Budgets are tools we use to run our business. I once worked for a company that did not prepare budgets. Instead the CFO built trend charts, provided thoughtful points of discussion in a very regular basis. He was continuously refining and looking for improvements. He projected expenses across the company each month for the next 3 months. And if you had a good idea that required spending money and it was something that had never been done before it did not matter “that it is not in the budget”. Instead you made your case and often were told to proceed. But it was also true that going to that trade show last year did not mean you were going again this year; one had to justify what value the company would receive by attending. You might call this continuous zero-based budgeting. It worked very, very well. It worked because we understood the business and kept looking for improvements. So as you review your budgets this year it might be good to think about a few things that have proven to improve the results in senior living.
1. Do our labor hours flex at least weekly, based upon changing census and changing acuity?
How do you know you have the proper amount of staffing in place? Last year’s budget may seem like a nice place to start, but be careful. If the census changes, staffing needs to change. Don’t fall into the habit of staffing only as the needs of the residents change. Be sure to staff to sell those extra services that are all about providing for the “wants” of the residents. Look at the top performing companies and you will see lots of extra services being offered. Software tools, many at very reasonable costs, can help take some of the risk out of this.
2. What are we doing to make life more convenient and home-like for our residents?
A 2015 study conducted by Margaret Wylde, of Promatura, asked senior living residents what makes them happiest. The most popular answer? Making their apartments feel more like home. What are you doing to support this finding? As an example, are you leaving paper notices when packages are available for pick up, or are you delivering them right to their doorsteps? Do you allow residents to use credit cards? You may not, because you don’t want to pay the 2% or 3% fees. But there are solutions that make it possible to use a credit card without incurring the costs. There is technology out there that makes all of this possible and actually saves staff time! Make sure you’re aware of it.
3. Are we creating the right “first impressions” with prospects?
Chances are you have already spent a fair amount of money on your web site. But does it show 3D floor plans? Are the flowers on the table in the entrance looking like it is the Ritz-Carlton or the no-tell motel? Do you have a phone number a prospect can call to speak with a real person, not just a message taker? Is your receptionist walking out to greet people as they arrive with a big smile or are they busy reading a magazine? Have you built in the costs to support a truly positive and memorable first impression? If you don’t have these, you are falling behind the market.
4. Are we spending too much or too little on our IT infrastructure?
This isn’t hard to determine. First calculate what you are spending now, including cost of staff, overhead, software licenses, etc. Now calculate what percent of revenue that number represents. Deustche Bank conducted a cross-industry study that showed an industry average of 3.7%. So if your average resident is paying you $4,000 per month, then spending 3% of that would be $120/resident/month. Does that work for you? What about in-house servers; are you still using them? Really? You can cut costs dramatically by using cloud-based solutions. And, providers are making it more secure than ever. Are you using business intelligence tools to mine your own data? Consider taking the money you save moving to the cloud and invest it in a solid business intelligence solution.
5. What is our staff turnover and what targets are we setting by job title for turnover?
There are plenty of articles out there on how to reduce staff turnover. The assumption that they should be lower and lower each year may be the wrong one. Think about some of the top-tier consulting and accounting firms. Think of the military. Their strategy is to have a high level of recruiting and inflow of staff at the bottom of the organization, knowing that some will move up and others will fall out. Apply that to your community. How many caregivers do you need? If your turnover is 60%, then how many do you need to recruit each month? What is the size of the pipeline needed to support that? By the way, make sure you are properly supporting your staff using tools, such as on-line training to save money and provide more flexibility. In short, build a model that fits your business. The budget numbers will come out of this.
6. How are we checking to see that vendors are licensed, bonded and insured?
Are you delegating this to individual communities? Do they have the proof of insurance from each contractor and vendor? This function can be outsourced, often at little cost.
7. What projects are we doing to fix things that are inefficient or broken and at what cost?
Could you automate the process of signing paperwork for move-ins and move-outs? How much time are you spending at each site each month assembling reports that could be automated? Ask your team, “What little things take up your time?” and you will get a good list. Then give that list at your suppliers and partners and ask how they can help.
8. Which sources of new prospects are producing move-ins and at what costs?
Spending money to market your community is necessary, but do you know what works, and what doesn’t? For example, simple newspaper ads targeted at seniors may seem “old school”, but are they getting results? What does your data tell you? Do you have systems that allow you to monitor this continuously as trends and conditions change?
9. What are we planning to do next year to seek out innovative ideas?
Innovation doesn’t just happen; it needs to be encouraged. Include in your budget enough money to send people to conferences. Ask people to come up with one idea per month. Innovation can be encouraged if you set aside some money to try some new things and get people thinking outside the box.
10. What ideas can your residents provide?
You most likely have former business owners, CEO’s, CFO, and former VP’s of Marketing among your residents. They bring years of experience AND they are the customers who probably see things you don’t see. They will appreciate being asked.
Look at your budget process as an opportunity to renew and change. It’s hard work, but it can be the foundation for improving the results next year.