When is the last time you slept well?
For senior living business owners, it’s sometimes less often than our aging residents. Worries about staff, vacancy, cash flow, contracts, suppliers… the list is endless, and the stress eats away at both our profits and our health. The result is an endless loop shifting from one concern to another, putting out fires and never being able to get ahead.
You’re stuck. What you’re facing is a resource problem. Whether the shortage is cash, people, talent, customers or processes, you’re starved for something to get unstuck. Here’s what being stuck sounds like:
- “There’s never enough cash / time / talent.”
- “I spend all my time putting out fires.”
- “I want to do __________ but can’t find the time.”
Sound like something you’ve said? Then you have a resource problem. It could be a shortage, or it could be a misallocation. To find out, you need to do financial planning.
Planning = Focus
The main benefit of financial planning is clarifying priorities.
Here’s an example: John bought an independent living home using an Small Business Administration loan with high variable interest rate. As the Fed started raising rates, he was terrified he would not have enough cash to pay the loan. He hired my team to build some forecasts under different interest rate scenarios, and we found that even massive interest rate changes wouldn’t sink his business. But having even slightly inefficient workers would quickly make him bankrupt. So John stopped talking to banks about refinancing and instead began training his workers and implementing more efficient processes.
John already knew that worker productivity was important, but he never had seen it measured before. Financial planning helped him set priorities.
Resource allocation through financial planning
A common myth is that finance only cares about cash. In truth, finance and accounting is an abstraction of every element of your business into a common base language: monetary value. This allows us to compare apples to oranges, examine relationships between people and processes, and look into the future with forecasting, just as John did.
If you’re facing a resource problem, start by examining all your resources on a common playing field. A fractional CFO (or part-time CFO) would do this by reviewing historical financial statements and building models to study relationships.
This gives you insight such as:
- How much does it cost to operate one room?
- What is my break-even occupancy rate?
- How expensive is it to acquire a new customer?
- When should I hire more staff?
- How much cash will I have available at the end of the year?
Now you have a good perspective on your resources, so we perform a sensitivity analysis. This measures risk and opportunity by adding or taking away resources, improving processes, or making new investments. You may find there is a massive return on investment in hiring a new assistant, advertising on TV or renovating facilities.
Best of all, you may find yourself sleeping better knowing that the business is growing.