6-STEPS TO ALIGN SENIOR LIVING OPERATORS AND INVESTORS DURING COVID-19 TO AVOID A DEVASTING BLOW TO 2Q20 EARNINGS
Sales and marketing cannot be an after-thought during this pandemic. Assisted living and memory care owners and operators must balance sales, marketing and operations more carefully than ever, or risk facing a devastating blow to occupancy, revenue and cash flow in the months to come.
What you do right now as an operator, owner or investor will determine the outcomes you see for the rest of the year.
Never has our industry been faced with such difficult circumstances. Not only do operators need to protect their residents and employees from COVID-19, they are faced with increased expenses to already stretched budgets. Some operators are paying employees up to $5 or more per hour to encourage them to stop working second or third jobs (to decrease the risk of getting the virus) and are purchasing protective safety gear; neither in the operating budget.
In addition to these stressors, operators must keep morale high for residents and employees who are in isolation and be prepared to deal with an outbreak of COVID-19 at any moment.
Adding to the pressure is the disruption to everyday life, fear of the unknown and personal challenges operators face in working from home for the first time; lacking the structure and normalcy most depend on to succeed.
This leads me to today’s blog content that was inspired by calls I’ve been on over the last two weeks that have had the same recurring theme: Occupancy and revenue that is far below expectation, investors who are frustrated and operators who lack urgency and in some cases fail to respond at all.
The definition of an investor is to put money to use, by purchase or expenditure, in something offering potential profitable returns, as interest, income or appreciation in value.
In the case of seniors housing, whether independent or assisted living, memory care or active adult, the investor provides capital for the development of senior living communities and earns a return either through a lease payment from an operator or both a lease payment and a percentage of the operational revenue.
The definition of an operator is a person who managers a working establishment or enterprise, and in this case, it’s senior living communities. An operator manages a congregate living environment and in most cases the care and safety of its residents.
Each group has its own priority and responsibility to its stakeholders and right now, both are under tremendous pressure. While some groups are working very well together many others are not. What I’m finding is those investors and operators who have been in the business for a long-time together understand it’s a long hold and are willing to ride out this downturn together, albeit with strong communication and transparency.
Investors who are new to the industry, meaning post-great recession, are struggling to understand why their operators are failing to produce financial results. The goal of this blog is to help communicate and bring unity where there is currently a division. This is not for the faint of heart and as we know, it may get worse before it gets better.
- Prepare for a Tough Six Months:
It’s not what happens but how you respond to what happens that matters. Stop and take an honest look at how you are responding now to conducting business in a COVID-19 world.
Like it or not, there is no business as usual. Returns may diminish in the short-term but what’s most important is protecting the viability of your future business and that means closely aligning with your operating partner. If your operator has decided to shut down access to the community, trust their judgment. It does no good to move in five new residents in April to only lose twenty in May due to the inability to contain the spread of the virus to your residents. The priority of an operator is to care for and protect residents, that is it.
On the flip side, operators must do their part which means keeping an eye on sales and marketing every day. There must be strong sales processes put in place that will allow sales activity to continue at a high volume remotely so that when this is behind us, a large influx of residents can move in. Operators must also explore how they can admit new residents with a two-week quarantine in place that may require moving existing residents to new rooms and working closely with local healthcare officials. Both must do their part in protecting the interest of one another because if one goes down, so does the other.
While it may be two, three or four months, it could be a solid six or more. An investor calling and putting pressure on an operator to drive move ins and revenue is not productive. Right now, investors should be asking “what do you need?” and “how can we support you” and operators should be communicating with transparency in what their constraints are, and their current strategy as it relates to revenue.
We see many operators who are failing to communicate with their investors, lack a sense of urgency, or even lack basic understanding as it relates to the needs of their investor. This is most acute in third party management contracts and ultimately will be the demise of these types of relationships. I find it incredibly perplexing. Sit down, be honest and get a plan together today. If you operate your own communities that you have financial interest in and also operate as a third-party manager for other assets, treat both equally; don’t disregard those you don’t own. If you can’t be unbiased, stop doing third party management; it’s not fair to owners and investors who count on you to protect their asset.
- Put a Game Plan in Place Now, Not Later: Speaking of game plan, what is your plan for 2Q20 and 3Q20?
Operators are buried in all things COVID-19 right now. The last thing on their mind is sales and marketing; it’s a simple reality. With skeletal corporate staff in place prior to the pandemic, it’s even worse now. People are working from home, lack much needed infrastructure and are learning as they go. Sales and marketing may have been low on the priority list prior to this crisis, I think it’s safe to say for many operators it isn’t even on the radar right now. The single most important priority for operators at this moment is protecting residents and employees.
Investors are going to have to take a hard look at how they too will respond. Can increased funds be provided for critical safety and protective equipment for employees and residents? Can childcare funds be provided to supplement critical caregivers who now have children at home and are unable to work? Can added sales and marketing support be provided to ensure a strong sales pipeline?
- Communicate Daily or Weekly, Not Monthly
I get it, the last thing an operator wants to do is get on the phone with their investor or owner. These calls can be stressful and oftentimes operators don’t have the answers their investors seek. I challenge operators and investors to set an agenda for their calls, so each is prepared. What does each need to hear from the other, what supporting data should be sent prior to the call and most importantly, what is needed right now to be proactive in building out a pipeline of future residents?
Infrequent communication causes frustration and creates tension among investors who are not seeing the traction they expect. This stems from operators failing to communicate what they are doing to sell and market their community. Investors are nervous and rightly so. Operators need to keep investors updated consistently; not monthly, on what steps are being taken to protect revenue and the asset the owner or investor has stake in.
- Operators Must Be Transparent About Current Capabilities
Operators, if you have little to no time to focus on sales and marketing efforts, your salespeople are being pulled into operations, and you’re not sure how to sell when the doors are closed to outside visitors, speak up and say so!
While there are many incredible operators, there are also a lot with egos that keep them from accepting much needed help. I see investors every day who are offering to provide funds to support sales accountability and operators who are saying “no thanks” even while sales are in decline.
A strong leader understands that ego must be left at the door. What do you need help with, where are you struggling, and what is it you don’t understand how to do? One example is asking for increased funds for a strong sales and marketing director. This is one position where you get what you pay for. Everyday I see operators in search of sales talent with a compensation plan that is subpar at best and that will lead to mediocre performance. If the best sales talent you can hire is asking for a higher base, communicate this to your investor, ask for it! Transparency has never been more important.
- Investors Must Provide Additional Financial Resources
The Bild & Co team works with operators nationally, in the U.K., and Canada. We see it all! Never in my two decades have I seen corporate staff stretched so thin. Good, strong leaders are working around the clock, trying to do the job of three people and are burnt out.
In most mid-sized companies there is no sales leadership; that is farmed off to an operational leader who has never sold and has no clue how to effectively lead sales. As a result, costly marketing firms are hired to handle what inexperienced sales leaders think works- digital marketing campaigns that look exciting with all their impressions and clicks but result in few to no move ins. Never forget, this is a people business first and foremost. Digital marketing should be used to support grass roots marketing efforts, not in place of.
I am seeing startling marketing spend with no return on investment and no accountability measures in place to ensure those funds are being utilized properly. Investors must provide operators with sales functionality and a team or individual who understands sales and marketing; how they are different and what specifically works in the seniors housing space.
- Act with Urgency
Yesterday I received a call from an owner operator in California whose community is sitting at 100% occupancy. His exact words were, “I want to get ahead of this and build a strong wait list of new residents to move in both during and after COVID-19.” Impressed doesn’t even begin to explain my feelings! This is an example of a strong leader who understands the importance of action and getting ahead of a crisis. There is a reason his community is 100% full.
As an operator or investor, you must decide right now what you must do today to ensure a strong second and third quarter. Waiting until this crisis is over will guarantee that your competitor who is proactive, will earn those move ins while your community tries to rebound and catch up once out of quarantine. Together, you must create a plan and ensure you have the proper training and tools to succeed in such unusual times.
As an operator you must equip your sales and marketing teams with the tools to conduct virtual tours, follow up via email, phone, text and social messenger with purpose, to ensure you are positioning yourself as a resource and build trust with vulnerable seniors and their families. All sales activity must be put in the CRM and conversion metrics tracked daily to ensure outcomes for the effort being put forth.
Tactics should be in place right now to engage with valuable referral sources, from discharge planners and emergency room workers to local community support services to communicate the value you offer during and after COVID-19. We have a lifelong client who has been extremely proactive and successful in taking care of their referral partners with emails and cards that communicate that they care about them as individuals and their families while asking what they can do to help. Trust me, these valuable referral sources won’t forget it and are already highly engaged. When possible, they are also doing consistent home visit drop offs to prospective residents that are in their pipeline along with care packages that include critical supplies like toilet paper. This is an operator that has urgency, is showing up and will have a strong second and third quarter of the year as a result.
What about you? Decide what action you will take today. Need support over the next 90 days from a team of experts that can plug in to any operator or market in under five business days? Check out our Revenue Protection Program. Leverage a resource like Bild & Co or devise your own, but do something now to bring alignment with your investor or operator, lay on added support and dig in for a long road ahead. Remember, it’s not what happens, but how you respond that matters.