Automation Risk – This is an absolutely minimal risk for an assisted living facility. This is very much a face-to-face business that requires ongoing interaction between residents and staff. Most importantly, assisted living facilities provide compassionate care to people in need. While automation and AI driven technologies will assist with managing the day-to-day operations of assisted living facilities, there will be no replacement regarding human interaction with residents that are seeking care and companionship.
Local Competition – As with any enterprise, there will always be competition from established businesses that render a similar suite of services. However, the demand for assisted living facilities is skyrocketing as people from the Baby Boomer generation enter their later years. Additionally, individuals with developmental disabilities also require ongoing care. In many market areas, the demand for assisted living services actually exceeds that of available supply. As such, local competition risk is relatively low for an assisted living facility.
National Competition – The vast majority of assisted living facilities are owned by local and regional operators. There are only a handful of competitors that develop and manage facilities on a national level. As such, the competition risk from major corporations is relatively low.
Owner Work Life Balance – It is very difficult to operate an ALF given the level of care that is required by these enterprises. Fortunately, many assisted living facilities operate with a clearly defined management hierarchy that covers all shifts over a 24-hour period. Most ALF owners typically work during daytime hours while having overnight staff available to address resident issues. As these enterprises expand, the Owner can easily hire a general manager that supervises of the work of each owned and managed facility.
Predictable Income – This is another low-risk aspect of an assisted living facility. For predictable income, many ALFs offer services beyond providing a residential facility. These additional services do create highly predictable streams of revenue for ALF operators.
Recession Risk – The recession risk for an assisted living facility is very low. Among older people and those with disabilities, the use of an assisted living facility is an absolute necessity. Both individuals and families are willing to pay a premium for quality care services on a monthly basis. As such, the risk related to an economic recession impacting the operations of an assisted living facility are relatively low.
Recurring Income – Nearly all revenue produced by an assisted living facility is recurring. There are substantial monthly fees that are associated with staying an ALF, and these fees are billed on a monthly basis. This is one of the reasons that many entrepreneurs seek to establish ALFs as they are able to produce this type of revenue, which substantially contributes to their economic stability. This highly recurring stream of revenue also contributes to a substantial valuation for these enterprises.
Scalability – Assisted living facilities are scalable enterprises. Once the initial facility reaches 100% capacity, many entrepreneurs have the ability to seamlessly establish new locations. Generally, an ALF owner will establish secondary and tertiary locations that are 20 to 50 miles from their initial location. However, in highly population dense areas, the ability to create additional facilities nearby may be advantageous as resources between numerous locations can be shared.
Skilled Labor – This is a higher risk for an assisted living facility as highly trained professionals need to be retained in order to render proper care. This can increase costs as it is expensive to train personnel as to the proper protocols and procedures to the operations of a specific assisted living facility. However, there are many placement agencies that can assist an ALF owner will sourcing proper labor during the development process and throughout the life of the business.