Assisted Living Facility SWOT Analysis

As discussed throughout this website, assisted living facilities are highly profitable businesses that are nearly immune from negative changes in the economy. There are always going to be families that need to have their loved one placed in an assisted living facility due to substantive care issues. Although the vast majority of people in assisted living facilities are elderly people, families with developmentally disabled people are often in need of these services as well. As such, once established – most assisted living facilities are able to operate near their maximum occupancy with minimal marketing required. Additionally, as a major strength, financial institutions are always willing to provide the necessary capital for development and expansion (including working capital lines of credit against receivables).

One of the other key strengths for an assisted living facility is that they are able to bill private insurance, Medicare, and Medicaid for certain services. Although the vast majority of payments for these services are paid by the resident (or their family), there are specific medical services that can be billed to government healthcare systems.

For weaknesses, assisted living facilities have very high operating costs. The cost of renting/owning a building that can properly house residents is expensive (including mortgage/rent, utility, and maintenance costs). Additionally, there are numerous federal and state laws that guide the operations of these businesses. For any entrepreneur seeking to enter this industry, a properly qualified attorney should be retained in order to outline all applicable statutes and regulations that must be adhered to an ongoing basis. Negative economic impacts can also have a moderate affect on revenues given that residents (or their families) may not be able to afford the month-to-month fees.

As it relates to opportunities, these businesses can thrive by establishing additional facilities once the initial location reaches maximum capacity. Additional capital, either debt or equity, is very obtainable given the large tangible asset base and economically secure nature of revenues. Many assisted living facility operators will often hypothecate their initial property in order to obtain the down payment for subsequent acquisitions. Many investors (especially private equity firms) are always happy to place capital with these types of businesses.

For threats, competitive issues are generally the most significant threat to an assisted living facility. Within major metropolitan areas and suburban markets, there are always a number of similar businesses in operation. Another threat comes from the improper management of the facility (including the potential for lawsuits stemming from elder abuse). However, this treat can be ameliorated by hiring well-trained staff that are able to deal with the day-to-day needs of older residents. Many assisted living facilities monitor nearly all aspects of operation through closed circuit video. This further reduces potential legal liabilities. As discussed above, economic issues can also cause a negative shift in an assisted living facility’s profit and loss statement (although this is a global threat to all businesses).

One of the other major issues that assisted living facilities have faced are the health matters as a result of the COVID-19 pandemic. Many lives have been lost in assisted living facilities as a result of the coronavirus. However, two promising vaccines have been released. It is fully expected that older people will be the first to receive the vaccine (which has already started). By mid 2021, many health experts expect that the pandemic will have subsided.