Running head: DAISY HILL 1

Daisy Hill

Senior Living at its Finest

Jason Hurt

Michael Maul

Midway College

DAISY HILL 2

Abstract

Daisy Hill Senior Living offers assisted living services in the Woodford County area.

Assisted Living provides seniors a place to live independently while having access to cleaning

services, meal services, and staff to assist with the basic needs of life. The assisted living market

continues to expand as the Baby Boomer generation moves into the next stage of life and Daisy

Hill is hoping to grow along with the increase in this demand. However, Daisy Hills market is

limited to the Woodford County area because a majority of assisted living clients are pulled from

within a fifteen mile range while the county must compete with similar services in Fayette and

Frankfort County. Daisy Hill must invest in pulling in customers through lower cost services,

adult day care, and increase their potential customer interactions in order to increase occupancy

levels and reach their desired growth in the future.

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Daisy Hill: Senior Living at its Finest

Introduction

Senior living has grown exponentially as the baby boomer generation ages and enters into

the twilight of life. According to Mueller and Laposa, the market for senior housing is forecast

to reach between 2.9 and 4.6 million units by 2030 (Crotty, Mullen, Weaver, 2001). The

exponential growth and large variations in needs for the elderly has resulted in a variety of

market segments for seniors. Daisy Hill Senior Living provides a bridge for seniors who need a

level of care beyond living independently but do not need full time nursing assistance. Daisy

Hill fulfills this role as an assisted living facility which provides daily services such as meals,

laundry, and daily living assistance. Although the market for senior living continues to grow,

Daisy Hill has a lower level of occupancy in comparison to other assisted living facilities. The

lower level of occupancy in conjunction with the entry of a new facility in Midway, which is in

close proximity to the Daisy Hill location, is driving the need for the review of the facilities

current strategy to drive growth for the business.

History

Daisy Hill Senior Living was established by GoodWorks Unlimited in 2007 as an

assisted living facility (Helton, C., Personal Communication, January 21, 2015). GoodWorks

Unlimited LLC is a company that focuses on the research and development of senior living

facilities based on their vision to be a team dedicated to senior living, with the conviction that we

are God’s workmanship created to do Good Works, which God prepared in advance for us to do

(GoodWorks Unlimited LLC, 2015). GoodWorks Unlimited LLC believed there was a market

for a private assisted living facility within Woodford country and brought in local investors to

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fund Daisy Hill. Although GoodWorks Unlimited researched and aided in the establishment of

Daisy Hill, it does not mandate how the facility must operate and dictate the functional aspects of

the facility. GoodWorks Unlimited provides market information and general business

information to enable the success of each entity. The partnership enables each facility to cater to

local needs of the market and does not require each organization to match a required set of rules,

layouts, staffing, or quality in comparison to a franchise agreement, which would dictate these

requirements of the business.

Daisy Hill Senior Living contains 45 residences, with a variety of spaces ranging from

one bedroom studios up to two bedroom apartments with patio’s. The range of prices spans from

$3,000 to $5,000 per apartment. The residents live within their own apartments, which have

been designed with accessibility and safety in mind. Residents provide their own furnishings,

enabling them to design their own spaces and make their apartment as close to their home as

possible. Residents are monitored by staff on a regular basis and they can page staff with a

button if any needs arise. The staff can ensure the residents take their medications but may not

directly give the medicine to the resident. The facility provides restaurant style dining within a

given period of time. In addition to the dining and living facilities, Daisy Hill offers a number of

other activities for the residents to participate in while on property. One key to their success is

the active involvement of the residents which spans from playing cards, movie nights, and

helping interview potential employees. The involvement of residents in the interview process

ensures both residents and staff recruit talent that fits within the organization.

Daisy Hill, through its appeal to the customer and their value proposition, appears to

currently utilize a best cost strategy. The best cost strategy is defined as “giving customers more

value for their money by satisfying buyers expectations on key quality, features, performance,

DAISY HILL 5

and service attributes” (Gamble, Peteraf, Strickland, Thompson, 2014). Daisy Hill Senior Living

residents receive a level of support, which enables them to avoid a nursing home environment,

while having piece of mind that someone is there to help if necessary. The residents are able to

care for themselves in many ways which keeps costs down for the company as well as the

customer. This allows the organization to offer a reasonable product to seniors who have the

ability to still live on their own.

Ultimately, Chad Helton, the executive director of the facility, believes the best-cost

strategy will become more difficult in the future with the continued construction of new assisted

living facilities (Chad Helton, Personal Communication, January 21, 2015). The construction of

new facilities has the potential to flood the market and suppress the profitability of current

assisted living facilities, leading to decreased quality of service for the customer. The primary

question is how does Daisy Hill market its organization and continue to recruit customers in a

segment when there is an increase in supply of senior living facilities to choose from. The

concern is driven by the fact that currently Daisy Hill only has 33 of the 45 residences filled,

which results in underutilized capital assets and higher overhead costs for the organization. In

order to continue with a best cost strategy, Daisy Hill must work to find a way to attract more

customers and expand the facilities to achieve economies of scale. The development of a

strategy for the organization will examine these factors and how Daisy Hill should proceed to

decrease vacancies and increase the overall profitability of the organization.

Daisy Hill Senior Living Macroenvironment

The macroenvironment is defined as the political, economic, social, and technological

factors that impact an industry. The senior living industry is significantly impacted by the

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political, economic and social factors based upon the transition of the Baby Boom generation.

The Baby Boomer Generation is quickly approaching the age that will require additional services

spanning from senior living to nursing home facilities. The primary political change to the

benefits for this generation was the shift in insurance requirements through the Affordable Care

Act. According to Cohen, the Affordable Care Act opens the door for states to divert typical

institutional care dollars into home or community care services (Cohen, 2011). The political

shift and government incentives could allow states to focus Medicare and Medicaid dollars to

placing seniors in assisted living or home care environments rather than traditional nursing

homes to lower senior living costs in the future.

The social environment for the Baby Boomer generation is based upon the needs of these

seniors as they age and the type of care available in the market. Aging seniors rely on their life

experiences and family to support them during their golden years. A MacArthur Foundation

Study found that the ability to maintain a high level of mental function was due to a strong social

support system, regular physical activity, education and lifelong intellectual activity, self-

efficacy, social connectedness, and a reduced feeling of isolation (Edelman, Engel, McCoy,

O’Brien, 2010). The need for seniors to be connected to their environment and family drives

their mental and physical state in later years. These factors become the driver in the economic

arena for treatment during the aging process.

A majority of seniors benefit from the social interaction at home and with family. The

survival of a senior is linked to their connection to people and the ability to afford treatment in a

manner that keeps them active in life. This connection also ties directly into the financial aspect

of treatment for seniors. Currently, 78% of seniors rely on friends and family to sustain them

through their remaining days of life (Family Caregiver Alliance, 2004). The significant reliance

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on family and friends shows that many seniors are ill prepared for the costs associated with

formal care facilities such as nursing homes or assisted living facilities. The cost of these

facilities is extremely high, costing the senior as much as $50,000 per year or turning over all

their financial assets to enter a Medicaid Facility. The entry into a Medicaid facility is not

beneficial to the senior from a mental or physical state and is usually triggered by the lack of

mobility, incontinence, or mental state. The huge financial burden on the system, when

combined with the other implications of entering a Medicaid facility means that the senior’s life

expectancy can be drastically impacted by their financial status and the level of affordable

services available.

Ultimately, the impact of the social and economic situation of each senior will impact the

life they live in the golden years. Seniors need an active, social life style to maintain their health

and ensure a long life outside of an institutional care facility. As the political system shifts to

fund seniors in alternative living environments, seniors will live a more affordable, healthy, and

gratifying life.

Five Forces Impacting the Assisted Living Market

Michael Porter’s Five Forces provide a frame work to evaluate various industries to

determine the strength of that industry. The Five Forces analysis examines the amount of rivalry

within a market, the difficulty for new companies to enter the market, the amount of supplier and

consumer power to extract profits, as well as the ability for the customer to find substitutes or

compliments to a given product. Internal rivalry is defined as the number of competitors that are

competing in the market for customers and attempting to gain market share from other

participants in the industry. Market entry is best described as how easily companies can choose

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to enter a given industry. If the costs or barriers of entry are high, new entrants struggle to gain

market share and profitability. Supplier power represents the ability of companies providing raw

materials or supportive services into the market to charge a premium price to extract profits from

companies participating in an industry. If the supplier has the sole source of a good, they would

be deemed to have significant supplier power, thus enabling higher prices and a great piece of

the profit from the industry. Buyer power, on the other hand is the ability for the customer to

extract profits. The commoditization of products or a constrained customer base could aid in

extracting profits from the industry through discounted prices for the industry. The final aspect

of the five forces analysis is substitutes and compliments. The substitute force is based upon the

ability of the customer to either replace the product with an alternate solution while still meeting

the needs of the customer. A complementary force is the ability of another good or service to

drive the sales a product within your industry. If the customer can utilize substitutes fairly

easily, the customer can drives prices down and obtain a better deal in the market. The analysis

of these forces enables a broader understanding of the Senior Living market and the ability for

Daisy Hill to evaluate changes within the industry and shift their future strategy to gain more

market share.

Market Entry

The traditional senior living market covers a broad range of products and services which

are dependent on the wealth level of the senior and the level of care necessary to live their lives.

These markets span from age-restricted housing, which provides dwellings for multiple families

catering to healthy seniors all the way to full care nursing home facilities that actively monitor

patients to meet their continuous needs. Each of these market segments has significantly

different levels of requirements and government regulations in order to operate the facility.

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Independent senior living facilities can be simple businesses charging rent but who do not

provide medical support, in comparison to nursing homes which are heavily regulated and

require significant investment for entry. Daisy Hill Senior Living falls into the assisted living

(ALF) category. Assisted living facilities provide a variety of services including food,

housekeeping, laundry, and transportation but do not provide direct nursing assistance.

Therefore, these types of facilities are able to operate without skilled nursing staff.

The entry into the assisted living market requires the building of a facility within a

general service area. The entry into the assisted living market centers on the location to create

the facility. Each state and city has established their own set of rules and licensing (Besnette,

2015). Therefore, a company with the desire to enter a specific market must choose a location

to determine the licensing rules and regulations for the business.

The correct location becomes the key barrier to entry because it drives the rules and

regulations of the business while also establishing the customer base for the organization. A

variety of studies have shown that assisted living facilities draw a majority of their customers

from within a thirty mile radius. According to Tessier and Mueller, 70% of the residents and

82% of the adult children come from within a fifteen mile radius of the facilities studied and

80% of the residents and 95% of the adult children come from within a thirty-mile radius of the

facilities studied, confirming that the market for ALF’s is very local in nature (Mueller, Tessier,

1999). The study shows a new organization that wishes to enter this market must find a market

with sufficient seniors to service within an area and examine the local level of competition that

the organization will compete with for customers.

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The combination of the localization of the market with the fact that assisted living

facilities do not have access to federal Medicare or Medicaid, further complicates the ability of

an organization to enter the market. Since assisted living facilities are viewed as private, for

profit organizations, the residents are typically paying for services through savings or private

insurance policies. These services can cost residents upwards of fifty thousand dollars per year

(Chad Helton, Personal Communication, January 21, 2015). The organization must find

locations which have a sufficient volume of residents capable of paying these high fees in order

to support the business and drive profitability. Often, project market decision analysts are

looking for markets with large percentages of middle-aged (45-64) and high income (more than

$75,000) households (Shuey, 2000). Ultimately, the sufficient supply of consumers who can

afford the service drives the ability for new organizations to enter the market, achieve

profitability, and recoup the value of the capital investment for building the facility.

Supplier Power

The assisted living market is primarily driven by providing services to the customer that

enable them to remain outside of a nursing home facility. The primary suppliers within this

industry are the care takers who assume the responsibility to aid residents with bathing, dressing,

laundry, cleaning, and other daily needs to enable them to remain on their own. Since assisted

living facilities do not require skilled nursing staff, they can easily train servicers to aid seniors

in their daily needs. Given the lack of skilled staff required for these types of facilities, the

employees providing the services lack that ability to demand higher salaries in comparison to a

nursing facility which requires certified nursing staff. Therefore, the supplier power within the

assisted living market is weak and ultimately lacks the ability to extract profits from the assisted

living facilities.

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Buyer Power

The localization of the market for assisted living has a drastic effect on the buyer power.

The buyer, within the assisted living market is the consumer purchasing services from an assisted

living facility. If an assisted living facility was capable of pulling residents from all around the

country, this would limit the ability of the consumer to seek lower prices due to the volume of

customers. However, since each facility will attract a majority of customers from within a thirty

mile radius, the facility has less reach and must fight to attract and retain the local customer base

to maintain the profitability of the business.

The market within Woodford country is defined by the population of 24,988 with

fourteen percent of these residents being over the age of 65 and thirty-two percent being between

the ages of 45 to 64 (Woodford County KY, 2015). These demographics translate to a current

customer base of 3,500 seniors and a potential future market of 8,000 seniors in the coming

years. Of the 3,500 seniors in Woodford County, 27% of them likely made greater than $75,000

per year. This reduces the number of consumers in the market to 945 customers who live within

the market boundary and could afford the services within the market. The market of those who

could afford assisted living will expand to 2,160 customers in the future. Although this a

substantial customer base for the 100 assisted living beds in Woodford County, the actual

potential for these customers is much smaller based on the usage rate of formal care by

customers. According to the Family Care Alliance, only eight percent of the market utilizes

formal care (Family Caregiver Alliance, 2004). This reduces the current potential customer base

in Woodford County to 75 units for assisted living expanding to 173 units in the upcoming years.

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The constrained demand and low rate of usage of formal facilities is driven by the utilization of

the family support systems to take care of family as they age. Given the controlled demand for

assisted living in Woodford County and the increased investment near Midway, the buyer may

utilize the small level of demand to extract profits and receive a lower price for the assisted care

market.

Internal Rivalry

Internal rivalry represents the amount of competition in the market to provide a good or

service to the customer. The geographic location has a significant impact on the customer base

for a specific facility. In order to examine the level of rivalry with regard to senior living and

the Daisy Hill Senior Living facility, the rivalry must be examined based upon the availability of

other senior living facilities within a fifteen mile radius. The fifteen mile radius defines seventy

to eighty percent of the potential customer base. The difficulty in establishing this boundary is

the fact the Frankfort, Lawrenceburg, and Lexington, Kentucky are all at the fringes with regard

to this distance and have significant population densities of seniors in need of assisted living

facilities. The number of facilities within these cities truncates the ability of Woodford County

facilities to pull customers from the fifteen to thirty mile range. The outer zone for customers is

highly competitive based on the number of facilities in those cities and their ability to pull a

significant number of customers in their region.

Upon examination of Woodford County itself, there are only two facilities that serve the

potential 945 residents within the county. These two facilities are Daisy Hill Senior Living and

Taylor Manor, a nursing home facility. In addition to these two facilities, Christian Care

Communities will be opening a facility near Midway, Kentucky, which is also located in

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Woodford County (Christian Care Communities, 2013). The completion of this facility will

increase the number of assisted living and nursing home beds up to eighty-one beds. Ultimately,

given the number of seniors within Woodford County, the adoption rate of seniors to formal care

facilities, and the number of available beds will require a highly competitive market to gain

residents and convert them from family care to formal care facilities. The need to compete for

these customers will drive down the profitability of the organization as each facility attempts to

gain market share and maximize its profitability.

Substitutes and Compliments

The senior living market consists of a large scope of various levels of service for

seniors. The first market option for seniors is age-restricted housing, which provides dwellings

for multiple families catering to healthy seniors. Services in this environment are typically

limited, but enable people within a common age group to form relationships based on life

experiences. The next class of services for seniors is independent living, which resides within a

congregate care facility that provides a variety of services including food, housekeeping,

laundry, and transportation. The independent living segment still relies on healthy seniors to live

day to day without the needs of medical staff. The third segment of care for seniors is assisted

living, which falls within a congregate care facility but provides advanced assistance to the

seniors. These facilities are equipped to aid with daily living activities such as bathing, senior

monitoring, grooming, and dressing. However, these facilities lack nursing staff and are not able

to administer medications to the patient. Finally, the last market option is a skilled nursing

facility or nursing home, which provides continuous monitoring of seniors and provides all the

levels of service necessary for care. These types of services require significant licensing and are

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typically required when seniors have dementia, incontinence, immobility, and other needs that

require nursing staff.

Each of these potential market segments could service seniors who are in need of care to

maintain their quality of living. Often, seniors who lack the financial situation to utilize the

private facilities are forced to enter nursing homes due the lack of ability of family to aid them in

the home and the lack of affordability of assisted living homes. Therefore, a large segment of

residents who would enjoy and utilize assisted living homes are forced to enter the alternative

nursing home environment to survive both physically and financially.

The second potential substitute for assisted living is a more limited senior living facility.

The senior living facility is designed to enable seniors to move around the facility and more

easily support themselves. These facilities lack a staff to aid and support the residents but family

and friends typically fill in to provide support to ensure seniors are able to stay out of a nursing

home but receive the care they need on a regular basis. The combination of these facilities with

the support of family results in a majority of seniors over the age of 65 from entering formal

senior care facilities.

The final substitute within the senior care market is the utilization of family care. This

occurs when people require full time care and the family chooses to move the senior into their

home to provide the required care to eliminate the need for a nursing home. Family care often

utilizes Medicare and Medicaid to provide treatments and medicine necessary for the senior but

the family provides the needs for the senior on a daily basis. The family becomes responsible for

the meal preparation, dressing, cleaning and bathing necessary to survive. The family care

DAISY HILL 15

support mechanism is the path for 78% of seniors due to their life situations (Family Caregiver

Alliance, 2004).

Ultimately, there are a number of substitutes to formal senior living. These services

support a majority of seniors outside of the formal care system. The lack of utilization of formal

care facilities drives down the adoption rate of senior homes and limits the potential customer

base for these facilities. The strength of these substitute forces assisted living facilities to lower

their pricing to attract customers, which potentially decreases their profitability. However, these

steps will be necessary as more competitors enter the market and each company attempts to

maintain market share and grow capital utilization.

Figure 1

Senior Living Industry Analysis Summary

Internal Rivalry* 30 mile Radius* Surrounding County’s limit customer base* Taylor Manor, Christian Care Communities

Entry* Facility Development* Location Specific* Lack of Government Funding

Buyer Power* Market Localization* Limited Customer Basis

Substitutes and Compliments

* Alternate Senior Living Facilities

* Family Care w/Medicare Support

Supplier Power* Availability of Assisted Living Staff

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Daisy Hill SWOT Analysis

Strengths

Daisy Hill has many strengths, one of the biggest is Chad Helton. Chad has been

working in the senior care industry since high school. He has worked almost every position in

the industry from washing dishes to Executive Director. He has the knowledge and skills

required to make Daisy Hill a success.

Daisy Hill is built on a historic 18th century farm that is adjacent to the Bluegrass

Community Hospital. The close proximity a hospital gives residents and family members an

added layer of security. Currently, Daisy Hill has 45 resident rooms, 33 of which are currently

occupied. Daisy Hill also owns the surrounding land which gives them the option to expand to

expand into dementia patients or standalone greenhouse style rooms. Another unique strength is

that Daisy Hill is owned by local investors and not a large corporate conglomerate, which creates

flexibility and allows Chad to be creative with marketing and strategy. The flexibility of the

organization has resulted in creative policies that set Daisy Hill apart from its competitors, such

as allowing the residents to sit on the interview panel for hiring new staff and the restaurant style

cafeteria (Helton, C., Personal Communication, January 21, 2015).

Weakness

Daisy Hill does not accept payment from Government programs like Medicare and

Medicaid. Residents utilize long term care insurance, private pay, and VA benefits to cover the

cost of the services. This limits the amount of potential residents. With the average cost of

$3000 to $5000 a month, the policy limits the target market to a small group of people able to

afford Daisy Hill and could be the reason that Daisy Hill is running at 73% capacity.

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Opportunities

One huge opportunity is the significant segment of the ageing population. According to

Vincent and Velkoff in 2010, 60 percent of the U.S. population will be aged 20-64. By 2030, as

the baby boomers age, the population in these working ages will drop to 55 percent (2010). As

the baby boomer generation begins to age, the assisted living industry will take off. This pattern

of aging offers Chad and Daisy Hill a real opportunity to expand and grow.

The ever increasing aging population has the opportunity to enable Daisy Hill to expand

its services for dementia patients as well as standalone housing where the residents have the

option to pay for the services they desire. Currently, Daisy Hill has plenty of surrounding land

that can be used to build a dementia facility and town house, a la carte style, senior living

services. This would maximize the profits for the organization while the a la carte housing

would allow residents to start with a lower cost home and gradually increase their services based

upon an individuals needs. The a la carte style housing is a good way to ease residents into the

assisted living culture without the shock of paying $3,000 to $5,000 per month.

Often times, there is a huge stigma for the elderly associated with the move into a

“home”. Seniors also have significant concerns about becoming a burden to their relatives.

Daisy Hill could capitalize on these concerns and start a Pre Pay option. This would work

similar to how funeral homes allow people to pre pay for their funeral. The resident would be

able to make monthly payments to Daisy Hill before they need the services, when the resident

reaches the point in their life they feel they are in need for assisted living they would simply

make arrangements to move in. This would create an annuity profit stream for Daisy Hill as well

as make the transaction easier for the resident.

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Threats

According to Chad Helton, the assisted living industry has a very high profit margin,

which makes for a lot of competition. He explained that Lexington lacked any assisted living

facilities ten years ago in comparison to today where there is a significant market presence and

competition for senior residents. The overcrowding of the market has led to poorer service and

lower profit margins. Daisy Hill has not had to deal with this level of competition because, until

recently, it was the only facility of its kind in the area. Recently, a new Christian Care

Community was announced in neighboring city of Midway. The new facility will have assisted

living, rehabilitation, and dementia facilities (Christian Care Communities, 2013). This new

facility will have the advantage of being “NEW” and will offer more services then Daisy Hill.

Daisy Hill we have to decide if they will expand their services to be more completive and find a

way to create loyalty amongst its residents.

Figure 2

Daisy Hill Senior Living SWOT Analysis Summary

Experienced Executive Director Expandable location Owned by local investors

S W Niche is small

Expanding Services to dementia and a la cart housing Pre-pay program Large aging population

O T Minimal barriers to entry New Facility announced in Midway

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Daisy Hill Senior Living Corporate Level Strategy

Daisy Hill has the distinct advantage of not being owned by a large corporation. Daisy

Hill is owned and operated by a local group of investors. The current corporate level strategy is

”Love is the gift from God that makes life worth living at Daisy Hill” (Daisy Hill Senior Living,

n.d.). The corporate level mission statement consists of a series of poetic lines emphasizing the

love for seniors in the operation of the organization. Although the vision and mission capture the

love for seniors, it fundamentally lacks the key requirements to direct the actions and

performance of the organization.

The organizational structure gives Chad Helton, the CEO of Daisy Hill Senior Living, the

flexibility to drive the company in terms of management and marketing but does not direct the

company in the long term. Daisy Hill currently offers assisted living services and only accepts

private pay. Chad Helton stated that the profit margin for assisted living can be as much as 40

percent, whereas the profit margin for nursing homes is 2 to 4 percent. The limitation of the

organization as private pay for Daisy Hill creates a very small target market, limiting the amount

of residents that can afford their services. Although these choices are key to the profitability of

the company, the vision and mission do not address why the organization seeks high profit

margins and the private pay market.

Daisy Hill’s corporate level strategy and mission are confusing and not concise.

Leuthesser and Kohli suggest “Mission statements are widely seen as necessary in helping a

company form its identity, purpose, and direction. They are important instruments by which a

firm’s essential values are conveyed to its stakeholders. Consultants specializing in corporate

identity often recommend the mission statement as the starting point for a corporate identity

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program” (Leuthesser, Kohli, 1997). Brown and Graham speak of key components that make up

a good business strategy and mission statement. “A good vision ought to paint a picture in all

employees' minds of where the organization wants to be” (Brown, 1998). It is important that

the vision be brief, so that employees can remember it without having to look at a poster in the

lobby or refer to a wallet card. Brief doesn't have to mean stupid, however. Starbucks' vision is:

"2000 stores by 2000" (Brown, 1998).

A vision should also be verifiable. In other words, you should be able to measure whether

it has been achieved. It would be hard to say, for example, when a company became "world

class" or "the benchmark." A verifiable vision is one that ten people could agree on whether it

has been achieved by the organization.

A vision is also not something that should stay the same forever. Once a vision has been

achieved, a new one needs to be written to encourage the organization to continually improve.

The time frame for a vision is generally three to five years because it is hard for many

organizations to visualize beyond that time frame.

The vision should also be focused on one or two aspects of a company’s performance that

are important for future success. Certain aspects of the company, such as growth, profits, safety,

and so forth, should not all be addressed in the vision because it becomes too cloudy (Brown,

1998).

Daisy Hill needs a vision and mission statement that follows the guidelines of Brown and

Graham’s guidance that can be used to form a corporate level strategy. Ideally, Daisy Hill vision

from an outside perspective is “Loving Seniors through Enabling Life”. The mission should

define the actions that drive the operation of the business and align with the organizations desire

DAISY HILL 21

to only accept private payment customers as well as capture the vision behind the desire to

expand to other services to increase growth. The creation of this vision will provide Daisy Hill

with a clear cut strategy detailing the direction they want to go, how they want to get there and

the amount of time to accomplish these changes. All the employees will know what direction

they are going and will be able to align their goals with the corporate level strategy.

Daisy Hill Senior Living Metrics for Success

Daisy Hill Senior Living services the assisted living market in Woodford County,

Kentucky. The assisted living market is founded on providing apartments that enable seniors to

live on their own while providing services within the facility to still assist them in life. These

services include meals, cleaning, monitoring medication, bathing, and other general support. In

order for Daisy Hill to continue to grow and service this market, the company must continually

monitor three primary factors to ensure success.

The first factor in the success of Daisy Hill is the occupancy rate of the facility. Daisy

Hill must continually monitor the industry to understand how occupancy rates are shifting and

work to ensure that the facility is in line with industry standards. Typically, senior living

facilities were averaging 90% occupancy in 2001 (Napoli, 2006). Daisy Hill must strive to meet

these occupancy rates to ensure it is capturing customers and performing competitively with

other assisted living facilities. The occupancy rate of the facility drives the potential profitability

of the company as well as the cost to revenue ratio of the organization. This becomes important

because a higher level of occupancy drives down the total costs per resident within the facility

and improves the overall return on investment.

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The second factor that Daisy Hill must monitor is the return on invested capital for the

company. The analysis of return on investment enables the organization to examine different

means of expansion to see if the new investment results in a profitable expansion of the

company. The evaluation of return on invested capital allows the company to examine new areas

like dementia care, nursing facilities, or more price competitive products to determine how these

businesses will impact the overall profit for the company. One potential investment that could be

evaluated via the return on invested capital would be the investment in a nursing home facility.

The general costs for a nursing home facility and the staff are significantly more expensive than

an assisted living facility. A nursing home facility’s typical profit margin is two to four percent

(Wall, 2014). The capital required for a nursing facility combined with low level of profitability

would result in a poor return on invested capital. In comparison, the profit margin is thirty

percent for assisted living facilities (Farrell, 2007). The capital investment and staffing

requirements are significantly lower which would result in an improved return on invested

capital. The comparison of the profit margin or profits from the business to the amount of

invested capital would show that the continued investment in assisted living would improve the

return on invested capital and the profitability of the business overall.

The third metric for evaluation of the business is the feedback on experience from the

customer. One common method of evaluating whether the business is servicing the customer

well is the net promoter score. Bain defined the net promoter score through the question “What

is the likelihood that you would recommend Company X to a friend or colleague?” (Bain, 2013).

The positive response to this question indicates the likelihood that a customer or employee

would promote doing business with a specific company. The utilization of this question with

regard to Daisy Hill Senior Living facility allows for the leadership team to quickly poll the

DAISY HILL 23

employees, residents, and families of residents to determine if the facility is meeting the needs of

customer and staff. The utilization of this technique would allow Daisy Hill to also understand

whether the residents and families have the same or differing opinions of the organization. In

the end, the metric can be monitored and changes made to ensure the families of residents and

the staff would recommend the facilities to those in need of its services.

Ultimately, using these metrics enables Daisy Hill Senior Living to examine whether the

company is maintaining market share and meeting the occupancy rates for maximum

profitability of the organization. The return on invested capital provides the company a means to

evaluate future investments and drive growth. Finally, the use of a net promoter score metric

enables the continual evaluation of the operations of the company in order to determine whether

employees, residents, and families will recommend the organization to potential customers.

Recommendations

Daisy Hill Senior Living has a desire to expand as a business and generate more profit.

Currently, the company has an occupancy rate of seventy-three percent, in comparison to the

typical occupancy rate of ninety percent, and has the desire to expand the size of the facility. In

order for Daisy Hill to drive increased occupancy and growth, there are three main categories

that could be explored by the organization to increase the pipeline of customers and improve the

profitability of the company.

The first recommendation for Daisy Hill is to increase customer awareness of the assisted

living facility and enable potential customers to experience the facility first hand. The most

difficult process in enticing seniors to move into a senior living facility is the negative stigma

that goes along with moving out of your home and into a senior living facility. However,

DAISY HILL 24

residents who were proactive rather than reactive and preparing sufficiently for the move

resulted in a positive post location adjustment (McNamara, Walker, 2013). The removal of the

stigma and showing potential customers the benefits of the facility would open their mind and

ensure the correct perspective on life within an assisted living facility.

One method to enable the initial experience is to offer Family Services on site for both

potential residents and the families of potential residents. These conferences would enable Daisy

Hill to describe the differences between nursing homes and senior living facilities. The company

can also provide information with regard to future planning for these types of facilities along

with the options families have to pay for the facility. The leadership can then discuss options for

payment such as annuities, senior living insurance policies, or pre-financing options that ensure

the family can plan to cover the future cost of care. This consulting service would allow for the

explanation of veterans benefits to cover the cost of the facility. These actions open the minds of

the seniors for the type of care that is available as well as bringing the families and seniors into

the Daisy Hill facility. Daisy Hill could provide a free meal as enticement but also allow the

families to grasp the quality of the services Daisy Hill offers to its residents. Daisy Hill can

gather contact information from the events and begin to establish a future customer base to

improve occupancy and plan for future growth.

Beyond the internal consultation services, Daisy Hill should upgrade the information on

its website to align with the strategy of informing the customer about senior living and the types

of facilities that create a one stop experience for determining the best path forward for families.

The site should include information about living options, financing options, and what families

should expect along the journey of transitioning from home care to assisted living. The creation

DAISY HILL 25

of this experience along with the consultation services provides a means to attract potential

customers and ensure the long term growth of the business.

The second recommendation for expanding the profitability of Daisy Hill Senior Living

is to expand its business model to entice a larger segment of customers. Currently, the market

for the assisted living in Woodford County is around 100 people. The market constraint is based

on the affordability of the service and the proximity to the facility. Daisy Hill cannot relocate to

increase their customer base but they can lure a larger market by decreasing the cost of the

facility for entry. Currently, Daisy Hill generates a profit based on the occupancy of the thirty-

three rooms. However, there are twelve rooms that are empty and would generate pure profit

based on the increase in residents and the current fixed investment in the staff. Daisy Hill could

create a lower cost market by taking five of the smaller rooms and offering an a la carte service

menu beyond the basic rent. The a la carte menu would enable the resident to purchase meal

services, assisted care, or cleaning services based on need instead of a locked in service at a

higher price per month.

The utilization of the current facility to test out the concept allows Daisy Hill to mitigate

the investment risk while testing the value of the model and the potential customer segment. If

Daisy Hill finds that the model is extremely valuable and highly desired, it could invest in

additional facilities that offer the limited service while maintaining the profitability of the

company overall. In addition to luring in the customer at lower cost basis, Daisy Hill establishes

a funnel for customers who may eventually need a full service assisted living room. Further, this

could capture part of the segment that currently utilizes a portion of family care and formal care

to expand the potential customer base for the facility.

DAISY HILL 26

The final recommendation for Daisy Hill is to expand the services offered at the facility.

Currently, Daisy Hill has a hair dresser come to the facility to style women’s and men’s hair and

do their nails. Daisy Hill could partner with a variety of services such as legal, tax preparation,

transportation services, and computer systems to provide other help for residents. One example

would be estate planning and wills for seniors. A large number of seniors do not have living

wills, power of attorney, estate wills, or other documents that streamline the planning for a

senior’s life. This ensures the seniors have access to people who could provide all their future

needs. In addition, these services could provide consultation to the seniors who are deciding to

enter an assisted living facility.

Although the internal services would help improve the lives of the residents, Daisy Hill

could also expand its services vertically to provide adult day care within the facility. The lower

level of occupancy provides excess space within the facility that could be utilized to watch

seniors during the day when their families must go to work. Daisy Hill currently has the nursing

staff and food services to care for the seniors within the facility. Daisy Hill would not have to

expand their facilities and could generate increased revenue by watching seniors during the day.

Currently, the market for adult day care services is predicted to expand and the average price per

day is $64 (Wagner, n.d.). The monthly revenue from one of these customers is $1200 without

establishing permanent residence within the facility. The number of accepted adult day care

patients could be adjusted based on residency level and the capacity of the facility. This would

enable Daisy Hill to add customers without expending additional capital up front. The service

could expend the utilization of food services and create a more social environment around the

facility. Finally, as the adult daycare customers need further care and their primary care giver

DAISY HILL 27

can no longer support them at home, they are already familiar with Daisy Hill and could become

future residents.

Conclusions

Daisy Hill Senior Living is competing in the assisted living market. The aging of the

Baby boomer generation will result in the increased need for assisted living facilities and other

senior services in the coming years. Daisy Hill offers an upscale facility with the amenities to

make retirement easy but relies primarily on private payments. Daisy Hill currently has a below

market occupancy of seventy-three percent. In order for Daisy Hill to increase profitability and

occupancy levels in the future, it must focus on growing its funnel of customers and make wise

investments for expansion. Daisy Hill could increase the funnel of customers through the

addition of senior consulting services, offering a lower cost entry product that focuses on seniors

who are more capable and expanding the onsite services offered to aid residents and draw in

future customers. Daisy Hill will be able to continue to analyze these changes through

occupancy levels, return on invested capital, and the net promoter score of employees, residents,

and families. In the end, these actions will aid Daisy Hill in expanding its senior care services

and growing as on organization.

DAISY HILL 28

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