RESOURCE: https://seniorcare.levinassociates.com/2018/06/15/cash-is-king-for-skilled-nursing-targets/

Recently, an article was placed by The Senior Care investor which read:

“When buyers value a skilled nursing facilities, or any senior living property, it is always the absolute level of cash flow (NOI) that matters, not the operating margin or expense ratio. Buyers are purchasing a stream of net cash flow, and that net cash flow is going to provide the returns to capital providers. As long as cap rates remain stable, which they certainly have in the skilled nursing sector, when cash flow increases, the prices paid increase.”

From 2008 to 2015, the average cash flow per bed of SNFs sold increased by 63% (peaking in 2015 at $9,600 per bed), and this was driving the five straight years of record average prices for skilled nursing facilities, according to the 23rd Edition of The Senior Care Acquisition Report https://products.levinassociates.com/downloads/scar23/ . Although there was a small dip from 2015 to 2016 to $8,800 per bed, just as the average price per bed peaked in 2016, the simple average does not always tell the story. In 2017, there was a very small decrease in the average NOI per bed for SNFs sold (a 3% drop to $8,500 per bed), but the average price per bed plunged by 18%.

The reason is that when we recalculated the statistics on a weighted average basis, the NOI per bed sold dropped from $12,100 in 2016 to $9,450 in 2017, representing a nearly 22% decline. This clearly explains the 18% drop in average prices, given average cap rates were almost identical in both years. The $12,100 figure also explains why the average price per bed peaked in 2016.”

For illustration purposes, for every $50,000 that drops to the bottom line, applying a 13-14% cap rate could potentially equate into $350-380k in additional value to the portfolio.

So, if “cash is king” then, having the highest profitability and least amount of operating expense ratios is imperative to the true “total success” or evaluation of a property, ownership and management. Taking these facts into consideration, everything possible should be done to drive costs out of your business (without sacrificing great service deliverables) with your vendors. Problem is…most people do not understand or believe this is possible. The internal thought is…

• “we couldn’t be being that much overcharged by our vendors”
• “you pay for what you get”
• “my people have that covered”
• “we have that covered”
• “I don’t want my service to go down because I am paying less”

These “big misses and paradigms” must shift in order to have the best operation, and most profitable entity.

While this issue remains for many companies, smart companies ARE getting ahead of this problem by finding a partner with the tools and expertise to manage the devil in their details as it relates to local, regional even national service relate costs. A partner they can trust, that will do the benchmark analysis on every single vendor, actively renegotiate for lower pricing and better T&Cs, ensure bills get paid on time and services aren’t shut off, and ultimately resulting in elimination of fat and more strategic use of budgets without losing strong deliverables from vendors.

This IS what our team at LIMITLESS does All Day and Every Day. We take this burden off of your people – so they can focus on the bigger problems at hand. We partner with each member of your team so they feel confident they can maintain the overall control, won’t lose the vendor relationships they value but, WILL gain the critical support they need to make better decisions. The support we provide allows your team to focus on the important work of ensuring occupancy rates, delivering exceptional resident experiences, and grow their business and market shares.

Don’t hesitate to stop the waste, and increase your profits now…and when it comes time to sell.

Contact LIMITLESS today for a FREE CONSULTATION to discover how to get control of your unmanaged spend and reduce expenses in your business.

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The primary objective of financial reporting is to provide useful information for decision making. Without proper documentation of all business financial aspects including expenses and vendors, it can be difficult for any company to not only determine whether a supplier is meeting its quality standards, but also for investors to be able to make financial decisions regarding the value of the company.

Lack of transparency in financial reporting and vendor management financial information, in any industry, has implications for investor trust. Companies that understand the importance of transparency in financial reporting, are also well informed about the psychology of the investors. Complex and opaque vendor management and financial reports gives no idea about the true financial, vendor and expense risks involved in the company.

The financial reports must include:
• Understand-ability. The information must be readily understandable to users of the financial statements.
• Relevance. It must be relevant, accurate and current.
• Comparability. Ability to provide financial comparisons.

Without proper management it is difficult for investors to access required financial information about companies, such as price levels, market depth and audited financial reports to include supplier and vendor expenses, documents, agreements and contracts.

Businesses with effective financial reporting practices but lacking collateral are also more likely to receive credit. Lending institutions will have more information on which to base their decisions, reducing their need to require high levels of collateral. It is essential for investment and doing business that every business should have effective financial and vendor management systems in place.

For more information on how to implement a vendor management solution, schedule a free consultation or ask questions, contact LIMITLESS at 866-504-4050.