Planning your Care Home Growth Strategy

As we look forward to the remaining half of 2023 many care providers are looking to the long term to grow their care home portfolios alongside care sector diversification.  Alongside Buyacarehome, Ownacarehome considers the factors behind a care home owner’s ambitious growth strategy. 

Solidifying your financial foundation 

“Having a successful partnership with your commercial mortgage broker can set the scene for a successful growth strategy,” commented Mark Hickman of Chandler&Co. 

As an indication as a care home provider looking at your refinancing timetable goes hand in hand with your growth planning.  Your business plan ideally will look at the next 12 months together with a strategy for the next 5 to 10 years, the locations you are targeting for your care home portfolio growth benchmarked alongside supply and demand hotspots, with ageing demographics and private fee demand.  

With talk in the distant future of a National Care Service, however this pans out, the independent private care sector will continue to have a place with thoughts generally thinking that they will have some form of collaboration.  We are already seeing some care home providers reducing their placements for local authority fee levels unless accompanied by a third party top up, and as more families put off seeking help from care home placements until they are no longer able to cope, the complexities of the elderly and the vulnerable needing care will only increase. 

Mark Hickman of Chandler&Co continues: “When looking at refinancing your current care home(s) as a care home owner you can take the opportunity to release equity in your current portfolio as a stepping stone to acquire a further care home.  Refinancing can result in a strengthening of your position in the care market with a reinforcement of your commitment as a provider for the long term.” 

The private fee market 

As the Team at Prosperwell (formally Smooth Digital) say: “Private paying customers make up a significant portion of the care sectors finances, so it’s crucial to consider them when marketing your care providing business with 43% of funding from this demographic.” 

When searching for your next care home acquisition the mix of local authority versus private funding will be an aspect that is considered as part of the financial viability of your growth plan.  Thus demographic hot spots with surplus demand over supply will be a well sought after location for your next care home, whether as a new build, a quality conversion or a care home where you can add value for the longer term.   

Location continues to be a significant factor when considering your next acquisition, indeed, most care providers will look within a two-hour driving range for their next care home purchase so that they can work more closely with the incumbent care management team as well as their existing provision, ensuring brand development, added value and continuous improvement in all sectors of the care provision. 

Mergers & Acquisitions 

In a typical acquisition Mark Hickman from Chandler&Co comments: “prior to the appointment of legal support, as a commercial broker specializing in the care home sector as a team we work behind the scenes with a care provider in search of their next acquisition for what can be many months.  Thus, once an Offer Letter has been sanctioned by the credit team by a lender the legal process can begin to head towards loan draw down in support of the care home purchase.   

A question often asked of a broker is “at what stage should a valuation be carried out on the target care home acquisition?”   

Valuations are often instructed after the lender has sanctioned the deal but the process varies between lenders.

Innovation and driving continuous improvement  

Demonstrating that your growing care home portfolio is contributing positively to society enhances your reputation not only with a local community but also further afield, which in the longer term encourages further investment in your care home brand. 

Having a champion within the care provision to monitor your innovation within the care sector and how your service can continue to adapt and change adds value to your care service offering, and in due course can strengthen your fee negotiations with Local Authority commissioners. 

Climate change, the Environment & the CQC 

Environmental sustainability is being increasingly talked about and slowly gaining traction within the care sector albeit anticipated to accelerate over the coming years. 

With the South of England due to adopt the Single Assessment Framework from November 2023 the rest of the regions will be on board by March 2024, with care providers needing to consider environmental sustainability and sustainable development with the Quality Statement: 

“We understand any negative impact of our activities on the environment and we strive to make a positive contribution in reducing it and support people to do the same.” 

Thus, part of your care home growth strategy will no doubt include refurbishment of an existing provision, extension consideration together with adding a complimentary care service, fit for purpose, to your existing portfolio. 

Contract furnishing and interior design 

When considering the growth of your care home whether the existing care homes are fit for future also should be considered.  It is not unusual for a growth care home provider to sell an existing care home in readiness to provide a deposit for a newer, more purpose-built care home. 

Alternatively, where an existing care home is in a prime demographic location consider retrofitting and extending your existing provision. 

Jonathan Sawyers of BoConcept Contracts South East is often looking at care home projects to fit out for a sustainable future acceptable to the growing cohort of care seekers and their families conscious about climate change and the impact that businesses have on the climate.  Jonathan comments further: “Our quality department works closely with the Technological Institute of Denmark, allowing them complete freedom for independent testing.  Such controls mean that at BoConcept we confidently offer a 5 year guarantee giving care home providers assurance of quality craftmanship for complete peace of mind.” 

New care home build versus converted and extended builds 

Whilst going to press Ashley Cooper of the Care Build Group is completing the last few months of construction of their new build Care Home in Hinckley. 

Land for care home development continues to be sourced for hot spots across the UK with the larger care homes being built, offering care services for residential and residential dementia care and nursing with specialist care such as complex care services a niche growth area. 

With a vast majority of care home property of older stock and the CQC’s Single Assessment Framework seeking to address any negative impact a care home has on the environment, we can expect continued and greater investment in care home property whether that’s new builds or refurbishment of older converted property. 

The social care sector has continued to recover from the Covid-19 pandemic with occupancy improvements over the last 12 months, with some care providers saying that the enquiry level for their service has prompted them to seek a further provision. 

When weighing up a new build versus an existing care home, albeit an older property, a new build requires a larger investment and thus a longer return together with new registration commissioning, turnkey considerations, marketing and staffing strategies with an average “fill rate of 18 months” (Sara Livadeas).   

When assessing an existing provision, its reputation is key together with the latest regulator rating including action plans as appropriate.  Management strength and staff continuity alongside a Buyer’s experience in the care sector remain key indicators when applying for finance, enhanced by external consultants as appropriate. 

Framework agreement improving patient pathways from hospitals to care 

With the onset of the NHS Shared Business Service (NHS SBS) Framework Agreement enabling the use of such services as virtual ward support to improve pathways from acute care to an appropriate care setting, it is hoped that discharge from a hospital environment to community care or a care home setting will take place seamlessly.   

Thus, it is envisaged that demand for care home settings whether for respite and recovery or a more permanent care service solution will result in increased demand for care settings.   

With this in mind as care providers, looking at the medium to longer term, a growth strategy is becoming a regular feature of a future sustainable care provision, fit for purpose, resilient and adaptable to change with increasing demands from an ageing and more complex population. 

Business Plan 

With any growth strategy a detailed business plan should be prepared to include current financials together with a forecast plan as a new care home joins the portfolio.  Having care sector industry experts can assist in this regard adding value to the proposed strategy and confirming the business structure of adding a new care home. 

Financial data including sensitivity analysis backed up by demographic benchmarking add value to the growth strategy planning. 

Having the right team behind you is key to a successful care business alongside a strategic marketing plan as a care provision enters its growth trajectory. 

Author Julie Hopkins - Ownacarehome 

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