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How To Add $250K In Revenue And $2M-$3M In Value To Your Seniors Housing Community By 2Q20

HOW TO ADD $250K IN REVENUE AND $2M-$3M IN VALUE TO YOUR SENIORS HOUSING COMMUNITY BY 2Q20

Learn Three Steps Operators and Senior Living Investors Must Know to Drive Increased Revenue to the Bottom Line

 

While operators and investors are hyper-focused on moving the needle on under-performing senior living communities, there is tremendous upside to making small gains in those independent and assisted living as well as memory care communities that are at 92% occupancy or higher.

 

There is a gold mine in your portfolio that can easily be tapped, driving increased revenue straight to your bottom line. In fact, it’s so simple to do that it’s oftentimes overlooked. Chief Investment Officers, take note.

 

Most operators and senior living real estate investors have portfolios sitting at 88-89% occupancy. Typically, there are one to two communities; maybe three that are putting a severe strain on revenue due to staff turnover, a recent acquisition or high resident attrition. While these few may be sitting at 70-75%, the remaining oftentimes are a mix of 88-92%; some even higher.

 

Those sitting at 70-75% need a lot of attention, starting with the proper hiring and training of the Executive Director; the single most important position in a senior living community. In these situations, the Executive Director is onboarded and quickly bombarded with operational barriers that consume his or her time. The second critical hire is the Sales Director and snagging one from the competitor no longer works; you need the right talent and cultural fit for your specific location.

 

Each of these positions, along with a Director of Nursing can take up to 90 days to place; if you want the right fit, not just a butt in the seat. While lost revenue is painful, a temporary fix is much worse than a slower go that results in a permanent turnaround. The problem is that investors must deliver earnings and put pressure on operators to fix these problems quickly. Yet there is no quick fix. Like any business barrier, if it’s too good to be true – it is! Fixing an operational mess can not be done overnight. It can be done in six to twelve months, creating a tremendous stream of cash flow and increased value of the asset.

 

The quick win operators and investors need, yet are failing to see, lies in the remaining portfolio.

 

STEP ONE: FOCUS ON WHAT IS WORKING VERSUS WHAT’S NOT

 

A 100 unit assisted living community sitting at 93%, or 93/100 units occupied, in most cases is running profitably and is well staffed. In fact, increasing from 93 to 96 or 97 residents, lets say a net four, can add $20,000 per month or $240K per year right to the bottom line as no additional resources are needed to absorb these new residents. This increase can grow the value of your community upwards of $2M. READ THAT AGAIN.

 

It’s counter-intuitive right? It seems natural to go in and fix those communities that are broken, not those that are performing. Yet your fastest win lies in your ability to work smart, not hard; to invest in those communities that are well staffed, run and vested in success but need an infusion of new ideas, a push in the right direction and the motivation to sell those final 6-7 units and create a true wait list with non-refundable deposits.

 

I wrote Zero Lost Revenue Days a long time ago, when people had no clue what the title even meant. So long ago, in fact, that I did a second edition update after the Great Recession because the nature of our business had changed so much. Yet the one thing that has been and will always be true is that independent and assisted living as well as memory care, active adult, CCRC and Life Plan communities are leaving a load of lost revenue on the table.

 

Executive Directors who have been trained by operators to manage a budget, not a business; don’t see this incredible missed opportunity and are not incentivized to either. So long as the budget is being met, most are happy and their operators too. As the business of seniors housing continues to mature and improve its sales and marketing as well as operational infrastructure, we need to invest in our Executive Directors and teach them the business of seniors housing and incentivize them to reach far beyond budget and toward the goal of zero lost revenue days- meaning no vacant units; all occupied, changing lives and generating revenue- a win-win for everyone.

 

 

STEP TWO: FOCUS ON LOST REVENUE, NOT BUDGET

 

Imagine if you took five well performing senior living communities and dropped them into an educational program with the Bild team where the Executive Director learned to be a solid sales leader and the sales team learned to work smart, not hard and removed the mental barriers around filling those remaining empty units. There is nothing more powerful than working to achieve success without pressure but instead to see what’s possible within the community.

 

If each of the five communities  netted up just three units, for a total of 15 net move ins, at an average rent of just $5K per month, that’s an increase of $75K per month or $900K per year going straight to the bottom line. Remember, with these communities, most are staffed up and the expenses are already covered. This concentrated effort has the potential to grow the value of the portfolio by $8M-$10M (at a nominal short-term investment)! More importantly, increased success results in employee retention and loyalty having a multi-pronged impact.

 

Rather than looking at your portfolio and just trying to stop the bleeding, implement a strategy to fuel success and invest in those that are doing well too; pushing them to the next level. Should you do this, be sure to implement a bonus structure for the Executive and Sales Directors as well as the team as a whole; a full occupancy bonus that is paid quarterly to incentive everyone to take part in this very important task. Getting excited yet?

 

STEP THREE: GET AHEAD OF WHAT IS CERTAIN TO COME: STAFF TURNOVER

 

As we look at taking a proactive approach to revenue and to identifying quick wins, another strategy to implement early this year is to hire a floating Executive and Sales Director that is in training and mobile. Like it or not, turnover is very real and the impact on your assets is incredibly damaging. While you may think there is no room in the budget, if you have a portfolio of five or more communities; it’s incredibly risky not to have someone in the wings who can step in when turnover occurs. If you can’t hire both, then hire an Executive Director who can operate and sell; putting them into whichever role opens and when all positions are full, place in those locations where value can be added. This bold step will ensure that you are not ever hostage to an under-performing employee who knows you can’t afford to lose them.

 

I challenge you to see 2020 differently. Rather than look at what you are earning as a senior living operator or senior living real estate investor, look at what you are losing. How many vacant units do you have right now, how much is that in annual lost revenue, net operating income and in truth, changed lives? You can do so much more but you can’t operate from a place of scarcity. Be bold, take risk, invest in your performers and non-performers and watch the transformation in awe!

 

Interested to learn more and understand how the Bild & Co team can jump in and put focus on those performing communities, moving them to 100% occupancy, zero lost revenue day in just six months? Email or text me for a candid discussion this week- tbild@bildandco.com or text 813.390.3349.

Closing Your Senior Living Revenue Gap Is A Phone Call Away.

Contact Bild & Co to grow your
occupancy now at (800) 640-0688