How Much Does It Cost to Run an Assisted Living Facility?

If you plan to open your assisted living facility with a million dollars, you would need to set aside $350,000 as your running cost.

Although we might not be able to state the exact amount you will need to run an assisted living facility because certain factors can influence the cost, but you should at least set aside about 35 percent of your initial startup cost. 

If you have an idea of how much it will cost you to run an assisted living facility, it will enable you to plan effectively, and then create a budget that will take care of that aspect of the business. Trust me, the running cost of any business is key to the sustenance of the business.

For example, if you successfully open an assisted living facility, and you don’t have the cash flow to run the business, it means the period where you don’t have people occupying your facility, or when the occupancy rate in your facility is low, the business will likely be grounded.

In this article, we will look at several ongoing expenses that can influence the running cost of an assisted living facility. These ongoing expenses can be categorized into three main groups:

Operational Expenses

1. Labor Costs

From available data, labor costs are usually the largest expense for assisted living facilities, as they require a significant number of staff to operate and maintain the facilities, including the:

Administrator, director of nursing, caregivers/personal care assistants, activities director, chef/cook, maintenance supervisor, marketing director, financial manager, and security guards.

For example, Average Assisted Living and Memory Care hourly pay ranges from approximately $10.95 per hour for a Director of Sales and Marketing to $30.40 per hour for a Culinary.

The average assisted living facility worker salary ranges from approximately $48,990 per year for a Dietary Supervisor to $93,000 per year for an Executive Director.

2. Utilities

Under operational expenses, taking care of your utility bills is yet another area where you will spend the bulk of your running costs.

This is so because an assisted living facility consumes utilities such as electricity for lighting, HVAC systems, and electronic scoring systems.

Costs vary based on location, size, and efficiency measures, but an average assisted living facility might spend between $20,000 to $150,000 per month to take care of the utility bills for an assisted living facility.

On average, a medium-sized assisted living facility spends about $50,000 on utilities monthly. Please note that the bigger your assisted living facility the more you will spend on utilities.

3. Maintenance and Repairs

Regular maintenance and repairs are major costs that can influence how much it will cost you to run an assisted living facility yearly.

This is so because the constant use of equipment such as medical beds, wheelchairs, lifts, and mobility aids in assisted living facilities can lead to wear and tear; hence it will require regular maintenance and repairs. You are expected to effect maintenance and repair of your medical beds, wheelchairs, lifts, and mobility aids.

Apart from that, maintaining your assisted living facility may involve addressing issues in seating areas, flooring, lighting, and HVAC systems.

Of course, there is no fixed price on how much you can budget in this regard because the cost of these maintenance and repair activities can vary depending on the size and complexity of the assisted living facility.

Available data shows that the average cost of maintenance and repair work in an assisted living facility is between 2 to 10 percent of your total operational cost.

4. Insurance

Another running cost you should budget for under your assisted living facility operational cost is the premium payment for insurance coverage.

This is very important because generally, assisted living facilities are at risk of various liabilities, such as accidents, injuries, and property damage. 

Note that the amount you should budget for insurance premiums will be dependent on the size of your assisted living facility, the number of residents you plan to house, and the risks the business is exposed to.

Averagely, in the United States assisted living facilities usually pay about $9,500 annually on premiums, but liability insurance premium usually ranges between $1,000 to $50,000 annually.

So also, you should budget around $40,000 yearly for property insurance, and between $2,000 to $10,000 per year for workers’ compensation insurance.

5. Marketing and Advertising

Your marketing and advertising costs are no doubt part of your operational costs. Marketing and advertising expenses are necessary for an assisted living facility if indeed you want to attract visitors and generate revenue.

Of course, we cannot have a fixed cost on this because the cost of marketing and advertising any business will depend on the location of the assisted living facility and the competitive landscape.

Even though you are at liberty to budget any amount for marketing and advertising your assisted living facility, the available report shows that most standard assisted living facilities spend between $40,000 and $120,000 annually on marketing and advertising.

Fixed Costs

1. Property Taxes and Rent

Under the fixed costs of running an assisted living facility is your budget for property taxes, and rent. In the United States, assisted living facilities are often subjected to property taxes or rent payments for the land they occupy.

Of course, we may not be able to put a figure to these fixed costs, but it is certain that this cost can be substantial and can vary depending on the property value and local tax rates.

2. Loan Payments

The only reason why this should not be part of your running cost is if you outrightly generated your startup capital without collecting any loan.

However, if the assisted living facility was financed through a loan, the business would have regular loan payments to make.

Of course, your loan payments are a fixed cost that cannot be easily reduced, and it will depend on how much you loaned, and the payment package.

3. Depreciation

Under your fixed cost, you should have your depreciation cost. This is important because, over time, the equipment in your assisted living facility will depreciate.

Depreciation is an accounting expense that reflects this decline in value and can impact the business’s profitability. Depreciation costs for an assisted living facility encompass the reduction in value of assets over time, including buildings, equipment, and furnishings.

Other Expenses

1. Supplies and Amenities

Part of the ongoing costs of an assisted living facility that you can place under other expenses are your supplies and amenities costs.

Assisted living facilities need to purchase a variety of supplies and amenities, such as food, beverages, bedding, towels, toiletries, cleaning products, medical supplies, dining utensils, recreational materials, and safety equipment.

Of course, we cannot put a fixed figure to these costs, hence the cost of these supplies can vary depending on the assisted living facility’s size, capacity, occupancy, and operational needs.

However, available data shows that average, an assisted living facility spends between $150,000 to $300,000 per year on supplies and other materials needed to run the assisted living facility.

2. Professional Services

During the cost of the year, you cannot rule out the fact that an assisted living facility may need to hire the services of professionals.

Hence, the amount of your budget for professional services should be part of the running costs of your assisted living facility.

This is so because assisted living facilities may need to hire professional services for various tasks, such as medical care, legal counsel, accounting, and IT support. The cost of these services can vary depending on the complexity of the park’s operations.

3. Special Events

Most assisted living facilities usually organize special events, and this can be grouped under “other expenses”. The fact that assisted living facilities can host various special events and tournaments, such as:

Holiday celebrations, birthday parties, educational workshops, live entertainment performances, and family gatherings means that there should be a budget for this.

We cannot put a figure to how much an assisted living facility can spend on special events and programs because the cost of these events can vary depending on the scope of the activities and the number of participants the assisted living facility would want to accommodate or cater for.