A recent Ziegler CFO Hotline focuses on the areas of marketing costs and commissions. While marketing budgets take into account many variables such as organization size, wage and commission structure, and the current occupancy stage (fill-up/stable/challenged) of the community, as a community's occupancy level steadies, its marketing cost per unit should decline and stabilize.
This survey was geared toward the "all-in" marketing cost for a budgeted independent living unit sale at a CCRC.
There were nearly 100 organizations that responded to the survey. The majority of respondents were organizations with less than $20 million in revenues and serving anywhere from 250-500 residents. However, 20% serve between 501 and 1,000 residents and more than 20% of respondents serve over 1,000 residents. There were only 10 surveyed who noted that they served fewer than 250 residents.
Just over 80% of the respondents characterized themselves as stable communities, with the other near 20% classified as either in fill-stage (10%) (new campus or expansion) or other (10%). Of the 10% of respondents that noted "other" as their status, many are multi-sites that have campuses at different status levels.
More than 1/3 of the respondents said they budget between $10,000-$20,000 per independent living unit sale, closely followed by a little less than a third who said they budget $10,000 or less.
There were approximately 13% of respondents who budget $30,000 or more for marketing cost per unit, which likely reflect the 10% of respondents who are in a fill-up stage. In addition, communities that have greater than $35 million in resident income, on average, spend $25,000 or more per independent living unit sale.
The other aspect polled in the CFO Hotline relating to the sale of an independent living unit is the commissions paid to an organization's marketing and sales professionals. Many organizations have adopted a policy of paying these professionals a partial commission upon receiving an entrance fee sales deposit (commonly 10% of the total entrance fee) and the remaining commission paid upon receipt of the remainder of the entrance fee.
Of the 85 respondents to this question, roughly 34% stated that they do split commissions. Of these, 71% said they have a policy of weighting the commission heavier on the settlement side. The remaining few mostly did a 50/50 split.
About the author: Angela Larson is the vice president of senior living finance research and development at Ziegler.