Challenges for the Single-Community Owner

Challenges for the Single-Community Owner

I’m concerned about being a Senior living owner-operator with just one community. 

Yes, you should be concerned.  A growing number of individually owned, self-managed communities must address three major concerns; 1) keeping up with the current state-of-the-art and growing complexities of the changing business model, 2) addressing change and challenges both short-run – in the next 18 to 24 months and longer range over the next 24 to 60 months and 3) the ability to afford and fund necessary change.

Examples of just some of the future typical needs include sophisticated systems and procedures, expanded strategic business practices, increased purchasing power and possibly funding a more market-responsive physical plant design.  One issue is very clear, increased financial viability resulting in available cash flow must be enhanced in order to fund strategic sophistication that is evolving within the industry.

Most self-managed single community owners desire to remain in complete control.  That’s understandable.  But it could be increasingly difficult to achieve.  Owner/operators might alternatively consider retaining a qualified third-party management company.

A key question is, “Should I consider exiting the business?”  Good question.  Exiting can result in a win-win outcomes.  Today, many single facility owners are selling to quality operators who have the objective to expand their existing portfolio of properties.

The complexity and sophistication of the senior living business has increased substantially over the past 10 years.  A frequently used business cliché is still very appropriate; “evaluate your past with 20/20 hindsight . . . but look to the future with an entrepreneurial vision.”

Contact MDS today to see what your next strategic move should be.  From necessary updates to expansion to an exit strategy, MDS can help you decide on your next step.

A Synergistic Growth and Revenue Enhancement Strategy

A Synergistic Growth and Revenue Enhancement Strategy

How would you like to bring a sharpened, market-responsive focus to your campus, as well as:

  • Increase your resident’s average length of stay?
  • Provide a “feeder market” for your independent and assisted living?
  • Optimize your resident profile?
  • Improve your operating profit margin?
  • Make productive use of available land?
  • Put additional cash in your coffers?

Better still, how would you like to accomplish all of this with limited capital and acceptable market and financial risk?

If this strikes your fancy, and you have some available land on your existing CCRC campus, consider adding active adult housing. While open space on the campus is certainly desirable, many sponsors and owner/operators now prefer to devote part of that land to active adult housing. Many continuing care retirement communities are located on a 20-acre or larger site.

An active adult community frequently consists of single family detached homes with living areas of approximately 1,500 to 1,800 square feet with garages.  The resulting unit density is typically four to six units/acre.  A higher density alternative would be single family attached duplexes, triplexes and quadraplexes with living areas ranging from 1,300 to 1,600 square feet with a density of six to eight units/acre.

Active adult housing can provide a very attractive alternative to your smaller CCRC apartments, which typically range from 600 to 1,200 square feet.

Active Adult Financial Synergy

Adding 25 active adult cottages/villas with a reasonable land cost allocation has a big payoff. Developing the land allows you to realize an increase of land value that you probably already own free and clear.  In addition, when successfully implemented, you will now be spreading much of your existing fixed costs (executive director, general administrative costs, etc.) across additional revenue-producing units.  You will also realize ongoing increases in cash flow after paying all operating expenses and mortgage payments.

You will also diversify your product mix and realize a more optimum resident profile. At the same time, you’ll also extend the average length of stay on your campus.  If you offer any form of life care, you will likely lower your future actuarial and financial risks.  Remember, entry fees (one active adult pricing option) are essentially interest free loans that you get to keep for an extended time – typically for as long as the resident lives on your campus.

Market Positioning for a Slightly Different Resident Profile

When adding active adult villas, you’ll have some unique market positioning issues to address.  Your current independent living or CCRC resident profile probably consists of 70 to 80 percent single/widowed females with a typical entry age of 80 years or more.  Most of these residents have specific needs and have probably already experienced a health related “wake-up call.”  This type of situation has motivated them to make the senior living decision in the first place.

On the other hand, active adult villa residents are typically couples in the 75- to 80-year-old age range, active, and in relatively good health.  Their average entry age will change slightly. Instead of residents moving in at 80 years or older, residents – primarily couples – will typically move in when they are 75 to 80 years old. They desire hassle-free living with the option of purchasing additional a la carte services such as meals, housekeeping, and possibly health care.

Market positioning must be concise and clearly segmented to avoid confusion and cannibalization between your cottages/villas and your independent living apartments.  Each must be positioned as separate products for seniors who have different short-term wants and needs, but common long-term concerns.

To many seniors, this represents the cure for the classical “I’m not ready for retirement living” sales objection.  They can access senior living without a comprehensive array of mandatory services.   To many CCRC owner/operators, it represents a whole new market.  In the past, this niche market of senior housing was usually perceived as a site-specific, large-scale project involving hundreds of units.  But today, a moderate-sized CCRC can boost its bottom line by developing its own brand of active adult housing at minimal cost.

Before moving on, take a very close look at your specific situation and consider whether active adult housing is appropriate for your campus in terms of the location and availability of land.  Also, consider “resident flow patterns” and how active adult housing expands your continuum of living options.  These are important issues you and your team should consider.  Don’t forget the potential financial impact. At MDS, we can help you examine your situation and together determine if this is a profitable situation for your organization.

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Senior Housing Expansion Strategy: Keys to Intelligent Growth in 2017

Moore Diversified Services, Inc. teams up with Senior Housing News to bring you the most up-to-date industry information you need to succeed.

Senior Housing Expansion Strategy: Keys to Intelligent Growth in 2017

The past few years have been busy for the senior housing industry as existing owners pursued growth opportunities and new players made investments in the sector.  Senior housing transaction volume in the first quarter of 2017 alone hit $4.4 billion, according to the National Investment Center for Seniors Hosing & Care (NIC).

Recent data show some markets are stabilizing while others are overbuilt, and yet in other markets, supply is still well below demand for senior housing.

This landscape means there are still many opportunities for new investors and existing owners and operators to target expansion, whether through organic growth, portfolio acquisition, or through other avenues if necessary.

But today, more than ever, it’s important to have a calculated approach to that expansion – both in understanding the markets and ensuring every deal makes sense from a financial perspective.

With the help of market studies and financial analysis expertise, today’s senior housing players do not have to navigate this market alone.  Instead, they can leverage industry experts to bridge knowledge gaps to make better investment decision.

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SELF-MANAGED COMMUNITIES – CHALLENGES AND OPPORTUNITIES

SELF-MANAGED COMMUNITIES – CHALLENGES AND OPPORTUNITIES

Looking to the future, a growing number of operators of individually owned, self-managed senior living communities have two major concerns; 1) they may not be fully aware of all of the issues that need to be addressed in order to keep up with the current state-of-the-art and the growing complexities of the senior living business model and 2) once they identify all of the issues, can they really afford to pay for them?

Multiple property portfolios and large third-party management companies have significant economies of scale and can spread the cost to develop and  implement the necessary strategies to keep up with changing trends.  The future challenges for individual self-managed operators involve two key time frames; 1) short-run, what must operators consider in the next 18 to 24 months? and 2) longer-range, how can they really address the future; at least over the next 24 to 60-months?

Examples of these current and future needs include: sophisticated systems and procedures, comprehensive and expanded business practices, growth and expansion of Information Technology (IT), enhanced business operations efficiency including financial benchmarking, enhanced sales and marketing, human resources, risk management, and increased purchasing power.  One issue is very clear; financial viability and available cash flow is a must in order to procure additional services, resources and professional advice and counsel.  The trends of increasing minimum wage will also impact entry level workers in senior living.

There are four basic property management decision options for senior living communities; 1) continued individual self-management, 2) purchase as-required, short-term third-party management company services and resources while sustaining full self-management autonomy, 3) procure selective management support on an ongoing basis from either local providers or through a negotiated contract with a full service, third-party management consulting firm and 4) full scope long-term outside third-party management support.

Most self-managed operators desire to remain in complete control.  That’s understandable.  But it will be increasingly difficult to achieve.  Some not-for-profits and for-profit operators may think they are somewhat immune to these future challenges.  That’s not true.

To remain successfully self-managed in the future, sponsors and owner/operators must essentially create the same service mix and resources that they might otherwise get from a qualified third-party management company. 

Here is but a sample of some existing and future self-management issues to address.  There are actually about 25 that will surface over the next few years:

  1. Systems, Procedures and Policies – Having sophisticated, yet practical, and cost-effective systems, software, operating strategies, controls and performance enhancements.
  2. Achieve Economies of Scale – Realizing the potential for creating significant ongoing operations and procurement economies of scale that deliver substantial (and necessary) financial benefits to an individual community.
  3. Staying on the Leading Edge – Sustaining the ability to stay on the leading edge of the state-of-the-art in operations strategies and technology in an ever-changing complex industry.
  4. Providing Innovative Operating Strategies – Executing cost-effective, consistent and focused market positioning, sales and marketing initiatives, along with cost-effective operations that result in high resident satisfaction and clinical excellence.
  5. Implement Risk Management – Having leading edge risk management knowledge, experience and systems. Contractual and resident care litigation will continue to increase along with potential cost exposure.
  6. Succession Planning – Operators must recognize that leadership can change by both planned and unpredictable events. Developing existing “bench strength” with existing staff  and forward looking succession planning will also be a mandatory initiative.
  7. Growth In Community Based Services – Progressive communities are creating an expanded seamless continuum beyond their campus into their Primary Market Areas. This generates additional revenue and sharpens the image and market positioning of the original senior living campus.
  8. Enhanced Organic Growth – That’s a fancy term for expanding service delivery and realizing efficient financial proceeds from an existing asset – the current community.
  9. Increased and Sharpened Board Involvement – Board members should no longer be selected or retained as an honorary position. Boards should be carefully diversified based on their specific experience and the ability to directly benefit the community on a continuing basis.

The complexity of the senior living business has increased substantially in the past 10 years.  This trend is projected to dramatically increase over the next 10 years.  A frequently used cliché is still very appropriate; “evaluate the past with 20/20 hindsight . . . look to the future with an entrepreneurial vision.”

MDS can help you evaluate your current position and the ability to continue to self-manage. You must know where you are in order to know how to get to where you want to go. Call us today for an appointment. 

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Top Five Strategic Challenges and Priorities for 2017

Top Five Strategic Challenges and Priorities for 2017

“You’ve Got Questions . . . We’ve Got Answers”

What are some top priorities I should focus on to become more market-responsive, operationally focused and successful in 2017 and beyond?

I’ve identified five top strategic challenges and priorities for sponsors and owner/operators to successfully address in 2017 and future years.

1) Increasing Resident Age and Higher Acuity – Many independent living communities are turning into “naturally occurring assisted living communities.”  The need for assistance in living for residents is increasing.

2) Aging Physical Plants – Some of today’s older designs are not state-of-the-art or fully market-responsive.  Physical plant retrofit and cosmetic enhancement is a mandatory initiative for many campuses.

3) Increasing Capital Expenditure Requirements – These investments can include functional design modification, cosmetic enhancement and adding market-responsive features like additional dining venues.

4) The Senior Living and Health Care Continuum Is Expanding – Many operators are specifically addressing Alzheimer’s/dementia, memory care and Continuing Care At Home (CCAH).  They also recognize that the psychographics and “birthmarks” of today’s prospect and their adult children/decision influencers have changed considerably.

5) Market Positioning/Sales and Marketing – Key strategies include sharpened marketing positioning, improving the lead management programs, have very targeted and quantified performance objectives and sophisticated social media strategies.

The next steps for you should be to objectively address three critical questions.  1) What will be your strategic position in 2017?  2) What specific action are you implementing?  3) What are your expected outcomes in 2017 and beyond?

Keep in mind I’ve only identified five strategies.  There are at least 25 initiatives that could be considered.

Let MDS help you develop and define your strategic focus. From a quick situation review to a full strategic analysis we can tailor a service just for your needs.  MDS helps clients to accomplish their goals. Contact us today.

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Digital Strategy and Content Planning for 2017

Digital Strategy and Content Planning for 2017

Is a Digital Presence Important for the Senior Living & Housing Industry?

Having a digital presence in this day and age is mandatory and it goes beyond just having a website.  You need an ongoing presence that can include a blog, Facebook page, Twitter account and more.

An image of a manager writing something in the air

Studies have shown that as anywhere from 67% to 94% of people research products and service online before purchasing.  This includes not just consumers, but also B2B (Business to Business).  If there is no website, or it is outdated, lacking in information or unprofessional, that potential customer or client will move on.  Yes, it is that important.  In addition to your website, added value comes from blogs, newsletters and other social media content you provide.

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You’ve got questions?…We’ve got answers.

You’ve got questions?…We’ve got answers.

Q: How should a not-for-profit senior living community objectively segment the financials of charitable mission initiatives from the basic senior living business operations?You've got questions?...We've got answers.

A: This is a three-step process.

1) Create an income statement and sheet that includes only your senior living business operation (revenue, operating expenses, profit, debt service, cash flow, etc.). If necessary, show any cash from the business operation that is needed to fund charitable initiatives as a separate financial burden below the operating profit and net cash flow line entries. The expected outcome is the execution of sound business practices while meeting industry benchmarks for financial performance.

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It’s a New Year, New Plan, New Game – Welcome 2017

It’s a New Year, New Plan, New Game – Welcome 2017

Happy New Year! The beginning of a new year.  Does that spark excitement in you? A clean slate to create and take advantage of new ideas and opportunities.  Or is it just another day? The current competition in the senior living and housing market can be fierce so if January doesn’t make you take inventory and commit to make a change, you need to get in the game!

Innovate Definition Magnifier Showing Creative Development And IngenuityDo Not Rest On Your Current Success

Now, this doesn’t mean you must totally revamp your business strategy (unless it is drastically failing).  But each year should bring new ideas and new goals.  Even if business is booming, resisting innovative additions or changes can see that success falter eventually.  Amazon is a great example of implementing new and innovative ideas into an already successful business.  No one can deny that Amazon’s business has been on the upswing for an extended period.  The secret to their success is that they are a step ahead with new ideas as the previous ideas run their course.  The Apple iPhone is another great example.  Same product, a phone, yet it is continually being updated and improved as to avoid letting the competition pass them up and it keeps their customers excited for what is new.

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Divide and Conquer Then Bring It Back Together: Sharpened  Financial Focus

Divide and Conquer Then Bring It Back Together: Sharpened Financial Focus

by Jim Moore

How can I develop a more sharpened financial focus on my campus which has multiple living arrangements?

Great question.  The Senior living business is becoming increasingly complex.  The continuum of products and services is growing.  There is a pressing need to optimize the financial viability of each individual product or level of care on your campus.

Optimize Financial ViabilityConsolidated financials provide the big picture/summary approach, but to determine the true financial sensitivity of your organization you must develop individual cost/profit centers within your continuum.  Simply combining three or four businesses within a community into one overall consolidated income statement of revenues and expenses is not the best practice for the future.  Just using consolidated financials can frequently mask unacceptable subpar performance of one cost center, while penalizing the overall operation.  Each individual major product and service offered should meet reasonable industry financial benchmarks of revenues, expenses including an overhead allocation, net operating income, profit margins and cash flow.

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One Company, Many Departments; One Strategy or Many

One Company, Many Departments; One Strategy or Many

by Kim Jimenez

When talking about your organizational goals, is every department within your company on the same page? Have you shared or even included all departments in goal setting and strategy development? Does your Human Resources department act as part of the strategy team for your community and your company or do they perform as an auxiliary function?

Woman drawing Flow Chart

People can make or break your organization. The front-line employees who interact with the public. The CNAs and nurses who care for your residents. The receptionist who greets everyone who walks into your office or facility. The marketing team who puts out the marketing material and branding that can draw in new business (or not). Your top management and executives who define and plan the company brand and strategy. So, don’t you think the department responsible for recruiting all these people need to be an integral part of the company strategic plan? Absolutely!

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