How to Start a Healthcare Business in 2024: A 9-Step Guide

Starting a healthcare business is a great option for entrepreneurs who want to positively contribute to people’s health. While there are some great opportunities in this field, it comes with its fair set of challenges, too.

Healthcare is a unique industry because you need to adhere to specific regulations that don’t apply to other businesses, such as the Health Insurance Portability and Accountability Act (HIPAA). You will probably also need to team up with medical professionals to make sure you provide quality services.

But not to worry. In this article, I’m going over 9 steps to starting a healthcare business to help you navigate the process.

Like any business, you need to figure out what product or service you’ll offer and who your target market will be. 

The quote, “When you market to everyone, you market to no one” is key; you don’t want to be everything to everyone. By targeting a specific niche within healthcare, you can tailor your business to the unique needs of potential customers. 

Jon Morgan, CEO of Venture Smarter, says, “The healthcare sector is ripe for disruption, and there’s always room for innovative solutions that can improve patient care, streamline operations, or enhance outcomes. Think about what unique value proposition you can bring to the table. Whether it’s a new technology, a novel business model, or a fresh approach to service delivery, make sure it addresses a genuine need and sets you apart from the competition.”

Some examples of healthcare business ideas include medical records management, medical transcription services, healthcare apps, and pharmacies. But don’t be afraid to get granular; a niche within a niche can be powerful. For example, within homecare, you could specialize in care for veterans or pediatric patients.

Here are some tips to help you choose a niche:

• Align passion with profit: Consider areas within the healthcare sector that spark your interest, but also research market trends and growth potential.
• Leverage your expertise: Identify your existing skills and experience. Can you cater to a niche where your knowledge gives you an edge?
• Identify gaps in your community: Research local healthcare needs. Are there underserved populations or specific services lacking in your area?
• Consider regulations and competition: Some niches may involve stricter regulations or face more established competitors. Weigh the challenges against the potential rewards.
• Future-proof your niche: Look for niches with projected growth or those aligned with emerging healthcare trends like telemedicine or personalized medicine.

Healthcare businesses are unique in the fact that they have different legal obligations and requirements than other types of businesses. You and your team will need to stay up-to-date on healthcare requirements and abide by HIPAA if your business will handle private patient information. 

If you aren’t a medical professional yourself, you should definitely consult with healthcare professionals for advice and resources on getting started, as well as how to best adhere to regulations.

Also, consider partnering with medical practices, hospitals, insurance companies, or health-tech startups to build trusting relationships within the field and who can vouch for and refer your business.

Another point to consider: While you may not be legally obligated to hire a medical director, you may want to consider doing so. In the homecare industry, for example, the requirement depends on your state. And even in states without this requirement, it’s considered the industry norm to have one anyway. 

This important document lays out all the details of your business, how you plan to get it off the ground, and potential future roadblocks. The more specific, the better. Also, if you plan to look for investors or apply for funding, you will need to present a business plan.

Here’s an example of the kind of information you should include. 

Let’s say you want to start a home health business that treats patients with chronic conditions. Your business plan should contain:

• An outline of your mission and vision for improving patient care and quality of life for those with chronic conditions at home.
• Specific services you’ll offer, such as skilled nursing care, medication management, or chronic disease management programs.
• Demographics of your target area, focusing on the prevalence of chronic conditions and the growing demand for home-based care.
• Explanation of how you’ll reach your target market. Consider partnerships with hospitals, physician groups, senior centers, and patient advocacy groups.

Make sure to include the following sections in your business plan:

• Executive summary
• Company description
• Market analysis
• Product or service you’ll offer
• Marketing strategy
• Financial plan and budget
• Operating plan
• Management team

Launching a healthcare business requires a solid financial foundation–but don’t worry if you don’t have the startup capital yourself. Most business owners get multiple funding sources, such as bank loans or angel investors.

The first step is to come up with a budget. You’ll want to have enough funding to support your business for the first 3-5 years. Once you’ve researched and better understand how much money you’ll need, you can start looking for funding. 

Here are some key funding sources to consider:

• Investors: Venture capitalists and angel investors provide capital in exchange for equity in your business. This is a good option for businesses with high growth potential, but it does mean sharing business ownership. 
• Banks: Traditional banks offer loans with fixed interest rates and repayment terms. To qualify, you’ll need a strong credit history and a detailed business plan.
• Small business grants: Government agencies and non-profit organizations offer grants specifically for healthcare businesses, often targeting underserved communities or new, innovative technologies. 
• Business credit cards: Credit cards provide access to immediate capital, ideal for covering initial expenses or unforeseen costs. However, be mindful of high interest rates and make sure to make payments on time.
• Startup business loans: The Small Business Administration (SBA) and other lenders offer loan programs specifically designed for startups. These loans often have lower interest rates and flexible repayment terms compared to traditional bank loans, but still require a strong business plan and good credit.
• Business line of credit: A line of credit acts like a revolving credit card with a pre-approved borrowing limit. Perfect for ongoing operational expenses or unexpected needs, interest is only charged on the amount you use. This option offers more flexibility than a traditional loan but requires good credit and established financials.

Your business’s legal structure will have a significant impact on your taxes and liability.

I highly recommend consulting with a healthcare lawyer to determine the most suitable structure for your specific needs. They can guide you through the legal complexities and make sure you choose a structure that both supports your long-term goals and minimizes risk.

But to get started, take a look at this list of the most common types of business structures:

• Sole proprietorship: Sole proprietorships are best suited for very small, low-risk healthcare businesses. They offer no separation between your personal and business assets, which means you’re personally liable for all business debts and lawsuits. 
• Partnership: Partnerships are formed by two or more individuals who share ownership and profits. In this business structure, partners hold personal liability for business debts.
• Limited liability company (LLC): A popular choice for healthcare businesses, LLCs offer limited liability protection, shielding your personal assets from business debts. LLCs can have multiple members and offer more flexibility in profit-sharing and management compared to corporations.
• Professional corporation (PC): This legal structure is specifically designed for healthcare professionals like doctors, dentists, and therapists. PCs offer limited liability protection similar to LLCs and may offer certain tax benefits. However, PCs might have stricter regulations and reporting requirements depending on your state.
• C Corporation (C Corps): A more complex structure often used by larger businesses, C Corps offer limited liability and are separate legal entities from their owners. However, they face double taxation, where profits are taxed at the corporate level and then again when distributed to shareholders as dividends.

For most small businesses, registering your business is simple–all you need to do is register with your state and local governments. For more information on how to do this, check your local government’s website.

At the federal level, you’ll need to apply for an employer identification number (EIN). This 9-digit number is how the government will recognize your business when it comes to paying taxes at both the state and federal levels. 

You’ll also need this ID number to conduct most of your business activities, like hiring and paying employees, opening a business bank account, and applying for relevant business licenses and permits.

As of January 1, 2024, many US businesses also need to report information about what’s referred to as its beneficial owners, the individuals who own or control the company. If required, you’ll need to report your business to the Financial Crimes Enforcement Network (FinCEN), a bureau of the US Department of the Treasury. 

HIPAA

Starting a healthcare business means you’ll need to adhere to some unique regulations that may not apply to other industries.

Depending on your business, there’s a high chance that you’ll be handling protected health information, which refers to any data about an individual’s health, medical care, or payment for healthcare. 

PHI is protected by the Health Insurance Portability and Accountability Act (HIPAA), which means your business will need to maintain compliance with this important healthcare legislation. 

You’ll be responsible for protecting patient information from data breaches and storing it securely. HIPAA violations can result in steep fines and even possible jail time, so it’s crucial to follow the law to avoid penalties. 

Keep in mind that your business will also be responsible for making sure all employees fully understand HIPAA laws and will be held accountable in the event of a data breach. For this reason, implementing an effective employee training program is crucial. 

Occupational Safety and Health Administration (OSHA) Compliance

OSHA is a federal agency that ensures safe and healthy working conditions. Like HIPAA, OSHA is an incredibly vast law with regulations that apply to different industries.

Here are a few examples of OSHA regulations that may affect your healthcare business:

• General Duty Clause: This core principle requires all employers to provide a workplace free from recognized safety and health hazards. This applies to all healthcare settings, regardless of size or specialty. Every healthcare business must take steps to minimize risks like slips, falls, electrical hazards, and violence. 
• Bloodborne Pathogens Standard: This applies to facilities where employees may come in contact with blood or other potentially infectious materials. Think clinics, dental offices, labs, and other settings where blood draws, injections, or surgeries are performed.
• Hazard Communication Standard:  Healthcare businesses may use hazardous materials like disinfectants, anesthetic gases, and compressed oxygen. This standard ensures proper storage, labeling, and employee training for safely handling these materials.

Food and Drug Administration 

The FDA, or Food and Drug Administration, plays a critical role in protecting public health by ensuring the safety and effectiveness of a wide range of healthcare devices and pharmaceuticals. 

Unless your business manufactures, markets, or distributes products regulated by the FDA, such as food, drugs, medical devices, cosmetics, tobacco, or radiation-emitting products, you are less likely to need to deal directly with FDA regulations and oversight.

The FDA regulates a vast array of medical devices, from simple bandages to complex medical equipment. They categorize devices based on risk and have different approval processes depending on the classification.

You’ve developed your business idea, consulted with healthcare professionals, written your business plan, and even secured funding. Now’s the time to really solidify your branding and create a solid marking plan.

‘Branding’ refers to how your business presents itself to the world. From design elements and color choices to the language and tone you use, these assets all add up to a cohesive brand identity. Branding is incredibly important because it builds trust, recognition, and loyalty amongst your target market, making your business stand out from the competition.

To get started, here are some points and relevant questions to consider to help you shape your brand:

1. Identify your target market: Who are your ideal customers? Consider demographics, health needs, and online behavior to create a buyer persona. This will make it easier to create a brand that resonates with them directly.
2. Craft your brand story: What are the core purpose and values that drive your business? How will you improve patient lives or healthcare delivery? Develop a clear narrative that resonates with your target audience and is incorporated in your healthcare company name.
3. Develop your brand voice and personality: How do you want your business to be perceived? Trustworthy, friendly, innovative? Create a brand voice that potential customers will relate to.
4. Design cohesive brand assets: Create a logo, color scheme, and fonts that are visually appealing, memorable, and reflect your brand personality. Ensure consistency across your website, marketing materials, and social media presence.

Once you’ve solidified your branding, you can develop a marketing strategy. This is how you’ll attract patients and customers, promote your healthcare services, and build strong relationships within the medical industry.

Most people will find your business online, so you’ll definitely want to focus on digital marketing. This includes:

• Building a website
• Optimizing your website for search engine optimization
• Buying search engine ads
• Utilizing social media channels
• Monitoring online reviews

Building a team with a strong work ethic and a commitment to ethical practices will ensure you deliver high-quality care and create a positive work environment.

Here are some tips for hiring the right employees for your healthcare business:

• Target the right talent pool: Go beyond general job boards. Look for healthcare-specific job boards, professional associations, and colleges with relevant healthcare programs.
• Craft compelling job descriptions: Highlight your unique company culture, mission, and the opportunity to make a difference in patients’ lives.
• Focus on soft skills: Technical skills are important, but don’t underestimate the value of soft skills like empathy, teamwork, and communication. Look for candidates who can build rapport with patients and collaborate effectively within your team.
• Conduct behavioral interviews: Ask behavioral interview questions to inquire about past experiences and how candidates handled specific situations. This helps you assess their problem-solving skills, work ethic, and approach to patient care.
• Embrace technology: Thanks to technological advances, software like applicant tracking systems (ATS) can streamline the application process and help you efficiently manage candidate information.
  
  You may also find that an employee management app, like Connecteam, is helpful for managing new-hire paperwork, certificates, and licenses. Connecteam also has multiple in-app communication channels, time tracking and scheduling tools, and much more to help you manage your entire team on the go, no matter where they’re working.
• Promote your workplace: Be prepared to answer questions about your company culture, benefits packages, and growth opportunities. Highlight what makes your business a desirable place to work and attract top talent.
• Consider referrals: Offer incentives to current employees for referring qualified candidates. This can be a great way to tap into a network of pre-vetted individuals who might be a good fit for your company culture.
• Invest in onboarding and training: A well-structured employee onboarding program helps new hires feel welcome, reduces turnover, and ensures they are well-prepared to contribute to the team. In fact, companies with formal onboarding programs see 50% better retention and 62% greater productivity among new hires.
  
  Once you’ve onboarded your new team members, make sure to prepare them for work with an effective employee training program. If your team works in multiple locations, take advantage of an employee training app to create customized courses that employees can complete right from their mobile devices. 

FAQ

1. What is the most profitable healthcare business?

Profitability depends on various factors like location, services offered, and operational efficiency. However, industries like pharmaceuticals, medical technology, telemedicine, and specialized clinics tend to be quite profitable due to high demand and unique offerings.

2. How can I start an online healthcare business?

Launching an online healthcare business requires planning and specific steps. First, choose a service that aligns with your expertise and has a clear market need. Research regulations and ensure your business model complies with relevant laws in your target area. Then, build a user-friendly platform and be sure to prioritize patient privacy to comply with HIPAA.

3. Do I need medical training to start a healthcare business?

While medical training isn’t always mandatory to start a healthcare business, it can be beneficial. You don’t necessarily need to be a doctor, but understanding the healthcare landscape is crucial. Many successful healthcare businesses are founded by individuals with business knowledge who partner with medical professionals to ensure they deliver high-quality care.