BROADCASTS.com

b'

Ben from Oklahoma City asks

We are looking at building a residential assisted living center consisting of 12 residential care homes. What are your tips on mapping supply and demand for the market. Our current approach is googling and building a list and talking with folks that are already in the assisted living industry for the market.  Do you usually commission a 3rd party to do a market study? What are your criteria for hiring and finding someone to complete that study? Thanks!

Ben, this is a great question.

You are focusing on residential assisted is very smart. The assisted living market is part of a continuum of care that starts with independent living with a very light amount of services at one end of the spectrum and skilled nursing at the other end of the spectrum. Assisted living fits somewhere in the middle.

The first step is to get your own market intelligence. That consists of talking with lots of people in the local market.

You want to find out which banks have funded the local projects. This is done by simply searching title and seeing who has the mortgage recorded on title. You can then talk to those banks and get their assessment of the local market conditions.

Next we talk to people who operate the local facilities, including staff. Do they like their job? How long have they worked in their current job? Is there high staff turnover?

You and your wife should visit all of the possible competitor facilities in the market as a secret shopper. You can interview each facility under the guise of looking for a place for a family member who is getting older and will need a place soon. When you do, find out the current occupancy of all the competitors. But most important, make an assessment of their strengths and weaknesses.

If the market were to become saturated and oversupplied, you need to know what it will take to compete to win and get more than your fair share of the market.

Then to answer your question directly. Yes, we always commission a third party market study. This is done for every major project. Some accounting firms and brokerages have consulting divisions that specialize in market studies. In the assisted living world, there are also consultants that have industry recognition.

You perform a market study for three different purposes.

\\n
1. Make sure you\\u2019re not deluding yourself into thinking that you have a viable project. It\\u2019s easy to get project fever and become emotionally attached to a project.
\\n
2. Your lender may require it.
\\n
3. If you\\u2019re raising capital from investors, it\\u2019s a good practice from two points of view. You can show your investors that you\\u2019re taking their investment seriously. The market study is part of your fiduciary responsibility to them. The market study which shows demand for your product can be part of your communication with your investors as to why the project might be a good investment.
\\n

The market study is going to look at other elements. They\\u2019re going to examine the demand and the ability to afford your product. So they will look at the number of people in the age demographic. But they will also match the age demographic with the income of the kids. Because often, the funding for the assisted living stay is coming from the next generation. If the parents don\\u2019t have the money, maybe the kids do. So you will get a comprehensive picture of the market. The market study will look at the capture rates for independent living as a leading indicator of what the capture rate might be for assisted living a few years down the road. They will also look at the capture rate for assisted living and compare that with industry averages for a healthy market.