Many entrepreneurs form private pay elder service companies, or buy home care franchises, driven by statistics such as "More than 65 million people, 29% of the U.S. population, provide care for a chronically ill, disabled or aged family member or friend during any given year and spend an average of 20 hours per week providing care for their loved one." http://www.nfcacares.org/who_are_family_caregivers/care_giving_statstics.cfm
That is one hell of a potential customer base. I'm not challenging these statistics. If anything they may be on the conservative side. But if your revenue model is based on elders and/or caregivers that must pay you from their private funds, look before you leap. Your business plan will fail if you assume that the 30 percent of the population that are or will be caregivers can afford your services.
According to the most recent data from the census bureau the top-earning 20 percent of Americans - those making more than $100,000 each year - received 49.4 percent of all income generated in the U.S., That ratio of 14.5-to-1 is nearly double the ratio of 7 to 1- in 1968.
The "middle class" in America is rapidly disappearing.
The U.S. has the greatest disparity of wealth among
western industrialized nations.
At the top, the wealthiest 5 percent of Americans, who earn more than $180,000, added slightly to their annual incomes last year, census data show. Families at the $50,000 median level slipped lower. Source: http://www.census.gov - September 28, 2010
You don't need to be a Ph.D economist to do the math on this one. It's 5th grade arithmetic. Look at the income breakdown above and estimate how many American elders and family caregivers can afford the following:
According to the recently published "long-term care cost study" funded by insurance giant Genworth "Home care rates have remained flat in part because of increased competition. If a person needs only 6 hours per day of care to stay at home the annual cost is about $41,000." A person needing round the clock care at home due to the limitations caused by Alzheimer's disease, Parkinson's disease and stroke will need $73,000 at $200 per day and $109,000 at $300 per day to pay for just 1 year of care in 2010. Source: www.genworth.com/.../long_term_care/long_term_care/cost_of_care.html
In other words by 2030, there will be about 72.1 million older persons, but less than 7 million of them will be able to pay for home or facility care if they should need it.
The US home healthcare industry currently includes about 23,000 establishments (single-location companies and branches of multi-location companies) with combined annual revenue of $56 billion. The industry is highly fragmented: the 50 largest companies generate less than 25 percent of revenue. http://www.marketresearch.com/product/display.asp?productid=2838995&SID=54562600-493508122-506124594&partnerid=811788012
To survive and grow in what could soon become an overcrowded marketplace for the high end families that can afford to pay privately, the companies and agencies that survive and thrive, will be those who find creative ways to provide their services to a broader marketplace.
Collaboration instead of competition (see the "Blue Ocean" posting on this blog) will position your business to offer a comprehensive, nationwide caregiver support service that will be sponsored by organizations that have a mission -or a vested interest- in helping caregivers in their organization.
There are lots of potential sponsors out their for your services including small businesses through their trade associations, credit unions and community banks for older depositors, health care systems, church organizations, labor unions, and other membership associations.
Designing your eldercare services to be more flexible and creative using a "Blue Ocean" strategy will position your business to continue to provide high end services that involve many hours of direct care to those who can afford it. But you can also draw on your in house expertise to provide more affordable services to that vast mass of millions of caregivers.
Find some creative solutions at Http://www.youragingparents.net
Bob O'Toole bob@elderlifeplanning.com
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