Articles

2008-06-02 - Retirement Homes - Business Opportunity?

Has it ever occurred to you that a retirement home might provide you with a business opportunity?  It’s no secret that this is one of the fastest growing business sectors in Ontario, which is obviously due to the aging population.  Furthermore, as the boomer generation grows through the latter years of its 70s, 80s and 90s so there will be increased pressure on the space within current retirement homes - as will be the demand for new ones to be built.

Many business people think that Canada is not prepared for the explosive growth and demand for services for the retired and aged.  Demographers suggest that by 2025 there will be a demand for a further 80,000 residential spaces, and that retirement residences will be the most significant provider for these spaces.

What you may not be aware of, and which you might find surprising, is that retirement homes are to a large extent unregulated.  This is unlike Homes for the Aged, Nursing Homes and Private Hospitals, which are regulated largely by the provincial government.  However, like most industries, the retirement home industry is self-regulated in Ontario through organizations such as the Ontario Retirement Communities Association (ORCA).

ORCA represents about 300 organizations, consisting of more than 40,000 residential spaces and provides advice to the Province for regulation.  It also provides members with education on operational best practices, and programs to train operational staff to offer quality service to residents.  As this industry expands, so it will be more reliant on organizations such as ORCA to provide guidelines on how to operate a retirement home more effectively.

Within the retirement home industry, ultimately it is space, accommodation and the services provided which are subject to the market forces of supply and demand.  The reputable facility should house a good mix of residents, and it should provide reasonable access to the common areas from the private areas.  There should be plenty of places to relax and catch up on one’s reading.  During our hectic schedules these days does anyone ever have enough time to read?

Good facilities will also promote physical activities.  Whether it’s a fitness centre on site, or access to one nearby, today’s aging population is more active than previous generations and expects access to activities.  Gyms, pools, yoga classes, dance classes or pottery classes are ideal.  Card games such as bridge help keep the mind sharp.

If you are considering starting a retirement home or acquiring an existing one, you should think about the maturing process of the local community’s population over a given period.  A newly-opened retirement home in its initial stages will more likely consist of the “young elderly”.  These will be people in their 70s, however as time progresses so the home will find that its average age of its residents will increase.  As a manager of a home you must be prepared to deal with this phenomenon.  In 10 years, the home will consist mainly of 85 year olds, and in a further decade the average age will be 95.

Of course, and sad to say, there will always be attrition.  Residents will move, some will become ill and require a nursing home and others will pass away.  Whichever way you look at it, the average age will continually be increasing.  As new residents move in, they are likely to be attracted to a home with an average age close to their own. So, if your average age has increased to 85, then you are likely to attract 85 year olds. The 75 year olds will go elsewhere. That issue becomes the most difficult issue to manage when you are running a retirement home.  As the manager/owner of the home, you might want to ask the question “is this really how I want my business to develop?”

The solution however may be a lot easier than it at first appears.  You plan and budget for expansion, by building onto your existing facility.  Some managers do not agree with this philosophy, but you can set up sections of the facility by age group.  You also need to find a way to attract the “young elderly” by perhaps offering relatively modern facilities catering to the younger age group.  By utilizing this strategy of anticipation, and to use a surfer’s term, one can conceivably maintain a position slightly ahead of the wave.

So, when you are looking for a facility you will need to ensure that there’s plenty of room for expansion.  It would be prudent to implement a 20 year strategic plan.  Some of the more important features of the plan would be to own sufficient land on which to expand, and ensure that the city’s zoning and by-law requirements are met to allow for expansion.

So in reality, to simply acquire an existing facility and hope that the business will maintain itself can be risky.  Your business success not only depends on meeting the client’s wishes now, but also to be able to meet the changing demands of the residents of the future.  In other words, develop a flexible plan.  Demand for services from the 75 to 95 age bracket will continually change.  Regrettably residents will become more and more dependent as they get older, and the provision of the right services will require more and more innovation on the part of the retirement home owner.  As time progresses new services will be required, and perhaps this will be a way to add new profit centres to your business.

Should you be considering the purchase of a retirement home, make sure that you know the age group you will be attracting and the types of activities in which they would like to participate.  But most of all ensure that you have the plan in place to expand and to meet future needs.