Plan the finances of a care business

A care business usually has two kinds of customer. Councils commission care for the people they fund and pay the fee rates agreed in their contracts. People who pay for their own care, often called self-funders, pay the rates you set. How your income splits between the two shapes whether your business is viable, so work it out before you take on premises or staff.

Understand how councils set fees

The Care Act 2014 requires each council to promote an efficient and effective local care market, so that people have a choice of good-quality providers. In doing so it must consider the sustainability of the market and the need for a workforce with the right skills and working conditions.

Statutory guidance says councils should have evidence that their contract terms and fee levels allow providers to deliver the agreed care at the agreed quality, pay at least the National Minimum Wage, train staff and keep them. It says councils must not do anything that may threaten the sustainability of the market as a whole, such as setting fee levels below an amount that is sustainable for providers in the long term.

Councils set out the services they expect to need in a market position statement. Read your council's statement and talk to its commissioning team about fee rates, contract terms and the services it wants more of before you decide what to offer.

In 2022 councils carried out cost of care exercises and sent reports and market sustainability plans to the Department of Health and Social Care, as a condition of the Market Sustainability and Fair Cost of Care Fund. In July 2024 the government announced that the charging reforms the fund was preparing for would not go ahead. An independent commission on adult social care, chaired by Baroness Casey, is due to report on its first phase in 2026 and its second by 2028.

Price care for people who pay for themselves

In its 2017 care homes market study, the Competition and Markets Authority (CMA) found that average council fees were below the full cost of serving council-funded residents, and that many homes relied on higher prices charged to self-funders to stay viable. Homes with mostly council-funded residents were the most at risk of failure.

Consumer law applies to how you deal with self-funders. If you run a care home, CMA advice says you should give people an indication of your weekly fees for self-funders before they decide, and point out any especially important or surprising terms, such as a requirement to show they can pay for a minimum period. Contract terms must be fair, and your complaints procedure must be easy to find and use. The CMA has acted against providers that charged compulsory upfront fees or kept charging for long periods after a resident died.

If a council-funded resident chooses accommodation that costs more than the council will pay, someone may agree to pay a top-up. The council should check that the person paying is willing and able to do so.

Build your financial model

Model your income and costs at the occupancy or volume of care you can realistically expect, not the level you hope for. Include:

• council and self-funder fee rates, and the mix of residents or clients you expect
• pay at or above the National Minimum Wage, including travel time between visits for home care workers
• employer costs such as National Insurance, pension contributions, training and sickness cover
• your annual CQC fee
• insurance, maintenance, utilities and food

Then test the model against lower occupancy and higher costs, so you know how much margin you have before you sign a lease or a loan.

If you grow into a large provider

CQC checks the financial sustainability of the largest providers under the market oversight scheme. A care home provider is included if it has 2,000 or more beds, or 1,000 or more beds and either beds in 16 or more council areas or more than 10% of the beds in each of 3 or more council areas. A home care provider is included if, in a week, it provides 30,000 or more hours of care, or care to 2,000 or more people, or care to 800 or more people averaging more than 30 hours each.

If CQC sees a significant risk to your financial sustainability, it can require you to produce a plan to reduce the risk, or arrange an independent review of your business and recover its cost from you. If CQC thinks you are likely to fail, it must tell the councils that would have to step in.

Whatever your size, if a registered provider stops providing care because of business failure, the council must meet the needs of the people it was caring for, for as long as it considers necessary.