The Spring Edition of the 2019 Home Care Benchmarking Study has been out for a little over a month, and its findings about skyrocketing turnover rates and shifting recruitment sources are starting conversations across the industry about how to deal with perpetual staffing challenges.
While these topics are critical to explore and address, understanding some of the less obvious takeaways from the Study, especially those related to sales and marketing, can help forward-thinking agencies to land on their feet as a variety of changes shake up the industry in coming months and years.
The sales and marketing findings won’t be officially released until September, but data from the Finance section mixed with preliminary sales and marketing data paint an interesting picture of the changing landscape of home care marketing.
There’s a common thread these takeaways: higher competition is making marketing harder, but for those who can adapt, there’s more opportunity for growth than ever. Let’s dive in.
Takeaway #1: If you’re spending more on marketing, you’re not the only one.
The Finance section contains a detailed financial report based on reported expenses from the agencies surveyed in the study. Interestingly, a comparison of this year’s expense report with the expense report from last year shows that the amount that agencies are spending on sales and marketing expenses has more than doubled from last year, jumping from 1.8% of total revenue to anywhere between 3-5% of total revenue depending on the size of the agency.
It’s also important to recognize that the increase in marketing expenses was much larger for smaller agencies, suggesting that increased competition is requiring smaller agencies to pour a lot more money into marketing just to get traction.
The bottom line is that it takes more money to grow than it used to, and you shouldn’t expect that the marketing budget that delivered growth last year will necessarily drive the same results this year. You should continually evaluate your marketing spend and optimize for return on investment.
Takeaway #2: When it comes to referral marketing, agencies are becoming more reliant on a few sources.
Preliminary data from the sales and marketing section is showing that while there’s likely been little change in the types of referral sources agencies are relying upon, most agencies are reporting that a higher percentage of their revenue comes from just a few of their referral sources—in other words, their revenue sources are becoming less diversified.
There’s a common phenomenon that many marketing experts cite known as the 80/20 rule: 20% of your efforts bring 80% of the results. While that’s not always true, it appears that the 80/20 rules is becoming more and more real to many home care agencies.
This may point to a few different causes: a maturing of the industry, increased competition forcing agencies to double down on their strongest referral partners, or other factors. Whatever the case, this point is further proof why agencies need to be agile in their marketing strategy and adapt to a shifting landscape.
Takeaway #3: Despite these challenges, there was more agency growth in 2018 than we’ve seen in several years.
The median revenue grew 14% over the previous year—a bigger jump than we’ve seen in years, especially as median revenue essentially stayed flat or even fell slightly through 2016 and 2017.
Some of this growth might be chalked up to a maturing survey base (this year’s study had more agencies with 10+ years in business than ever before) or an increase in mergers and acquisitions; however, it’s unlikely that these factors account for all of it.
What seems clear is that despite increasing competition and rising costs, 2018 was a year of growth for the home care industry and individual agencies—and it seems likely that 2019 will follow suit.
The Verdict? Optimistic Pessimism
Optimistic pessimism is the idea behind the phrase “hope for the best, prepare for the worst.” In this case, it means that there’s a lot of growth potential and a lot of room for optimism—but only if you’re willing to acknowledge, anticipate, and adapt to the coming challenges.
This year’s Benchmarking Study underscored a variety of challenges that we already knew were creating problems for home care agencies—competition, staffing challenges, new legislation, and more. What it also proves is that this is still a great time to work in home care.
Will you adapt?