An Assisted Living Facility market report is a vital first step if you’re considering either acquiring an existing assisted living community or building a new one. The information that you obtain from an assisted living market report represents insurance against undertaking a bad venture. And, consider this-regardless if it’s an acquisition or ground-up construction, your financial stake in an assisted living facility is substantial. With that in mind, why take chances?
Does this project make sense?
Assisted Living Facility Market Report-some initial considerations
If you’re new to the assisted living facility business, then it’s wise to seek expert guidance when formulating an assisted living market report. But, even if you are experienced in the business, it may be beneficial to have an outside party vet your project. In the end, lenders and investors commonly require a third-party expert to conduct a market study and render a judgment on the viability of the venture.
When seeking outside expertise, it is important to be mindful of several factors. First, make sure that the party fully understands the assisted living industry. It’s ideal if they have operating experience and thus, can appreciate the complexities of the business you are seeking to enter into. Second, ensure that they have experience in formulating assisted living facility market reports. Lastly, it’s essential that they are willing to tell you if it’s a bad idea.
Now, getting bad news is never pleasant, but it’s a lot better to spend the money to have an expert tell you the project is a bad one. The alternative is to spend a substantial amount of money, time, and effort, only to find out that the venture is a bust. That is not only a catastrophe in terms of finances, it is just as bad in terms of time and effort. An assisted living market study can help you to avoid that disaster.
What kind of study?
In general, there are often two types of market studies. We distinguish them by whether or not it involves an onsite visit or not. Let’s first start with the type that does NOT involve an onsite visit.
Often, these types of assisted living market reports are for internal use only. In most cases, they involve parties that are very familiar with the assisted living business and simply want an outside party to identify any substantial red flags that might signal concerns about the viability of the venture. These reports cannot be used for attracting investors nor seeking funding for the project.
The more complete and accurate market report is one that involves a multi-day onsite visit. This “boots on the ground” approach yields valuable market information, including an accurate assessment of the competition and the market. In my opinion, this is a much more valuable and desirable market study. And yes, it can be used for attracting investors and seeking funding from lenders.
What’s in the report?
What follows pertains to the onsite type of market study. Market reports will vary in content of course, but they should contain, at a minimum, the following components:
- Determination of the primary and secondary market areas-this is a critical step as it serves to define several key factors in the report. We like to say that markets are defined by either man-made factors or natural factors (sometimes both!). The best way to identify these factors is to conduct an onsite visit.
- Demographics-it’s important to identify the target audience. The average age of an assisted living resident is in the mid to late 80’s but that’s not an accurate reflection of the target audience. There are residents that are in their 70’s as well as those healthy individuals that are well into their 90’s and beyond. Age and income demographics are common metrics in an assisted living facility market report. Finally, it’s the demographics for the primary and secondary market areas that are relevant to the project.
- Competitive analysis-it’s necessary and I might add, crucial, that there is an examination of the competitive inventory in the primary and preferably, in the secondary market areas. Consideration must be given regarding your potential competition-price points, lines of service, quality of care, quality of staff, quality of service, and physical plant layout to name a few considerations. A qualified expert can effectively analyze these and other factors when conducting an onsite visit. There are numerous benefits to a properly conducted competitive analysis. An obvious benefit is an understanding of the price points in your market and the service lines available to potential residents in your market. But, an example of a less obvious benefit is an understanding of the quality of staff and the general atmosphere of the competition. All of these and more can provide you with valuable input on how you may want to position your assisted living community as well as how to design your physical plant and your operations.
- Demand analysis-every assisted living market report needs to answer the question, “does this project make sense?”. A determination of bed need or bed surplus can go a long way towards answering that question. There are many components and methodologies that can go into calculating the metrics that will help to answer that all-important question. Some of these factors include penetration rates, overall occupancies, bed capacity, and utilization rates.
There are plenty more components of a market report but the above points are essential parts of the study and ones that you must have in your report.
Assisted Living Facility Market Report-final considerations
Regardless if it’s an acquisition or a ground-up development, a well-conceived and well-executed market study is an essential first step in your assisted living community journey. If you are engaging an outside party to do the report, it’s a very small price to pay to ensure that you are not making a much more costly investment in a poor venture. Consequently, it is absolutely vital that you take the time to select the right party to be your partner in this journey.
An assisted living market report can prevent you from expending a whole lot of capital and time on a bad idea or it can provide you with peace of mind that your project is ready to succeed. I definitely think that’s a step well worth taking.