10,000 people turn 65 every day and 4,000 others turn 85. This has led to increased demand for senior housing units. The demand is set to increase even more, with the estimated number of units being 3.2 million by the year 2040.
In a bid to cash in on the promising future, more investors are now making make a leeway to this sector. The sudden upswing has, in turn, resulted in a series of unprecedented changes in the industry.
For instance, nowadays, more senior housing companies are transitioning away from owner-operating models. Why is this, and why was it so popular in the first place. Learn more here.
Why the Owner-Operated Models Were Popular
An owner-operated model is a facility whose operations are managed by the founder. Five years ago, senior developers preferred these models over assisted living management companies. Here are a few reasons why:
They offered Total Control
The model was popular about a decade ago because it offered total control to the owner. This meant that such owners could tailor their work environment to suit them. Being in control also meant that they could direct the culture of their business.
The aspect of controlling the destiny of their business is perhaps one of the reasons why owner-models, also known as self-managed housing companies, remained popular for so long.
Bigger Financial Rewards
Investors preferred to manage their companies because of the appealing financial rewards. By managing these companies, owners eliminated the need for business managers.
It reduced the number of heads on the payroll. This meant huge financial rewards at the end of each month.
Senior Housing Companies Were Their Primary Areas of Focus
About five years ago, a majority of investors who invested in this realm had no other businesses. This meant that they dedicated 90% of their time in running them.
A typical senior living company was a small nursing or residential facility. It means if they had other businesses, they could manage it even while running their separate entities.
Why Senior Housing Companies Are Transitioning To Merged-Affiliations
There’s no denying that owner-operator models have their benefits. However, transitioning to the side of assisted management packs even more perks. Here are some of the reasons why senior living developers are making the move:
They Lack the Skills
The projected demand for senior living solutions has been attracting hordes of investors. Majority of these investors look for a stable, long-term, and profitable investment. They risk their capital to establish the facilities, but they lack the expertise to run them.
Instead of taking the risk of doing the job themselves and failing, such investors usually turn to senior living management companies for a helping hand. This explains why a majority of the newer facilities are under the management of the said companies.
To Help With Marketing
The senior living arena is a highly localized relationship-based market. Therefore, unlike most businesses which thrive in almost any environment, success for a senior living company is not brand-able!
In other words, for a senior living company to be successful, it needs to have a good relationship with the local community to gain referrals. As a new investor, creating such relationships might take a while.
This may slow down the growth of the business. An assisted living management company is already well-established in the market.
It has good relations with the locals and outside communities, thus has a broad customer base. New assisted living companies can easily grow under a consultant company. This is due to the excellent relationship between the operator and its clients.
A management company directly deals with potential clients as well as current residents. This helps in taking the burden off your hands!
This, in turn, results in increased referrals, which automatically leads to business growth.
They Own Multiple Businesses
In the past, those who established senior living companies had no other ventures. They solely focused on running their facilities on a personal level.
However, things have changed today as a majority of those who establish these facilities today have a diversified portfolio. This means that they can’t commit to one venture. Therefore, they leave the role of management to an experienced assisted living management firm.
To Take The Responsibility Off Their Hands
Besides marketing, an operator company usually takes on all roles of running the facility. These include collecting payments, responding to complaints, handling maintenance and repair issues, and ensuring that the facility complies with the government senior housing regulations to hiring and training employees.
In addition, the company will also bring on board some of the best vendors and any required third-party business to facilitate the smooth running of your entity.
All these activities would be time-consuming and incredibly tough on unskilled investors. Thus, by managing the facility, they take the heavy weight of responsibility off the shoulder of the owner. They also bring extensive experience to the table.
Some Facilities Are Large
One of the most popular trends in senior living nowadays is the establishment of large communities. As noted earlier, in the past, a senior living facility usually meant a small nursing or older adult’s home.
However, given the new trends in the sector, such as independent living, most facilities are now quite large. For instance, Brookdale senior living is one of the largest assisted living facilities with over 900 properties spread.
Therefore, as much as the investors would like to be involved in the running of the community, it is too big for them to singlehandedly run it and maintain effectiveness. Hence, they’re left with no option but to transition away from owner-operated models to merged affiliations.
Challenges Faced By Assisted Living Management Companies
Despite being the preferred option, operators don’t always have an easy time. Like any other industry, they face a few hurdles along the way as described herein:
Too Much Owner Involvement
Hiring an operator to run your company means that even though you’ll still have say in major decisions, the management company practically has control over everything else. Unfortunately, most owners don’t often realize this!
Even after hiring a well-established management company, they usually refuse to let go. Most of them will still show up almost every day in the name of trying to understand what is happening.
While it’s okay to show up every once in a while, trying to control aspects that they already gave up often results in administrative confusion. This, in turn, causes the staff they hired to manage the company to lose motivation and in the end, causing contract termination.
At the end of it all, they go home the bigger losers as this leads to slow growth and a high turnover rate, which negatively affects their brand image.
Even though managing companies are often willing to collaborate, it’s essential for owners to have a clear understanding of the boundaries. This will help create a better working environment for both them and the managing firm; hence, everyone goes home happy!
Lack of Pre-Marketing
A majority of those who invest in this realm usually believe that the market is needs driven. Therefore, they go into business thinking that if they establish the facility, seniors will automatically come to it. Unfortunately, this isn’t the case because the senior living arena is a relationship and referral based kind of market.
Therefore, before establishing a facility, one is supposed to pre-market it enough. This means hiring the management company early so it can have time to market to the locals.
However, these investors often hire the management company once everything is ready, giving the operator a hard time in achieving and surpassing the set goals.
High Expectations from Senior Developers
With 10,000 seniors turning 65 every day, most investors often go into business with unrealistic expectations. They establish the facilities with a flawed mindset that it will bring back all the money they used in building it within a few months. Unfortunately, things don’t work this way, and it takes a while before they can realize massive profits.
Therefore, when an operator fails to deliver their unrealistic expectations, the owners often don’t understand why resulting in conflicts.
Lack of Qualified Staff
Another common challenge that operators face is the lack of qualified staff. It’s especially hard because the majority of potential employees realize that there is demand for their services, and as such request for huge salaries. This is further worsened by the high wages that staff members in some of the largest senior living companies receive.
This makes it difficult for an operator to get qualified staff, which in turn results in poor services.
Steer Your Senior Housing Company to Success Today
As a first-time senior developer, start this business with a realistic mindset. Have a clear understanding of areas that you have control over. Also, understand those you’re supposed to leave to the operator.
Seeking the assistance of a consultant can easily steer you to the success you have always wanted.
Check us out to learn how you can facilitate the smooth running of your senior housing companies.