In my last post I told you about the financial viability seminar where I presented the argument that your number 1 priority should be to make sure your care business is financially strong enough for the year ahead.
In this post I’ll take you through the 2nd half of my presentation –how to make that happen.
This is the best thing you can do now to ensure your care business is still around this time next year.
Like any business, you need to make sure you are generating enough income. To know that you are, you need to know your costs and what income you need to generate to cover those costs and return a healthy profit.
Broken down into 2 key milestones, here are the steps you should follow.
Milestone 1 – Review Your Current Fees
1. Know your current average monthly costs.
• Fixed Costs
• Staff Costs – separate out your care and nurse (if you have them) average monthly wage cost. Include agency costs.
2. Increase your costs in line with what you think they will be in April.
For example, under your fixed costs your utilities are going to increase by 54% come April when the price cap is increased, food has increased by around 6%, your insurance has increased massively and so on. Based on these percentage increases you can work out an overall percentage increase.
Your staff costs are going to increase too with NMW, NLW and National Insurance increasing.
3. Know your average hourly rates for your care and nurse teams.
The cost of the care your carers and nurses (if you have them) deliver is the cost of their time. Assuming you pay your carers and nurses different rates depending on experience, seniority, responsibilities, etc. you need to establish what an average hourly rate is for each team.
How much will these rates increase come April?
You then need to add on employer on-cost of around 25% to cover the general costs of employing a person such as taxes, insurance, sick pay, maternity/paternity leave and so on.
4. Re-calculate the cost of caring for each of your clients.
With your fixed costs, staff costs and hourly rates increasing, your cost of delivering the care your clients need is of course going to increase.
5. How much profit do you need to return in order to make your care business financially healthy?
30%+ profit margin is healthy and you shouldn’t go lower than 25%.
6. Create a new fee for each of your clients.
How much does each fee compare with the fee you currently receive for that person? Based on your new increased costs that you will face in April, how much profit does your current fee give you?
So, there’s your first milestone broken down into measurable steps. Your next milestone should be to arrange client reviews for those clients you are not making a healthy profit on.
Milestone 2 – Receive the Fees You Need
If your current fees aren’t enough then you need to arrange client reviews and present the fee you need.
The work you have done under milestone 1 will give you the clarity you need to be able to do this from a much stronger position because your argument will be based on objective facts and not vague guesswork.
You could set the first milestone to be completed by the end of March and the second milestone to be completed by say the end of May depending on how many clients. Of course, you would start with those clients who return the least profit or actually result in a loss.
There is one other thing you need to have to make this work. You need to have the mindset that you must receive the right fees.
This is so important and again, the numbers will help. In fact, they will actually take away your choice of being persuaded to keep the client on the same fee.
If your calculations show that a client is making next to no profit or is in fact making a loss for you then what choice do you have but to either receive a higher enough fee or serve notice on that person?
And when you know your numbers you can also work out the financial impact of an empty bed and make a much more informed decision rather than panic that an empty bed must be filled at all costs.
Read More: How Long Can Your Care Home Manage with Empty Beds?
If you want more detail on the steps you need to carry out to make your care home or home care business financially secure in the coming year then check out my new report.
5 Steps to Make Your Care Business Financially Secure.
In this report, I highlight the steps you need to take to work out your cost rises this year.
It also includes links to tools that will help you do this.
If you use these tools then for a short period I’m also offering my help for free if you need it to put your numbers together.
I know you’re busy running your care home or home care service but this is too important to ignore.
Seriously, if you don’t know your cost rises and address them then your care business may not be around this time next year. It really is crunch time.
Once you have worked out what your costs will rise to, the quickest, easiest and most accurate way to see the impact of these cost rises on your fees and what fees you need to be to return a healthy profit is to use the Care Fee Calculator.
And you can take advantage of the 30-day free trial that comes with the tool to review all of your fees and then cancel your subscription if you no longer want to use the tool to set the right fees in the future. No risk.
The Care Fee Calculator is the only tool that has been developed to help you set accurate bed fees.
This tool will give you that vital clarity needed to not only make sure you are setting the right fee but to also be able to negotiate for that fee.
When you see a clear breakdown of your running costs and the cost of the care you need to provide someone fee discussions become very matter of fact.
Reviewing your fees is by far the most important task you need to carry out as we approach April. Please don’t put it off.
