The UK social care sector has long been under sustained pressure. With a population that has a greater life expectancy than ever before, this has opened up considerable opportunities for private companies offering residential, home-based, and flexible care services.
While further expansion is widely anticipated, the care accountancy specialists at James Todd & Co have also reiterated why detailed, strategic planning and stable financial management are essential for new competitors, given that care providers are subject to stringent regulatory and legislative controls – leaving no margin for error, assumption or non-compliance.
The accountancy company's care sector experts have shared some stats, guidance, and general advice to support those looking to launch a company within the care space. They explain the key role of planning to ensure every new business is primed for success.
The Rapid Growth and Future Prospects for the British Care Sector
Over recent years, we've seen a huge rise in the number of private care sector businesses, from residential care and nursing homes to community-based home care agencies, those offering mobility devices and home improvements, day centres and social organisations, and hospices providing comfort, safety, and dignity for residents approaching the end of life.
The latest data speaks for itself. Reporting shows that the health and social care sector is now the country's best-performing industry in terms of new business growth.
In Q2 of 2023, more than 3,400 new care sector businesses were registered, a jump of 8% from the year before. Spending on healthcare accounted for 10.9% of GDP in 2023, and there are today an estimated 18,500 organisations providing adult social care services, spread over 40,000 establishments and employing a workforce of 1.84 million.
There are, of course, complexities behind that, but the reality is that care has never been as attractive from a commercial perspective, with enormous demand for private, accessible and high-quality services, particularly in more affluent regions and in areas where limited public sector services mean there is sustained need for private alternatives.
Care homes are just one example, but the spikes in new facilities have been driven by a growing older adult population, greater interest in specialised and on-demand care services, more awareness of the benefits of high-quality, personalised assistance, and because demand simply outpaces supply when it comes to council-funded care placements.
Crucial Elements of Business Planning for New Care Sector Companies
We're focusing on business stability. Although the backdrop appears ideal for new businesses to prosper and scale, the reality is that care organisations are reliant on multiple moving parts to become profitable.
They also need to conduct ample due diligence and research to ensure the services they intend to offer are required, cost-efficient, compliant, and sustainable.
The best business plans don’t necessarily start with a concept or idea but with detailed research, ensuring that a fledgling care business has been created to meet a clear, measurable demand or has a differentiating factor from other competitors—especially those with niche specialisms or areas with a larger number of comparable businesses.
From there, most successful care sector professionals focus equally on funding and compliance with the Care Quality Commission (CQC) regulations in England and put together plans about how they will meet all of the standards from the point of registration onward.
In terms of financing, this may depend heavily on whether a prospective new owner is self-funding their business or has pre-established financing routes, but for most businesses, plans need to set out how the business model works, projections about income forecasts, and transparency around how those figures have been arrived at.
Almost any investor or lender will expect to see a fully thought-out, complete set of business plans to consider investing or offering funding. They must have sufficient confidence that the proposal is robust, stable, and complies with lending or financing criteria.
Guidance for Care Sector Business Owners Keen to Expand or Gain Market Share
One of the most common reasons care organisations fail is financial. That could be because of a lack of financial management or know-how, issues with staff recruitment and retention, the inability to secure longer-term funding or private investment, challenges with occupancy or client numbers, or rising overheads.
Business plans aren’t a new concept and are relevant across the sectors. However, care providers need to be certain that they have identified viable revenue streams, have a firm grasp on costs and outgoings, continually update their financial projections, and can pitch to investors and lenders with confidence that their business is designed with longevity in mind.
We often speak with ambitious business owners looking to branch out, expand their current operations, or progress into new areas of care delivery. The vital step is always to create comprehensive plans, alongside market research to identify competitors and the size of the localised market before making any initial investments, plans, or acquisitions.
Working With a Care Sector Accountancy Team to Maximise Returns and Profitability
Getting a new care agency or organisation off the ground is step one. The bigger picture should always involve forward-thinking plans to ensure owners have clarity about changing demand, reforms to legislation or regulation, and trends or sentiments that may impact the types of services and support they offer their clients.
Changes made within the NHS adult social care space also impact private-sector care companies. This means remaining up to speed with changes as they are announced or proposed and having the agility to adapt and respond to protect their financial stability.
This is why so many care sector businesses rely on specialist care accountants who have a keen and in-depth knowledge of the sector, forthcoming challenges and opportunities, and can assist with compliance, financial reporting, budgeting, forecasting and putting strategic contingency plans in place to protect the longevity of the business.
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About James Todd & Co
James Todd & Co have been providing accounting services for more than 30 years across Chichester, Fareham, and Portsmouth for businesses across the South East. Their clients trust them to provide bookkeeping, financial auditing and compliance, management accounting and financial advisory services.
