to renting out part of your residence. Borrowing from friends and family is often an option as well, although you must balance its benefits with the possible awkwardness that can arise from imposing a business relationship on a personal one.^{[7]
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Part 2

Part 2 of 3:

Navigating the “Red Tape”

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Build a relationship with the relevant government agencies. In the U.S. at least, if you want your group home to succeed, you need the supervisory local and state (and perhaps federal) agencies to be “on your side.” Without active government support, you will struggle to find residents, keep abreast of licensing rules and regulations, and get the proper financial reimbursements for your work.
- In California, for example, a group home for children must have the written support of the host county (among other requirements) to be eligible for essential reimbursement funding via the AFDC-FC program.^{[8]
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- Connecticut, as another representative example, has regulations for group homes covering areas ranging from telephone service to clean bathrooms. You are likely to need all the help you can get in navigating through the red tape necessary to start a group home.^{[9]
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2
Research the licensing process in your location. It is difficult to be anything but general here, because every U.S. state (and possibly even county) has its own licensing procedures for starting and operating a group home. You will need to be proactive in ensuring that you complete all the necessary steps.
- Just to name a few of the multitude of examples:
  - In California, group homes for children are licensed by the state Department of Social Services (CDSS).^{[10]
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  - In Florida, the Department of Health provides information but not licensing for group homes; that responsibility lies (depending on the nature of the facility) with either the Agency for Health Care Administration or the Department of Children and Families (DCF).^{[11]
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  - In Connecticut, the Department of Developmental Services (formerly the Department of Mental Retardation) handles licensing for group homes for the mentally disabled.^{[12]
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- State licensing for your facility is likely only the start of the process. You may need to be personally licensed as a Certified Administrator of Group Homes, for instance.^{[13]
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3
Identify relevant federal, state, and local regulations. Do you know the requirements for health and food inspections in Florida?^{[14]
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- Start by contacting your local (such as county) department of health, or human services, or social services, or whatever other unit seems most likely to deal with the operation of group homes in your area. Step up to the state and federal levels as warranted.
- Ask lots of questions, and be very patient. Remember why you want to render this valuable service to your community. It can never hurt to solicit guidance from existing group home operators as well.
4
Apply for non-profit status and obtain insurance. Depending upon your location, one or both of these may not be legally necessary, but they are essential steps nonetheless. Take every opportunity to protect the time, effort, and money you are investing in your group home.
- Unfortunately but not surprisingly, establishing non-profit status in the U.S. is not a quick and easy process. You need to create a corporate entity by filing Articles of Incorporation with your state, then begin work on the lengthy Form 1023 provided by the IRS, then, if approved, circle back to the state level to ensure your exemption from state taxation. You may find it beneficial to hire an attorney well-versed in this process.^{[17]
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- Check to determine whether your state requires insurance coverage for your group home,^{[19]
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Prepare to become an employer. No matter the size of your planned group home, you’re going to need to hire some help. Before actually engaging in the hiring process, though, it is advisable to “put your ducks in a row” regarding the various forms and requirements.
- This SBA article and this IRS publication are good starting points regarding the paperwork and recordkeeping required to hire an employee in the U.S. The many requirements include:
  - Completing Form I-9, which verifies an employee’s eligibility to work in the U.S.
  - Providing Form W-4, which determines federal tax withholding for each employee.
  - Determining your individual state’s requirements regarding new hire reporting, tax reporting, and worker’s compensation insurance.
  - Establishing a functional record-keeping operation so you can keep track of your many responsibilities as an employer.

Part 3

Part 3 of 3:

Establishing Your Home

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Find the right home site. Once you’ve jumped through a sufficient number of bureaucratic hoops, it may finally be time to establish your actual group home. If you have not already identified a good location, do so now, while keeping in mind potential roadblocks.
- Familiarize yourself with local zoning regulations, so you know where you can legally establish a group home. Also look into local and state requirements for group home facilities; in Connecticut, for instance, there are specific square footage requirements for resident bedroom sizes.^{[21]
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- You may face opposition from local residents who are not keen to have a group home in their midst. They will often cite safety concerns, decreased property values, or even traffic and parking problems as reasons for opposition. Even if you have verified your legal right to establish your home, be prepared to explain and defend (in a neighborly manner) the benefits your group home will offer to the community.
2
Determine your budget. As with any business, it pays to have a clear breakdown of your likely income and expenses in place well before you actually open your doors. This process will likely make it more clear just how dependent your group home will be on government reimbursement for your services.
- Although based on 1998 figures, the sample budget for a group home serving 8-12 children in Georgia provided at https://www.cga.ct.gov/2003/rpt/2003-R-0169.htm may prove a useful point of reference. Note the estimated expenses of $250,000 per year for a relatively small group home, and the importance the 60% per diem reimbursement rate provided by the state of Georgia after the first year of operation.
- Basically, don’t expect to make big money by operating a group home. Focus on the good work you are doing for those in need.
3
Hire good people. Hopefully, you have already prepared yourself for the process of hiring employees, and now you can focus on finding the right people to fill the positions. Hiring good employees is at least as much of an art as it is a science, but there are steps you can take to improve your odds of making strong hires for your group home.
- Finding people with (positive) experience working in a group home setting is great, of course, but don’t automatically exclude everyone without experience. Consider educational backgrounds and training, as well as temperament and personality traits. Working in a group home setting requires lots of patience, perseverance, and compassion; it takes the right kind of person with the right kind of attitude to succeed.
- At the interview, asking questions like "Can you provide an example of a problem that you successfully solved?" may offer insights into a potential employee's ambition, ingenuity, and work ethic.^{[22]
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  Research source} Keep in mind that such questions are common, however, and the interviewee may have prepared stock answers already. (An inability to answer effectively is thus a bad sign.) In addition, try to think up a few problem-solving hypotheticals, for instance, that are specific to the group home setting (“How would you deal with a resident that is / says / does …?").
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Get a “host letter.” Once you’ve done all the paperwork and planning, and are ready to open your home, you’ll need to get the “stamp of approval” from your local government authority responsible for group homes. With this “host letter” (or similarly-styled document, based on your location), the local social / human services department will direct prospective residents your way.^{[23]
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- For example, if you are operating a group home for abused children, it will be essential to your survival as a business that such children “in the system” be located with you.
- Depending upon your location, a legitimate “host letter” (or similar) may be required in order to receive reimbursements.^{[24]
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- Inquire with the local government authority responsible for group homes regarding the requirements and process for acquiring this document.
5
Prepare to open for business. Opening a group home isn’t the same as opening an ice cream parlor or repair shop, but any new small business that wants to survive needs to make a strong start. You’ve been laying the groundwork for a successful opening all along, but you need to spread the word of your opening and make sure the initial experience is a positive one.
- How to Open a Small Business offers a nice range of general advice on the topic, much of which is relevant to the group home experience.
- Advertising is important, even if logo balloons and prize giveaways may not be right for your group home’s grand opening. But, spreading the word about your business through traditional, digital, and social media methods is still valuable. For group homes in particular, making connections with the proper government agencies and community organizations — charitable, religious, educational, and so forth — may be your most vital form of advertising.