Independence Days

Entrepreneurs offering a compassionate option to nursing homes are fueling the $12 billion assisted living industry.
Magazine Contributor
8 min read

This story appears in the July 1997 issue of Business Start-Ups magazine. Subscribe »

Growing up in the nursing home business taught Philadelphia entrepreneur Irving Seldin one thing: Nursing homes left a lot to be desired. The problem wasn't that Seldin's family ran inferior homes. The problem was the concept itself. "I had an aversion to the whole institutional setting,' Seldin says. People were being treated like patients, not individuals, even when they weren't in need of real medical care.

Like most people, Seldin saw the need for alternatives. But unlike most people, he made it his business to create them. When his father decided to retire in the early 1980s, Seldin worked with him to convert one of the family's homes into a new kind of residenqce: Seniors would have access to help with daily living--transportation, meal preparation, bathing and laundry, for example--without being subjected to the loss of privacy and individual identity common to many traditional nursing homes.

When Seldin opened the Chestnut Hill Residence in 1982, he called his concept "personal care.' At the time, his was one of several fledgling ventures to enter the uncharted territory that's now known as "assisted living.' Today, assisted living represents a major growth area for entrepreneurs with the compassion and skill to tap into it. The Assisted Living Federation of America (ALFA) estimates current industry revenues at $12 billion--and they are expected to hit $30 billion by the year 2000.

Growing Older

What makes this kind of growth possible? Simple demographics tell part of the story. Using recent Census Bureau statistics, ALFA estimates that 3.1 million Americans were over the age of 85 in 1990. By contrast, a projected 4.3 million Americans will be over 85 in 2000, and by 2010 their numbers will swell to 5.7 million.

Beyond the basic numbers is a question of attitude. Peg Thompson, co-founder of Thompson White & Associates Inc., a Huntsville, Alabama, company that manages and develops retirement and assisted living communities, describes the current cohort of older Americans as an "independent generation.' Folks who weathered the Depression and fought their way through World War II don't want to be treated like invalids--or mere numbers. Moreover, their baby boomer kids are equally adamant about wanting the best for their parents.

Before assisted living, the traditional alternatives for people who needed help with daily living were nursing homes and home care. But neither choice was ideal for a significant number of seniors, says Paul Klaassen, whose assisted living business, Fairfax, Virginia-based Sunrise Assisted Living Inc., went public in 1996 and saw $47.3 million in revenues that year. "There were far too many people in nursing homes when we started Sunrise in 1981,' remembers Klaassen. "Nursing homes are essentially [health care] institutions. We thought there wasn't any reason to be institutionalizing people simply because they had care needs.'

Home care is less institutional. "But it's expensive," says Klaassen. "You still have the expenses of maintaining a home, plus the added cost of care. And home care doesn't really address the isolation that many seniors feel.'

Assisted living, by contrast, often provides a happy solution. Though facilities vary considerably in size, style and range of services offered, the concept of assisted living remains constant from place to place. ALFA defines it as "a special combination of housing, supportive services, personalized assistance and health care designed to respond to the individual Assisted living, by contrast, often provides a happy solution. Though facilities vary considerably in size, style and range of services offered, the concept of assisted living remains constant from place to place. ALFA defines it as "a special combination of housing, supportive services, personalized assistance and health care designed to respond to the individual needs of those who need help with the activities of daily living.' This may include anything from mobility problems to memory disorders and incontinence. Assisted living residents usually have access to housekeeping, common dining facilities, round-the-clock security and assistance, as well as social activities. At an average cost of $72 per day, assisted living is also more economical than skilled nursing.

Keeping residents safe and happy is an obvious priority. But the assisted living philosophy also emphasizes respect for individual dignity and privacy. "Assisted living starts with the assumption that we are dealing with people,' says Seldin. "We're here to not only provide for their physical needs but to recognize their individuality. Even the language we use is different. The institutional model uses the word `patient' and all that it connotes. We don't call our residents `patients.' It's not just a semantic difference; it affects the way we view people, and how they view themselves.'

Business Of Caring

The appeal of assisted living is apparent--and so, in turn, is the market need. From a business perspective, however, assisted living can be as daunting as it is attractive.

This is not a business for the unskilled. In fact, skill is required at various levels--from the provision of care to the management of food services, from the nuts and bolts of real estate development to the understanding of health-care legislation. No one person is likely to possess all the skills necessary to run a facility well. But if you hope to jump into this arena, you should probably have demonstrated ability in at least one critical area, coupled with an aptitude for learning on the fly. Also, adds Thompson, "You have to know what you don't know and get the help you need.'

Meanwhile, competition is heating up. Although no one company dominates the market yet, several are expanding regionally and nationwide. "We're seeing more professional management than in the past,' says Klaassen. "Weaker models are closing.' Translation: Standards are high and climbing, both in terms of service and business savvy.

Some metropolitan areas may be approaching saturation--if not in terms of existing facilities, then certainly in terms of projects in development. Suzanne Perney, associate publisher of Briefings on Assisted Living, a monthly newsletter covering the assisted living industry, advises newcomers to look for niches in the marketplace. "You see a lot of companies developing large facilities, but I see a need for small facilities in smaller and rural communities,' Perney says. "Some operators are also specializing in areas such as Alzheimer's care.'

Getting The Word Out

Of course, taking on the care of the frail elderly--let alone those with special needs like Alzheimer's patients--isn't a casual thing. Entrepreneurs entering this field need more than raw talent; they also need compassion and a commitment to service that goes beyond the bottom line. "This is not a business for people who are solely focused on making money,' says Whitney Redding of ALFA. "It's a conscientious bunch creating this industry.'

The fact that conscientious operators succeed isn't a coincidence, either. Residents and their families want sincerity. And referral sources--such as hospitals, churches, social service agencies and clients themselves--are equally discerning. Since word-of-mouth is the primary source of new business, operators who can't win the enthusiasm of their clients and communities often find marketing tough.

Because standards are high and competition stiff, breaking into this business on a budget takes some maneuvering. Building a new, state-of-the-art facility for, say, 90 residents will set you back millions of dollars. Converting a smaller existing facility is less expensive, assuming that your market will support such a location.

Not every market will. If your community already sports several shiny new facilities, make sure your venture can differentiate itself successfully and that the available population is large enough to sustain what you're proposing.

The assisted living business is demanding, but it's also in great demand. Entrepreneurs who find their way into the industry successfully can look forward to explosive growth in a dynamic and challenging field.

For the truly committed, there are emotional rewards as well. Even after 16 years in the business, Klaassen says, "I love the openings. Families are moving in with their loved ones; there's a feeling of excitement and hope. It's a fortunate person who finds [that] their work and their faith come together in a single calling.'

Want To Know More?

Assisted Living Federation of America(ALFA) is a gold mine of information and services for aspiring assisted-living entrepreneurs. For information on membership, training and conferences, contact ALFA at (703) 691-8100 or write them at 10300 Eaton Pl., #400, Fairfax, VA 22030.

Briefings on Assisted Living is a monthly newsletter for developers and administrators in the assisted living industry. Annual subscriptions cost $187. For information, call Opus Communications at (617) 639-1872 or write them at P.O. Box 1168, Marblehead, MA 01945.

Contact Sources

Chestnut Hill Residence, 465 E. Abington Ave., Philadelphia, PA 19118;

Sunrise Assisted Living, 9401 Lee Hwy., #300, Fairfax, VA 22031, (703) 273-7500;

Thompson, White & Associates, 2820 15th Ave. S.W., Huntsville, AL 35805, (205) 536-5992.SWO


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