The Biggest Expense in Operating a Residential Assisted Living

assisted living business plan assisted living expenses assisted living staffing costs financial planning for assisted living starting an assisted living facility 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!

Ready To Take The Next Steps?

Get your free business plan checklist here so you can get started building a solid business plan to help you know how to get your business up and running. Also, consider applying to our Assisted Living Investing Mastermind program. This program focuses on the five fundamental concepts required for success: creating a business strategy, locating land, securing finance, acquiring a license, and running and scaling your business.

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