I receive a lot of calls from entrepreneurs opening assisted living and nursing home facilities. It’s a very profitable and necessary business. Anyone who has the heart to care for our elderly is a blessed individual…and I salute you. Sometimes you need a business plan to receive funding or certifications for your assisted living facility. There are 7 sections of the business plan for this industry.
- Market Opportunity. We’re proving mathematically that there is more demand than there is supply. In this section of the business plan, you’ll discuss how many beds your facility will have, the amount a resident must pay per bed per diem, the types of clients you’ll have, and much more.
What do I mean by the types of clients you’ll have? Some entrepreneurs accept clients on Medicaid and Medicare. Others require individuals who have long term care insurance or other assets. Neither way is right or wrong but this decision does affect your business model and structure. For example, the total number of long term care recipients is much different then those Medicaid.
- Marketing Plan: In the nursing home and assisted living business, marketing begins with occupancy rates. If a bed is empty, you will never receive revenue for that night. You also can't put two people in the same bed on the same night. When it comes to occupancy rates, your goal is to get as close to 100% as possible. Will you ever be 100% occupied? Probably not. People move. People die. Things happen. But a 90% occupancy rate is not unlikely if you’re marketing properly.
Your first goal. Begin marketing before your facility open so you’ll be 100% full the first night. Then your company should constantly market. When a bed suddenly becomes vacant, you will have another individual occupying it within 5-10 days. In fact, you want a waiting list. Discuss your plans for consistently adding people to your waiting list in your marketing plan.
If somebody calls you and says “I want a tour of your facility,” what will you do? Facility tours are the best way to convert prospects into residents. The marketing section of your business plan outlines your process for collecting information, showcasing your facility, asking for the sale, and getting to YES. The more detailed you are in this section, the more believable your business plan will be.
Operations. Insurance requirements, legal requirements, and family concerns will dictate how you operate your facility. Having an operations section of your business plan shows you have thought through staffing ratios, fire hazards, 24/7/365 care, and much more. It ends up being a very good section that you can pull out and have it as an operations manual.
Your Team. How much staff will you have? Does it comply with state and county regulations? We want to make sure that that ratio is compliant with your state and county regulations. As a 24 hour facility, you’ll want to have the right amount staff for your first, second, and third shift.
Adding a nice staffing matrix always does the trick. Readers can easily see that you are properly staffed. It also helps as you bring on your recruiter. They know exactly how many people you need for the first, second, and third shift. They’ll also know how many CNAs to hire, how many RNs, etc.
- Your Competition and Competitive Advantages. The number one mistake many entrepreneurs make is assuming competition is just other assisted living and nursing home facilities. Nope. Competition could also be an adult child choosing the keep mom at home, an individual changing their house so that they could stay in place longer, or a family member choosing to hire a stay at home nurse for that person.
So what are your competitive advantages? Saying to an individual, “we provide great care” is not a good response. Everyone says that. If you have video cameras so loved ones that live far away can see the treatment of their elderly family members, then that’s a competitive advantage. Other competitive advantages could include texting family members giving a daily update, daily foot massages, weekly outings to the local park, etc.
- Financials: We typically provide 5 year financial forecasts even though some organizations may only require 3 year forecasts. Showing your revenues, expenses breakeven point, and balance sheet are essential in this section.
But don’t forget to add your assumptions. Occupancy rate, construction costs, estimated salaries, rent or mortgage expenses, equipment and medical supply costs, and insurance are a large portion of your expenses. Requesting proposals from as many suppliers are possible makes your financial forecast more believable.
- Your Payback Plan or Exit Plan. If you have an angel investor, they’ll ask when and how they’ll be repaid. You may want to have a couple of different options for investor repayment within your business plan. You can treat an investor as a lender and offer them an attractive interest rate. (Remember…you are competing against the bank, treasuries, and real estate tax liens for their capital. Make the interest rate and payment terms truly attractive in comparison to the risk they’re taking). You could also offer a percentage of revenues or a percentage of profits. Many investors may prefer a percentage of revenues because profits can be manipulated. Entrepreneurs can include unnecessary or non-business related expenses to reduce the net profits. If you offer an investor 3% of gross revenues or 10% of net profits, they may take the gross revenues because it will be easier for them to calculate their pay out.
If you need help writing a business plan for an assisted living or nursing facility, I would love an opportunity to assist you. Please contact me at wewritebusinessplans.com.