The Biggest Expense in Operating a Residential Assisted Living
Nov 29, 2024
Running an assisted living facility is a big job, but it can also be super rewarding! One thing new owners often don’t realize is how much it costs to keep a facility running smoothly. If you don’t know your expenses ahead of time, you could end up with surprise bills that mess up your budget. Whether you’re opening a new facility or improving an old one, understanding your operating costs is key to long-term success. Every choice you make, from everyday spending to big investments, affects how your business grows in the future.
In this blog, we’ll break down the largest costs you’ll face, focusing on the biggest one—staffing. We’ll also cover other major expenses like utilities, food, insurance, and debt service. With the right knowledge, you’ll be ready to handle any challenge and create a successful business that families can trust. Let’s dive in!
Check out the video, too:
Staffing: The Biggest Expense
Staffing is the number one cost in any assisted living facility. In fact, it often takes up over half of your total budget! And it’s not just about paying employees. There are other things to consider too—like payroll taxes, workers' comp insurance, and even the cost of the company that handles your payroll.
For a 16-bed facility, you might spend $10,000 to $20,000 every two weeks on staff salaries alone. That adds up to around $20,000 to $40,000 each month! Of course, this number can change based on where you are and what kind of care your residents need. To be safe, plan to budget between $28,000 and $32,000 monthly for staffing if your facility has 10 to 20 beds.
Here’s a closer look at some staffing costs:
- Administrator Salary: The administrator runs the facility, making sure everything is working smoothly. Smaller facilities pay them between $45,000 to $60,000 per year, while bigger ones may pay $70,000 to $80,000 annually. If they’re earning $60,000 a year, that’s about $5,000 a month.
- Caregiver Wages: The number of caregivers you need depends on your residents' needs and the size of your facility. Typically, you’ll need 8 to 12 caregivers, who might earn between $15 to $25 per hour.
Offering benefits like health insurance or retirement plans will add to your expenses, but they can help you keep the best employees. And having happy, well-trained staff makes a big difference in how well your facility runs!
Other Major Expenses
1. Utilities
You can’t run a facility without lights, heat, and water! Utilities are a big expense that you need to budget for each month. Think about the costs for electricity, gas, water, internet, and trash services. Depending on the season and where you’re located, your bills might go up or down. Make sure you budget for those changes!
For a mid-sized facility, utilities could easily cost $1,500 to $3,000 a month, depending on your location. Plan for those costs, especially during the winter and summer when heating and cooling can get pricey!
2. Food for Residents
Keeping your residents happy and healthy means serving delicious, nutritious meals. The more residents you have, the more groceries you’ll need. For a facility with 10 to 20 beds, food costs can take up a big chunk of your budget.
You’ll need to budget for weekly grocery trips, plus any special snacks or treats. Many states have rules about food safety and how much food you need to keep on hand, so always plan ahead. It’s smart to estimate spending about $5,000 to $7,000 a month on food.
3. Insurance (Liability, Property, and Workers’ Comp)
Insurance is one of those costs you can’t avoid, but it’s super important. Having the right insurance helps protect your business in case anything goes wrong. You’ll need several types of insurance:
- Liability Insurance: Covers accidents or injuries that happen on your property.
- Property Insurance: Protects your building and everything inside it.
- Workers’ Comp Insurance: Helps if an employee gets hurt on the job.
Insurance costs vary depending on your location and the size of your facility. It’s smart to budget around $2,000 to $4,000 monthly for all these insurances. Keep in mind that the costs might go down as you build a good safety record over time.
4. Debt Service
Debt service is what you pay every month on loans for your facility. If you borrowed money to buy or renovate your facility, this payment is a big part of your monthly expenses. It’s super important to keep up with these payments so you don’t get behind.
Your debt service will depend on how much you borrowed and the terms of your loan. For example, if you have a $1 million loan with a 25-year term, your monthly payment might be around $7,000 to $10,000. Always factor these payments into your budget so you don’t run into any surprises.
Expense Management: Tools and Tips
Managing all these expenses requires a good plan. Tools like our free underwriting calculator can help you estimate costs accurately. You can enter details like wages, utilities, and food to get a clear picture of what your monthly expenses will look like.
Books like Profit First by Mike Michalowicz and How to Grow Your Small Business by Donald Miller also have lots of simple tips to help you manage money and stay profitable.
Why Knowing Your Expenses is So Important
Understanding your expenses isn’t just about numbers—it’s about making sure your business is healthy and strong. If you don’t plan for your biggest costs, you could end up in a tough spot financially. Staffing, utilities, food, insurance, and debt service are the major pieces of running an assisted living facility, and knowing how much they cost helps you plan better.
When you understand where your money is going, you can make smarter choices, avoid surprises, and grow your business with confidence. Plus, your residents will get the best care, which is what matters most!
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Show full transcript 👇
Transcript
00:00:00
there are a lot of expenses when it comes to starting an assisted living facility there's a lot that goes into operating that business in today's video we're going to get into what the biggest expense is so you can have an understanding of what that looks like and what some of those other big expenses are if you're interested hey everybody welcome back to the channel it's Brandon Gustafson welcome to Assisted Living investing excited to have you on the channel today uh today's topic we're going to get into
00:00:32
the biggest expense for operating your assisted living facility now uh we've talked about this I think several times you're probably aware of it uh but the biggest one is by far your Staffing uh it it is expensive to have staff when you are operating your ex your assisted living facility uh I don't have the numbers right in front of me uh but our payroll is uh I would say between 8 and $110,000 uh per pay period and we pay out every other week so if you do the math on that you know we're up to 16 to
00:01:06
20 grand a month uh on average that we're paying for our staffing for a 16 bed facility uh that doesn't need a lot of cares so that kind of gives you an idea of what that Staffing might look like uh you know you might be living in a state that has a higher minimum wage um or things like that but I would say you should expect to be spending I would on the safe side I would put you at 20 to $28,000 a month is probably a a reasonable amount that you should be projecting as you get into this
00:01:42
especially if you've got a facility that is like from 10 to to 20 Beds which I think is probably the majority of you that are watching this video are going to be looking at that obviously if you get less than that if you're looking at uh doing like a care home or something like that it's going to be significantly less or if you are uh one of the people that is Staffing that um you know you have some flexibility in how much you're going to pay yourself as you kind of go through that process but uh Staffing is
00:02:10
definitely a huge expense for it now we pay our administrators on a salary they kind of it varies from state to state so you want to do some research on that as you're getting started to see what the going rate is for a facility administrator in your state now keep in mind if you're looking somewhere like indeed to look at that or uh you know something there's a there's another website that kind of goes through salaries it might be like salary.com or something like that um if you're looking
00:02:37
at those what you're going to see for a lot of these facility administrator positions for the average salary is somebody that's working in a bigger box facility so you might see the average salary for a an administrator $70 to $80,000 um I would say if you are a smaller facility you're looking at a residential facility you're not going to be um paying your person that much uh you want to kind of you're going to be within a range um that you might see on some of these websites but you're going
00:03:05
to probably be towards the lower end of that range because uh you just have less residents uh less cares you have a little bit more control over what you're doing and there's going to just be less overhead as you get into it but I would say um you might be looking somewhere between $45 and $60,000 a month or $45 and $60,000 a year for that facility administrator for your small residential facility so you want to keep that in mind that's going to be a big expense you know if you divide that let's just
00:03:36
use 60,000 because it's a a round number when we're dividing it by 12 that's $5,000 a month for your facility administrator um from there you're going to need to make sure that you have enough staff to fully staff your facility um we have between 8 and 12 staff at each of our facilities and they all make between I want to say like 14 and $18 an hour is kind of the range that they're in so if you have a calculator you can go ahead and do the math on that um to to figure out what
00:04:08
those expenses are and then you can um kind of back that into how many stack if you visit us on Assisted Living investing. net I'll make sure we link that down in the bio um you can go ahead and sign up for our free underwriting calculator and on there I've got a tab that actually goes through wages and you can put that in there and plug those numbers in there for your uh facility administ rator and then also for your other stack and I'll link above a video where I go through that calculator so
00:04:35
you can kind of get a feel for how that works and um you might want to go ahead and look um specifically for the video where I talk about the wages tab of the underwriting calculator but as you get into that it's going to kind of give you a lot more um information on how you can build that out but Staffing is a huge expense when you're operating your facility it's probably going to be close to half of your operating expenses um just just in the people that You' got to do because in addition to their hourly
00:05:05
wage you've got to be paying uh taxes if you're offering benefits um you might have to do that whether it's health insurance or excuse me uh whether it's health insurance or uh uh like a 401k type of a plan or things like that and then you're going to be having to pay your uh payroll vendor for operating your fac or operating your payroll processes so there's going to be some extra things in there uh workers comp insurance so there's there's just kind of a lot of things that go into the
00:05:34
whole Staffing process and the expenses that exist for uh operating your facility so that is by far the largest expense a couple other expenses that you want to be aware of and that are going to be high and now make sure you get over to the the website Assisted Living investing. net and grab that calculator you're going to see this as you get in there but other ones that you want to be aware of are food um food is definitely a big one that you're going to have to feed all of these residents and so the
00:06:04
more residents you have the bigger your budget is going to need to be when you are operating your assisted living facility so you want to be sure that you are aware of that one and then another one is just going to be kind of like facility maintenance especially if you've got an older home um you know you might need to be replacing doors or Windows or the roof or AC units or just those things make sure you're buffering in an amount there make sure you're budgeting and saying you know I'm going
00:06:31
to put $1,000 a month over into this kind of house maintenance type of a budget um so that I have that uh just available to me in case I need it uh in case something breaks down uh cuz stuff happens all the time um we in Idaho for example we just found out that we have to get um some heating elements in the ceiling for our smoke detectors and that's a $3600 bill um right there and it's a state regulation that we've got to get in and and move on pretty quick we had our fire alarm system uh we had a
00:07:03
funny uh issue with it uh I won't get into it too much here but we could not get the fire alarm to turn off and so we had to have the company come out uh and and get it turned off which you know that was after hours and we had to pay them to come and do it and so they just kind of expenses there so those types of expenses are going to creep up and and get in there activities is another one depending on how you want to do that can can be expensive um and also Furniture so you're going to need to be providing
00:07:30
mattresses and beds and dressers to your residents and those will last for several years but um you're going to have to also um rotate them out especially our facility in Colorado uh which is a younger population they're pretty rough on that furniture and so we have to do it quite a bit we we have to Churn it through more quickly than we do in our Idaho facility so kind of pros and cons of mental health facility versus an elderly care facility there uh so hopefully that gives you enough
00:07:59
information to kind of get you started on the types of big expenses especially Staffing as you are getting into your investment Journey with assisted living and trying to underwrite it and figure out if it works for you um and you know as you're trying to figure out how that works if you want to learn more about how much money you can generate when you're operating a facility I'll link up a video where I talk about um how that money comes to you and how much you can actually generate uh you can you can
00:08:24
generate a lot of money when it comes to assisted living but you need to be aware of those expenses and how to have expense control and implementing a good financial management system we'll talk about this in a future video um H but profit first or how to grow your small business by Donald Miller is also great uh there's a great chapter in there on financial management so highly suggest you get into those books and learn a little bit about them so that you can uh kind of get a handle on your finances
00:08:53
and how you're going to be dealing with that make sure you get over to the website Assisted Living investing. net so you can grab that calculator also does investing in Assisted Living sound interesting to you but you don't know where to get started at Assisted Living investing we walk you through the process from start to finish thanks for watching and have a great day
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