Assisted Living Investing: The #1 Rookie Mistake You Must Avoid

Transcript

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Hey friend, have you been looking at getting into assisted living, but you're just like, man, there's just so many things in the way. I'm not sure if this is going to be a good fit for me, if I can really make this successful or not, and I'm not sure if I really want to jump into this world because I'm scared I'm going to make mistakes. You know, if that's you, this video is going to be perfect for you because I'm going to walk you through some of those big basic

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rookie mistakes that a lot of people make as they're looking to get started in assisted living. figure out how to navigate those and know what you should be doing so that you can move to the next phase and not make those mistakes and move forward with clarity and confidence so that you know that hey, this is the thing that's going to work for me. If you're ready to do that, make sure you stick around for today's video. This is going to be a good one to help you out as you're going through that

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process. Hey friend, my name is Brandon Gustafson. I help first-time assisted living entrepreneurs launch profitable, purpose-driven businesses, creating prosperity, purpose, and peace in their lives to help them, you know, get into assisted living, launch a successful business, and create the time of financial freedom that they've been seeking. Super excited to help you out as we get into this. If you need some help and some guidance, by the way, I'm going to talk a little bit here at the

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end of the video about a special opportunity to work with me. But if you want more information about that, just type in roadmap in the comments down below and we will get you a link so you can learn more about that program and that opportunity. And with that, let's get into today's video. All right, let's hop into it. Today we are talking about the biggest rookie mistakes that people make as they are looking to get into assisted living and the things that you should be trying to avoid so that you

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don't make those same mistakes and you can move forward with clarity and confidence as you're trying to launch your assisted living business. And if you need some help on some guidance as you're doing this, go ahead scan the QR code that's over here in the bottom corner. Aliquiz.com as well. 30 second quiz can give you some guidance on which of my programs are going to be the best fit for you. We'll also have links and things in the bottom in our description for my book, um, other resources that I

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have to really help you out as you're trying to move things along and launch your assisted living business. Now, I would say the biggest thing that most people don't realize when they're looking at assisted living, they just look at the pure numbers, right? Oh, I could get $5,000 per room and I have 10 bedrooms or I've got eight. I've got six bedrooms. Whatever number it is that you got and you're multiplying it and you're like, man, I could do, you know, I could do $50,000 in just income in here. This

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is going to be awesome. The thing that you need to realize is that assisted living is a business. It's a business first. And with it being a business, that means you're going to have expenses more than you would in traditional assisted living. And for those of you who are my nurses, and if that's you, you're a healthcare worker, you're in that space, just type in nurse down below because I love seeing people like you uh that are coming to these videos because I know I can help you out as

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you're doing this because you realize, hey, I can do this care better than anybody else. But it's also one of those things that if you are on that clinical care side, you probably haven't thought much about the business. And this is something that's a little bit foreign to you. So, I want to make sure that you understand going into this that hey, assisted living, you're going to not only provide care, but you're going to have to run a business. And if that's not something you're comfortable with,

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then you have two options. One, this probably not for you. Or two, you probably need to hire somebody that can kind of run the business for you and handle the business side of things because it is a big part of it. Now, what you need to understand is in this world of assisted living, specifically residential assisted living, you're going to see this in bigger commercial type properties as well, but you have two pieces, okay? You have the real estate, which is going to help support things. It gives you a good base, uh,

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gives you some equity, gives you something that you can put as collateral for a down payment as you're getting into this business. It's really good. It helps support things, but the business itself is what's going to drive those profits. Um, you're not making a ton of money off of the real estate. In fact, it's one of your biggest expenses that you have. If you want to learn more about the top five expenses in assisted living, type in wif w down below and we'll do a video for you that's specific

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on those top five expenses so you understand what those are. But you're going to have these expenses in the business and you need to understand kind of how those finances are going to work and that's a big part of running the business. Your revenue that you're going to bring in is going to be tied to the type of care and the amount of care that you are providing to your residents. So if you bring in higher care need residents, you're going to be able to charge a premium for that because you

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are providing more service. So if I have somebody that is a twoerson lift, I'm going to need to have two employees there, right? Just in case I've got to get this person up out of bed, they fall or something like that. I need to have two people there all the time if I do that. If that's the case, I'm going to be charging a premium for that person because it's going to cost me more as a business owner. That's just kind of a quick example. So, you need to be taking into consideration what are the care

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needs of my resident? How much support do they need so I can meet their care needs? If I can't meet their care needs, do I need to hire more staff or do I need to tell them, "Hey, I'm really sorry. I would love to have you here, but we don't have the staff. We don't have the ability to hire more staff and so we're going to have to discharge you and put you in a a spot that can meet your care needs." you're going to have to make these really hard decisions. And this is part of owning a business,

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right? There are hard decisions and you need to make those decisions. But your care, the care that you provide and the amount of care is going to directly impact the amount of revenue that you can bring into the business. So you need to understand that hey, it's okay if I bring in higher care needs residents because then I can raise higher rates and then I can have more revenue coming in. and they need to just kind of do some basic math and say, are the expenses associated with the amount of care I'm going to have to provide to

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this resident? Does it positively or negatively impact me from a revenue standpoint and from a net operating income standpoint? Am I going to be profitable or not? So, you need to understand those numbers and that's what's going to allow you to be profitable. This is the type of thing you have to be thinking about when you are running this business. You have to always be thinking about kind of the bottom line. And again, if that's not the type of person you are, or you're just not into that, then this business

00:06:16
may not be for you. And that's totally fine. Or maybe you need to hire somebody that can handle the finances and handle the bottom line for you so you can focus on the care. So, as much as those of you who are my nurses, my healthcare workers, uh you're like, I know I could provide a better experience for people. And I'm absolutely 100% confident that you can because you have seen the type of care that can happen in these homes, which is unfortunate and you know you can do better, which is great. But you

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also have to understand that if you cannot turn a profit, then your home will shut down and then those residents that you care for and you love, they will be going to one of those homes that you don't want them to go to. So as much as we want to do this out of the kindness of our hearts, we do have to make business decisions. We have to be paying attention to the finances. That's what's going to allow us to continue operating, continue serving those that need these services because they're

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going to need them regardless of if they're with us or not. So, you might as well learn the ins and outs and how to be profitable so that you can provide that service to the people that need you the most. All right? Just like real talk with you. just want to have that conversation because it can be hard and people don't want to talk about money all the time, but you do have it's it's just a huge part of running this business. Like, it's it's real. So, you got to do that. The other thing that I

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want to point out to you is in assisted living, you're going to be managing staff more than you are residents. Your residents are they're going to be there. They're going to need care, but oftentimes they'll just kind of go with the flow and do the things that you ask them to do. And uh you're going to have difficult residents from now from time to time. But the thing that you are going to be managing a lot more and the the bigger personalities are probably going to be your staff or the families

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of your residents. And so this is a big part of running this business. You have to kind of hone in on those people and make sure you're serving them in addition to your residents and creating a good atmosphere. And that's what's going to allow you to run a successful and profitable business is understanding how to manage those egos and how to help those people along the path so they can help you have a good experience create a good experience for your residents. And when you can hone in on on how to work

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with them and you have plans for good daily operations, you have good, you know, policies and procedures that you're following and standard operating procedures, SOPs for how you're going to run the business and handle certain situations, it makes your life that much easier and it's going to allow you to have a profitable business. So these are the types of things that you need to be doing. You have to treat this like a business first. As much as we want to make sure that we are providing adequate

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care and meeting the care needs of our resident, this is a huge part of assisted living, you still have to treat this like a business if you are going to remain profitable and not be hemorrhaging cash because people can get in that situation quick. I've had that experience not with assisted living but in other businesses in the past and that has been really hard to do and I had to shut down that business and had to sell my house and my brother who was my partner had to file for bankruptcy. Like

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I've been there. I know how crappy that is and I want you to avoid that. And so if that's something that you are struggling with and you're just like, you know, I don't know how to move forward with this. You need to have a plan. You need to treat this like a business. And it really has to be that way. You have to separate it from your personal life. You have to take yourself out of all the emotional things that happen there. And it has to be a business. You have to treat it like a

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business. This is that rookie mistake that most people they just like, "Oh, yeah. I just want to do the care and you know the business will will come after. This is a business first and you have to you absolutely have to treat it like a business or you will not be successful. Okay. Next thing I want to talk to you about is staffing. The the staffing piece of this it is going to determine your success. And for those of you who have never run a business you know that I just want to share with you staffing

00:10:06
is going to be your biggest expense. I talk about the wife expenses. Again, if you're interested in learning about those, type in wif wife down below. We'll do a separate video for you or point you to one of our our previous videos that talk about that. But the W in the wife expenses is wages. It's 50 to 70% of all of your expenses. It's huge. It's a huge amount of money that you are paying toward your staff. And you need to make sure that your staff are happy, that they are well trained,

00:10:34
that they have the support that they need so that they can be successful. You make sure that they're showing up. And the culture that you are building for your staff is going to have a direct impact on your residents and their experience inside of your facility. So, you need to spend time building up the culture that you want, hiring the right people, and this is really hard to do. If you're interested in learning about the hiring process, just type in hired down below and I'll do a separate video

00:11:03
on that because if you can find a person, I operate out of state, okay? I live in Utah. I have operated in Colorado. I operate in Idaho. So, I do this out of state. Hiring the right administrator has been absolutely key uh to allowing me to to run my business the way that I want to run it. And so you need to find and hire good people that you can trust that kind of align with your management strategy and your goals. And when you find those people, it's going to allow you to be a whole lot more successful. Super important. And

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when you can do that and you have good administrators and you have good training processes and you're paying people well, you know, not exorbitant, but you're paying people market or slightly above market rates, you're going to create an atmosphere where people want to stay there. You're going to retain your staff. We went through a shift in our business about a year and a half ago. We hired a new administrator and that change. It's always scary when you do that because this person is going

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to be running so much of your business and you're putting a lot of trust in them, especially somebody like me that does this out of state. And what we found is this person has been able to implement incredible processes for the rest of the staff. and he has been able to really stabilize our staffing model and our retention rates for our staff have gone up incredibly. And then that has resulted in happier residents that know what to expect because the staff are the same. They know what to expect

00:12:28
from the activities that we do and the food that we plan and just the way that the home is cleaned and just the interactions that we have and how it looks and all of those things. And when you have that in place, it creates a much more stable environment and then you're creating this culture and staff want to stay there and staff want to come and work for you and it just creates a much better experience overall for everybody involved. So the more that you can retain your staff and and create

00:12:54
a culture that works well for them, the more happy everybody's going to be. Like it's just the way that it is. When you have turnover, it creates chaos and that can be really bad. Especially for some residents, depending on the type of resident that you have, they don't like that change. They want the consistency. So, the more you can build these things in and create that consistency, the better off you're going to be. And your leadership and then the people that you hire to be leaders, they are the ones

00:13:20
that are going to create the culture that creates that stable environment. So, it's so important for you to hone in on who these people are and communicate what you want that culture to look like and then work on it. Continually work on it because when you have it, it makes just a world of difference inside of the home. I also want to point out to you that compliance with the different rules and regulations is extremely important. Now, in assisted living, it's highly regulated. It's the world of healthcare.

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There's a lot of regulations. You just have to be aware of that. It's just a part of running this business. And the more that you come to understand that those regulations are in place to help you out and help stabilize your business, the better off you're going to be. I was just doing a video on this and the thought popped into my head. The rules and regulations, one of the big things that they force you to do is create your policies and procedures. And I cannot express to you how many

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businesses that is a struggle for. They don't have policies. They don't have procedures. They don't have standard operating procedures. They're just flying by the seat of their pants, hoping that things will work well. In assisted living, a part of becoming a licensed facility is creating your policies and procedures. This is the handbook for how to run your business. When you do this and you take it seriously and you write good policies and procedures and you follow them, you are doing what so many other business

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owners wish they had, wish they could do. And that is kind of forced on you before you even start the business, which is incredible. It's going to help you be so much more successful. It's going to reduce your insurance premiums. It's going to allow you to know how to handle certain situations, how to be more profitable as you're getting into this. There's a book called The E-Myth Revisited. I would highly recommend that you do go read that. We'll link it for you down below. Uh it's by Michael

00:15:10
Gerber, so make sure you go check that book out. But it's all about setting up systems and processes and how that's going to help your business become more profitable. And you get that inside of assisted living. It's incredible the way that this is set up. It's going to allow you to be more profitable, allow you to be more consistent. And if you don't have those things, it could shut you down. Like, you don't want to do it because you could lose your license, number one. But also, and licensing is

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super important. I think unlicensed homes are fine. I I really do. I think they're okay, but you do have a limit in how many residents you can have. Typically, most states, it's four to six. Once you hit that mark, then you're going to have to become a licensed facility. Some states it might be a little bit more. But regardless of if you're going unlicensed or not, I think you should still follow the licensing process, especially the policies and procedures. And when you're licensed, it's going to

00:16:01
cost you a little bit more, but you can have more residents so you're going to have more income. So, you just need to kind of play with the numbers, figure out what's going to work best for you. I love licensed facilities. I think they are a better option. They're they're more heavily regulated. Yes. But I think it creates a better and safer environment for residents and that is I'm all for that. I'm not going to be mad at you if you want to start off with an unlicensed facility. But I will

00:16:25
caution you and tell you make sure you run the numbers because what you think is oh I've got this two or threebedroom home and I could have four residents in here and you know I'm charging people $5,000 per month and that's $20,000 in income. Cool. Yeah. Make sure you run the numbers. Type in calculator down below. we'll get you our free underwriting calculator uh to help you out as you're going through your journey to see if this is going to work. But I promise you what you're going to find is

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your income earning potential, your pathway to profitability shrinks significantly when you go that way because if you have one or two residents out, not only are you not making any money, you're probably losing thousands of dollars per month. So you have to make sure that you understand the numbers before you jump into this. Okay, do that. Type in calculator down below. we'll get you the free underwriting calculator and help you out along your journey. Uh, from that standpoint, if you do not stay in compliance with the

00:17:17
rules and regulations, there there will be regular surveys if you're a licensed facility and they're there for the resident safety. But what is cool about them and you may have fines associated with it and we've had fines for things where we had operational weaknesses and certain policies were either not existing or not followed the way that they needed to be. Those created conversations for us as owners to have with our with our administrators and how to run the business, but they are also

00:17:45
like these kind of cool opportunities that are built in to how you operate your business to see if you have any operational deficiencies and where you can make improvements for a better experience and safer experience for your resident, for the way that you operate your business. It's a kind of a built-in way for you to evaluate your business on a regular basis, annually, semianually, depending on your state. And those are opportunities that you should take advantage of to really um hone in on

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what you are doing in your business to see if it's going to remain profitable and still serve your residents. So these are incredible opportunities and you need to make sure as a part of the surveys, as a part of getting your license, that you have extremely strong documentation that you follow as well. The documentation is not just there to check a box when you get your license or to make sure you have it for when you have a survey. You need to follow these things like we were talking about with

00:18:39
the E-Myth Revisited. Don't just create those policies and procedures. In that book, he talks about McDonald's and it's pretty amazing when you think about McDonald's. You could go to any McDonald's anywhere in the world and order a Big Mac. And high schoolers all over the world are going to be able to give you a Big Mac the same in Utah as it is in New York as it is in South America. Like I lived in Argentina for a couple of years and had quarter pounder with cheese down there. Now, it tasted

00:19:07
better cuz the beef is better in Argentina, but it was the exact same experience down there as it was in Utah as it was in New York when I went and got a quarter pounder with cheese in New York when I did that a few years ago. So, it was the same experience and that's pretty incredible. And so, you want to create systems and processes that allow for that same experience whether regardless of the resident you're working with or the facility you're working with, you want to have these things in place. You need to treat

00:19:33
them like they are your Bible and how you're going to run your business. And that allows you to have strong operations, creating a better atmosphere for your staff and your residents. Makes everybody happier. Allows you to stay in compliance, avoid fines, and run a profitable business. You got to have that. It's a huge It's one of those things that you think, "Oh, this is a necessary evil. I've got to do. I'm going to check the box." But if you take it seriously, it will allow you to

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skyrocket the way that you run your business. I promise you that. The fourth thing that I want to talk to you about today is working capital is going to protect your runway. So, this is a huge mistake that I see people make as they are trying to get started. They are looking at this and they're like, "Yeah, I could do this and you know, my income earning potential, I could get, you know, $10,000 per month if we're at 100% occupancy and all of this stuff." But what you don't realize is when you're

00:20:22
getting started, it costs a lot of money. you don't always have a lot of revenue, especially if you haven't bought an existing facility and you're starting from the ground up, which a lot of you want to do and I think it's great. You know, converting a home, renting a home, building something from the ground up, a home like that, but you're starting with zero residence. You have no income. And so, you need some kind of a runway. And the more that you can project out what you need, put it

00:20:45
into your business plan. I have had success in writing business plans for multiple types of businesses where I ask for a certain amount of money and I justify that amount in my business plan and in my underwriting projections. Again, type in calculator down below will get you access to the underwriting calculator for free. But when you can do those things, it's going to give you this runway. If you justify, hey, I need an extra 30,50, $100,000, and you can really justify it and work with a lender, you're going to be able to get

00:21:15
that money. And that gives you a huge runway as you're trying to ramp up and get your business where you need it to be. And that could be that, hey, maybe it's not a lender that does that. Maybe you need to have that money set aside or you need to find a partner that has access to it or maybe you you got to find some other kind of a loan, a secondary loan that's going to help you get that. But when you have extra working capital in the beginning, it gives you this incredible runway that

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gives you some space and some time to figure out your operations, figure out how to get your beds filled, and that's going to allow you to be successful and profitable in the long run because your payroll is going to start before your revenue stabilizes. You're going to have to buy food for your residence before your revenue stabilizes. You're going to have to still pay your debt service, your mortgage payment, your lease, uh any loans that you have before your revenue stabilizes. You have to have

00:22:04
some kind of a runway so you can make those payments so that you can be successful. Otherwise, you're going to be three, four months into this and your whole mindset is going to be on how am I going to pay my staff this month, this week. How am I going to pay them when I'm at 30% occupancy right now? I don't have the residence and I'm dipping into my personal funds. And your entire mindset is over here on just like I don't have money and you're shrinking and it's getting small. And I don't want

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you to do that. I want you to have a runway. I want you to have a plan so you don't have to be shrunk over here. And you can move forward with confidence that, hey, I've got the money. We're going to get it. We're going to focus our efforts on bringing more residents in. I don't need to worry about the other stuff. My entire focus is on bringing more residents into my facility so I can increase my revenue so that that shrinking feeling goes away. I don't have to worry about it because I

00:22:53
now have the money that I need to allow me to be successful. Right? That's what you want to do. You want to be doing those things because everything is going to start from day one. even if you don't have the money for it. So, you got to build in some kind of a runway so you can be successful that way. It's just absolutely key for you to be successful here. Um, and the other thing I'm going to tell you is don't just do that in the beginning. As you are bringing in revenue, use a system like Profit First.

00:23:18
We'll link that down below. It's a book by Mike Mallowitz, but he talks about setting aside some money. and he does it from a profit standpoint, but I think you should do this as well from just like an operational reserves money in case something happens. Your furnace goes out, you had a low month in income, so you've still got to make payroll and you have been putting money aside into a separate bank account, a separate suffix in your bank account, wherever it is that is dedicated. It's rainy day fund.

00:23:45
You can pull from it if you need to rather than dipping into personal funds. And so, make sure you are doing those types of things as well. It will make your life so much easier. Trust me, we have had instances where it's like, crap, the water heater just went out. What are we going to do? The furnace just went out. I've owned my facilities since 2020 and we've had some of those big emergencies and it's like, oh crap, how are we going to handle this? And we would have been better off had we set

00:24:10
money aside. And it's something that we have started implementing in our business. And we just recently had a spot where was like, crap, Medicaid hasn't paid us enough money. Oh, look. We had we had just set aside $10,000 in the bank as our rainy day fund. We can just pull from that to make payroll. We don't have to pull from any personal funds or anything like that. We can just pull from that $10,000 and then once Medicaid catches up, we'll just reimburse it and we've got it there and

00:24:33
and all of a sudden everything's fine, right? These are the types of things that you should be doing and Profit First is a great example of how you can do that. Highly recommend that book. Again, we'll link it down below uh to help you out with that. I also want to share with you that this is a big confusing scary thing to start this business, right? It's hard to know where to go. I have a framework I call the focus framework. And inside of that focus framework, focus is an acronym by

00:25:00
the way. It stands for foundation first, optimal property selection, capital and funding, understanding the rules and regulations, and having strategic launch for your facility. When you have a framework like the focus framework, it gives you clarity. It gives you confidence as you're trying to move forward and launch your own assisted living business. And when you have that, all of those big rookie mistakes that we've talked about today, you know, just like the regulation piece of it and the

00:25:27
working capital and the compliance and making sure that you stay in compliance and staffing, all of those things get taken care of because you have a system and you have a framework that you know works. It is the process I use to start my facilities. I know it works. I've helped dozens of people in my coaching programs get to the point where they also have assisted living businesses and they follow that framework and it makes their lives so much easier. I would love to help you out with that. I have a

00:25:53
quiz, ALI quiz. It's down here in the bottom corner QR code. Just scan that or go to aliquiz.com. It will tell you which of the programs are the best fit for you. And would love to see you inside of one of those programs because I love coaching people and helping you see that there is a process, there is a framework, there is a system for starting these businesses. I don't have to do it alone because it can feel really heavy when you're trying to go through this and you're trying to figure

00:26:19
things out and you're just like, "Oh man, I don't know if I'm going to am I making the right decision? Do these numbers look real? Is my business plan sound? You know, those types of questions. And as you get started with this, these are real questions. And I cannot emphasize enough how important it is to have a guide. And whether it's me, and I'd love to help you out, or it's somebody else, find a guide. Go grab the book. If you can't if you can't get into one of my coaching programs, the

00:26:45
ali.com. There we go. That's what the book looks like. You can get on Amazon. Go to the website, the alibook.com. We'll have links down below. You can grab it there. Get some help. get some guidance and that's going to help you out as you're trying to figure out where to go and that's going to catapult you forward into the next system. If you need some help and some guidance with that, again, type in roadmap down below. We'll get you the link to my next roadmap challenge. I would love to see you in

00:27:11
there. It's a live coaching experience. You can if you have a VIP ticket, you can ask me whatever questions I am an open book. I love helping and coaching people and would love to do that for you. Roadmapchallenge.com or just type in roadmap down below. we'll get you the link and you can sign up and I would love to be in there and help you out as you're just trying to figure out is this going to work? Is this possible? How do I navigate these things? Ask somebody like me. That's what I'm

00:27:34
here for to help you out and to guide you and help you take the next step on your process to launching your assisted living business. Make sure you like the video if you found this helpful. Subscribe. Ring the bell as well so you get notified every time we put out content like this. We go live on Tuesdays and put out content on Thursdays. I love being here and helping you out as you're trying to figure out the process for launching your assisted living business and would love to work more directly with you. But yeah, you

00:27:57
you have the opportunity just type in roadmap down below. We'll send you the the details on that. And are you curious about assisted living, but you're not sure how to get started? At assisted living investing, I help first-time assisted living entrepreneurs launch profitable, purpose- driven businesses, creating prosperity, purpose, and peace in their lives. I'd love to help you out. And I just want you to remember that it doesn't take a lot, just a little bit. Just keep going step by step

00:28:17
by step. And I promise you if you do and you are consistent and persistent, you are going to be successful. Thanks for watching and have a great day.