William C. Fisher
Every product or community goes through a life cycle that includes these stages: Development, Growth, Maturity, Saturation and Death. At Maturity, a product/community begins to become irrelevant, outdated and no longer competitive due to changing consumer demands.
A financial management team must look at the community's life cycle probabilities and decide if it requires either an “extension strategy” or an exit strategy.
Changing the course of an organization requires an investment of time, money and planning. Most extension strategies require the capacity to restructure and/or take on additional debt; demand a management team that is capable of running the existing operations profitably; seek affirmation from market studies with evidence of viable future market/consumer strategy; and call on decision-making competencies from the board/leadership team. If all these criteria are in place, a facility might be ready to extend its life into a Growth stage with new revenues and a new future.
In 2009, Larry Bradshaw became CEO of National Lutheran Communities and Services in Maryland. The Village at Rockville, the flagship community, fell behind consumer expectations in a competitive market. Bradshaw and his team deployed a compelling extension strategy for The Village, but only after curbing a $4 million operating deficit.
“Eliminating the deficit enabled The Village to invest $8 million of its own operating funds to improve the aesthetic appeal of its property and be attractive for refinancing,” he explains.
Lydia Pugh, principal at Aging Research Institute, says, “Senior living organizations of all types in all locations need to have the financial strength over time to remain competitive.”
Without intentional planning and the financial resources to re-invent their communities, providers may find themselves on a decline curve too steep for recovery.