We receive numerous inquiries for an assisted living market study. The majority come from individuals/organizations that are not familiar with what an assisted living market study exactly is, what it contains and what benefits it can provide. A recent survey of senior housing and care community executives revealed the following:
- 70% indicated that it was likely that they would pursue new construction this year (2016).
- Of the 70%, 51% felt it was “extremely likely.”
- 61% felt that Alzheimer’s/memory care would experience the most growth this year.
Suffice it to say, the current environment would appear conducive to developing new projects.
It is very important to mitigate the risk of developing a new project through planning. As we like to say, “failing to plan is planning to fail.” A critical element in this planning process is the assisted living market study. (Regardless of the type of venture, a proper market study is key!) In this blog, I’ll address some of the common questions we encounter.
Assisted living market study – what is it and what information do I get from it?
There are some key elements that are a part of the market study.
Defining the primary and secondary market areas:
The primary market area is defined as the geographic area from which you would expect to obtain 75-80% of your business. As you will see, much of the information is gathered from that area, thus, the identification of the market area is a critical element in the process.
Review/analysis of key demographic data related to the market area:
Key data such as age and income demographics will serve to provide a solid basis for the quality of the market area.
Identification of competitors in the market area:
This is an extremely key piece of information that is often underappreciated and overlooked in the process. The quality and the characteristics of the competition provides valuable and essential data to any new project.
Analysis of potential referral sources. Calculation/projection of absorption rates and market need:
We utilize both well established and proprietary methodologies to calculate market need. These results provide a quantitative analysis of market need.
Observations on programming and design:
We like to offer up observations/recommendations on programming and design once we have had the opportunity to conclude our market analysis.
Why do I need a market study?
An assisted living market study can address three main needs. First, it can be utilized as an internal decision making tool. It can provide peace of mind that that “good idea” is in fact really a good one. And when you’re about to spend a whole lot of money, isn’t peace of mind a nice thing to have?
Second, if you’re going to seek involvement by either investors or joint venture partners, an assisted living market study is going to be a requirement in their minds.
Lastly, if you’re looking for financing for the project (unless you’re one of the lucky few to have a few million lying around) most financing sources will want to see a recently completed market study.
What are the limitations of a market study?
The results of an assisted living market study are better when the focus is on a specific location or at least, a fairly tight geographic area. As Yogi Berra said, “if you don’t know where you’re going, you might wind up somewhere else.”
A market study does not provide you with a detailed financial projection which is typically contained in a financial feasibility analysis (Pro-Forma).
An assisted living market study is an essential first step in your journey towards a new development. It’s a step that should never be overlooked nor skipped in your quest to develop a new assisted living community.
In part two, we’ll take a look at four other commonly asked questions…stay tuned!