March 13, 2023
The IRS publishes tax return data each year on the roughly 28,000,000 sole proprietorships in the U.S. We analyzed the 100,188 tax returns that were filed in the Nursing Home industry to pull out some key statistics and insights to help our customers ensure that they are creating realistic financial projections for their Nursing Home.
We hope that this data will be helpful for you as a “reality check” for your financial projections and Nursing Home business planning process. We hope you create a forecast for your unique situation and plan, and then use this data to make sure your projections seem reasonable based on industry averages.
Here is what we will cover in this article:
Learn How to Use this Financial Data
If you are creating projections for your startup business, or you just want to see how your existing business stacks up to industry averages, you can take your income statement and compare key ratios and percentages for your business compared to this industry average data.
How many Nursing Home businesses in the US are sole proprietorships
There are approximately 100,000 Nursing Home businesses in the US organized as sole proprietorships. We specifically analyzed 100,188 companies based on the 2019 IRS tax return data.
Average annual revenue for Nursing Homes
The average annual revenue for all sole proprietorship Nursing Home businesses in the U.S. was just $65,361.
This number seemed incredibly low to me. In fact, in our blog post How to Start a Nursing Home we found that the average nursing home revenue was $3.9 million per year.
So what gives?
I think we need to remember that this tax return data includes all sole proprietors that categorize themselves in the “Nursing Home and Residential Care Facility” industry. So it must include facilities that are very small with only a couple of beds.
This underscores the importance of actually creating your own Nursing Home projections based on your planned facility capacity.
Average annual expenses for a Nursing Home
The average annual expenses for all sole proprietorship Nursing Home businesses in the U.S. was $57,608.
It should jump out to you immediately that average annual expenses for a Nursing Home is likely less than it takes to employ one full time Registered Nurse, so again let’s not focus too much on the specific dollar amounts here, what we can gain from this tax return data is an understanding of expenses and profits as a percentage of revenue rather than a specific dollar amount.
Average net profit margin for a Nursing Home business
The average net profit margin for a Nursing Home business was 12%.
How much can I make by owning an Nursing Home business?
In order to calculate the earnings potential of a Nursing Home you can take the following assumptions:
- Number of rooms
- Average rate per month
- Occupancy rate
These assumptions will allow you to come up with a revenue forecast for your assisted living facility. From there you can apply the 12% profit margin.
Top 8 expenses for an Nursing Home business
Based on the tax returns of roughly 100,000 sole proprietors operating in the Nursing Home industry, the following were the 8 largest business expenses as a percentage of revenue.
Average salary expense for a Nursing Home business
The average Nursing Home business spent 28% of annual revenue on salaries and wages.
Average car and truck expense for a Nursing Home
The average sole proprietor Nursing Home business spent roughly 5% of annual revenue on vehicle expenses.
This seemed a bit strange to me as I wouldn’t expect nursing homes or assisted living facilities to be driving that often, but perhaps this is an expense for transporting patients / residents to and from appointments, etc.
Average rent expense for a Nursing Home
The average sole proprietor Nursing Home company spent roughly 5% of annual revenue on rent.
Keep in mind that some of the 100,000 facilities that reported rent their facility and some own the facility. So if you are renting, you might expect to pay more than 5% because this number is an average between those that rent and those that own.
Average utility cost for a Nursing Home
The average Nursing Home spent roughly 3% of annual revenue on utilities.
Important Details about the Data
I want to point out a few key items about the data:
- You can download this data for free from the IRS website.
- The data includes 100,188 Nursing Home sole proprietorships in the U.S. in 2019.
- This data will include businesses that operate full time, and businesses that only operate on a part time basis.
- Because of this, you should take the raw numbers for revenue, expenses and profit with a grain of salt, but the percentages can still be quite valuable when trying to forecast expenses for your business.
- This data includes businesses from all across the country, keep in mind that revenue and expenses can vary greatly based on your specific geographic location.
- We used 2019 data because we felt it was most likely to be representative of a “normal” environment for the industry. COVID-19 caused disruption to almost every business in 2020 and 2021, so we wanted to utilize “normalized” data.
If you have any questions about the data or how to utilize the data in your financial forecasting process please don’t hesitate to reach out to us!