On today’s episode of A Drink With The Hurricane, Steve discusses the financial lifetime value of a caregiver.
I love the Home Care Pulse report, so we are going to use another graphic from the spring 2019 Benchmarking Study. (I’m excited for the one coming out in the fall cause I get to sales and marketing which is more my bread and butter.)
So financial lifetime value of a caregiver. As you see in the graphic on the screen above, there’s a huge separation between the agencies that are doing less than a million dollars and then the people who are considered leaders and masters. The leaders/masters are doing three million dollars and beyond. Their revenue per caregiver generated is around 17 thousand dollars.
Whereas everybody else’s is around 11 thousand dollars. So why is it such a difference, a six thousand dollar difference from what the leaders versus the people who are figuring it out. Well, several things.
1. The leaders have better procedures.
Most of them have a 20 hour minimum. They offer more benefits. They have consistent work coming in so when a case ends there’s another case for them to go to right away. So as a result caregivers tend to stick around longer.
2. The leaders tend to pay more.
Now paying more you may think well of course because they’re doing five million dollars a year they can afford to pay more. No. It’s still the same amount of money per hour. But they might be charging a dollar or two more. They might even be charging three or four dollars an hour more than the people in this category over here.
I’m here in New Jersey, the average price in New Jersey right now is 24 dollars an hour. That means that the low is like 20, 21 and the high is like 27, 28. To give you a 24 dollar average. So the leaders are charging 25, 26, they might even be charging 27, 28 dollars when everybody else is charging 24 or less.
So yeah, they pay more because they charge more. Now how can they charge more though? It’s because they got better systems, which is the next point.
3. They know how to close.
4. They know how to onboard a patient.
5. They know how to answer the phone and handle an inquiry.
6. They have management policies and procedures in place for people to be able to come out and visit that patient.
Because they pay more they’re attracting better caregivers and those caregivers are providing better care so as a result, they’re able to do things that these folks aren’t. Now, $17,000 per caregiver is not bad. But it really needs to be better.
When you look at the financial lifetime value of a client for this group over here, it’s $12,500. Which means that if they have a client that comes on services that client will spend about $12,500 during their time. So this gives you a $4,500 difference back and forth.
Which means caregiver leaves this client and goes to one other client part time before they end up quitting and leaving the leaders. This needs to improve.
Your goal when you have a caregiver is a caregiver should work for at least three patients before they discontinue services. So even as a leader, if a leaders revenue per client is $12, 500 and you have three clients, that’s gonna be $37,500 and that’s how much revenue one caregiver should be able to generate for your company.
They should be able to work and serve three clients during their time with you. This is closer to what my caregivers generated with me. This is closer to what many of my mastermind clients, who are the ones that we do the most amount of work with, have their caregivers generate for them.
Now that comes from multiple things. One being referrals equals freedom.
If you’ve ever attended a bootcamp or any event that I’ve ever spoken at I always throw that quote out there, referrals equals freedom.
If you want freedom in your business, to be able to run your business and run it smoother, you have to have an abundance of referrals coming in. It all comes back to referrals. Including your caregiver retention.
So if I have an abundance of referrals and the first client calls to discontinue services for whatever reason and you have five referrals that you need to staff anyway. Caregiver, do you want this case? Yes you do, great, boom, they go from one case to the next. Caregiver loses no hours. Caregiver loses no revenue. You don’t lose the hours yourself. You keep that caregiver. You don’t have to replace that caregiver. And they go work into the next one.
Then that client discontinues or they pass away, you know the nature of our business. And then the same exact thing. There’s an abundance of referrals. We have another case. Do you wanna go to work tomorrow?
I used to call my caregivers on a Thursday when I would know that their case was ending and we’d had a couple of days cancellation period so if it was a Thursday and it was a seven day a week case, Friday, Saturday, Sunday so Monday they would be their first day out of work. So do you want a couple of days off caregiver or do you wanna go right to work Monday with a new client? And the caregiver would tell me.
So I knew on Thursday the caregiver wanted to go to work on Monday. We had cases coming in every single day that were signed, started, getting ready to go. And we just took a caregiver out, put ’em in the schedule somewhere else and boom, they never had inconsistent work. They never lost a dollar in their paycheck. That’s how we kept our caregivers. That’s how our caregiver retention rate and our revenue generated for caregiver was over 30 thousand dollars. And this is what you should be shooting for from an operational metric with your caregivers. Three times the clients for every caregiver you bring in.
So look at your caregiver retention rate. If you’re turning over more than 50 percent, you probably don’t have enough referrals coming in. You’re probably not giving those caregivers consistent work, then you gotta make a change. Get the referrals and then you can handle and do the things that I’m discussing here. And be like the leaders with all of this.
If you liked this content, you are going to love my free course Initiate: Master Your Home Care Business.