Supported Living the Investment Decision

Last week  I wrote some observations, narrating what we have seen practically over the past year. We have received additional comments following the short article.

We have had many clients coming for assistance looking for Supported Living clients.  Some have remained without clients for almost a year even with CQC registration, and even ‘’won tenders’’.  The stress point is they are renting a property or two which they spent money to make them fit for purpose and ready to receive clients and recruited staff, but these have been empty but rent, utilities and salaries pilling up. 

It was is a chicken and egg question with Supported living, do you get the property first or clients first. Now the condition is they want to see the actual property from where you will be delivering service, meaning the property comes first.

So, it means you must acquire the property first. If you acquire the property, there are a lot of elements to consider.  Firstly research abut the local authority where you want to locate your services, research thoroughly, speak to other providers who have been operating in that borough how easy is it to work with that borough council. 

It also means you have to start paying rent during the registration process and then after registration has gone through, start hunting for clients by applying for tenders. When people say I have ‘’won the tender’’ technically, that is an incorrect statement and very misleading.  

Before starting a Supported Living or Home Care business, you have first need to make the investment decision; that is the critical step most people are skipping, and this is proving fatal to those starting a supported living business. The first step is the ‘’investment decision’’ that you must be clear first before starting to spend your hard-earned cash or business loan. It can prove to be a bottomless pit.  

The investment decision can be easily explained by a business model called Porter’s five force model so that you can see the scenarios in making your investment decision.   It looks at the five forces that impact your business, and you must ensure you can be on top of them for your business to succeed,  Yes you can get a consultant to assist you in registering your business with  CQC, but that is not the investment decision. It completely a separate exercise.

Let us look quickly at how this works for the  Social care industry, in particular the Supported  Living business. 

Threats of new entrants

Here is simply means people coming in to start their own supported living business. Is the barrier too high or low? What does one need to start a supported living business, e.g. you need a manager, a house, staff, CQC registration if you are doing personal care, or you can start without CQC registration, some startup capital etc. Judging by the number of people starting the supported Living business, we can confidently say the barrier to people starting is low. But you have to take Go or No Go decision.

Barging Power of Buyers

Here we go! This means who holds more power in negotiations, you or the person buying your service.  It’s no brainer that Local authorities wield such enormous power to bargain and state terms of the deal. More than 60% of all supported Living clients are from Local Authorities.  Hence they have instituted the DPS or Dynamic purchasing System the tendering process. You can go after private clients we the returns a huge, but you need a marketing budget to up your game to be able to attract private clients. Looking after one of these private clients is highly lucrative.  You have to research the local authority where you are going to locate your services and get clients. The Local authorities do not use the same system.

You have to play the game very fast as well to ensure you are listed as one of the approved providers by the Local authorities. Remember the property is empty, and rent needs to be paid. That means you have to apply for tenders.  With tenders, if you do not get listed or approved the first time, they will tell you where exactly you went wrong and ask you to resubmit. So do not be afraid to apply for tender by yourself unless you have thousands of pounds to pay consultants to write you the tender.  But if you keep failing, yes by all means seek help.

So here the barrier is high the buyers (local authorities & private clients) have much bargaining power.  You have to be bold to apply to the tenders or save thousands (3k to 7k) to pay consultants to apply the tenders and finally have the marketing budget to promote your services with private clients. You have to make the Go or No Go decision.

Bargaining power of Suppliers

Here it would be best if you buckled up seriously.  Here wolves in sheep’s clothing are everywhere!  The advice is do not blink.  If you do not have a property of your own to use for the Supported Living home it means you need to lease one from a landlord.  That sounds simple but it means you have to enter into a commercial agreement with the estate agents and not many of us understand half of what is written on those pages and pages of the agreement.  Most people just cross their fingers and hope it will be all good.

First, you must make sure that the property has an HMOC (House of Multiple  Occupancy) licenses valid for the period of the lease. All the health and safety issues have been addressing, including exit lights, fire doors.  Do not lease a house without an HMOC license, the property owners must make the property fit for purpose.

Again, remember the model is seeking to establish who has more bargaining power.  Remember you are going to lease the property for 5 years minimum.  So, in essence, if the property is renting out at GBP 2,000 per month or GBP 24, 000 per annum.  It means you are offering the landlord GBP 24,000 X 5 = GBP 120,000.00.  So do not be pushed around they will use all tricks to force you to make a rushed decision. Stand your ground and demand to see up to date Electricity and Gas certification, HMOC license, new kitchen appliances or the units must be in a good state to last the period of the lease, Demand fire doors, new beds and mattresses. You are not giving them GBP2,000 but look at the whole deal, which is GBP120,000.  Please click the link to see a checklist for conducting a property viewing:

Therefore you have to be cognisant that  CQC or Social Workers will need to see the actual house that you will be using so that means you have to make sure it is fit for purpose before they come.  If you are pushed to sign up by Estate Agent you will end up out of pocket getting the house to an acceptable standard. The landlords are not known to respond fast to anything that makes them spend money.

Industry rivarly

Today businesses have changed from competition to collaboration. Very important businesses have a different mindset from the previous era when they were competing for customers. That is no longer the case.  This has been adopted within the car industry, airlines, technology,  service industry etc.  similarly as pointed out you not winning a tender but just being listed onto the Provider’s framework. 

So if someone is applying for the tender and asking for help and you have been listed on the Providers Framework. There is no point in not helping them to answer the tender question because at that stage they are not your competition. It is just like helping a parent getting a birth certificate for their child.  There are hundreds of thousands of people that need placement and no single Care Provider can do it alone. So collaboration with others is the mindset of the modern business world.

When people say ‘’I have won the tender’ technically is an incorrect statement.  Instead, it only means in the simple terms`you have been listed as an approved provider among the list of other 100s of Care Providers who have been operating for 100s of years.

Therefore the next step you now need to market your Supported Living services to the local authorities that have listed you as a  provider. What you get is access to the list of placements and then you select the ones suitable to your services. Once you receive the referral you have to submit a favourable costing. Please note it is not recommended to submit a  costing without doing an assessment first, it will put your service practice in a very negative light with most local authorities.

Therefore you need to first establish links for collaborating with other players already operating Supported Living in the borough where you want to start providing your services. This will provide you with valuable information that will take years to learn and also avoid costly mistakes.

Threat of substitutes

There is no immediate threat of substitutes to the service offering but you must have head the lobbying is going on especially in Scotland for the National Social Care Services but this being a reality depends on the strength of the lobbists.

Next article we see considering starting with providing Home Care services such as ylive-in care? The advantage is you do not have any overheads (rent, utilities, council tax etc to pay)  Once you get a client you send your Carer in and build your client bases that way. The weekly charge averaging around GBP1250.00 per week less the Carer’s wages equals your gross profit. Once you build a large war chest of funds then think of  Supported Living service.  You can get the step to step guides from people in the other groups Newbies Supported Living, Domcare &  Recruitment. Hope that helps

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