Per Diem Math: How to Price a Government Bed Without Going Broke
I've seen good-hearted operators sign a contract at a rate that slowly put them out of business. 😔 Love keeps the mission alive. Math keeps the doors open. Let's do the math.
🧮 Step 1: Add up your monthly costs
Rent or mortgage, utilities, internet
Insurance (all policies)
Staff wages and payroll taxes (house manager, case manager, overnight coverage)
Food (if you provide meals)
Supplies, cleaning, maintenance, repairs
Drug testing supplies
Transportation
Software, phone, admin
A reserve for vacancies and emergencies (many operators set aside 5–10%)
Say your total is $12,000 a month.
🛏️ Step 2: Plan for realistic occupancy
You will not be 100% full every day. If you have 10 beds and plan for 85% occupancy, that's 8.5 beds filled on average.
📐 Step 3: Find your break-even daily rate
$12,000 ÷ 30 days = $400 per day to run the house.
$400 ÷ 8.5 filled beds = about $47 per bed per day just to break even.
📈 Step 4: Add margin
Your program needs a margin to grow, replace a water heater, and survive a slow payment. Whatever you add, make sure you can explain it.
⚠️ Step 5: Check what the agency actually pays
Government rates vary widely by state, county, and service level. Before you bid, look up past contract awards (many states publish them) and ask peers. If the rate can't cover your real cost, it's okay to say no or to propose a different service level.
⏳ Don't forget cash flow
Government agencies often pay 30–60 days after you invoice. You need enough cash to run the house while you wait. Plan for it before you sign.
Faithful stewardship is part of the calling. 🙏🏾 Know your number.
📥 Get our free "20 Growth Strategies" guide on the homepage for more ways to strengthen your program's finances.
This content is educational and is not legal, tax, or financial advice. Requirements vary by state and agency. No funding or contract award is guaranteed. — Elder Keith Humes, Halfway House MasterMind Training™
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