As any home care agency owner can attest, running a home care agency is difficult. Many home care owners wear many different hats during the course of their day, and this often leaves little time to step back and analyze the health of your business.
Despite this, it’s critical to make time to do just that. You should step back periodically to get your bearings on what’s brought your business this far, where it’s headed, and what course corrections you may need to make to accomplish your goals.
In doing so, you’ll find that looking at the right metrics will make your job much easier. We’ve all heard the old cliché that numbers don’t lie. In this case, numbers are valuable because they’ll save you time, give you the most precise insights into the workings of your business, and reveal where to focus your efforts as you move forward.
Here are five metrics that will help any home care agency to operate more efficiently and achieve better growth:
1. Sales Per Full-Time Employee
What is this? Sales Per Full-Time Employee tracks your relative overhead costs by comparing how much revenue your agency is bringing in for each full-time office staff member you employ.
Why is it important? By comparing your sales per full-time employee against industry averages, you can identify whether you have generated too many overhead costs and are losing profits by operating inefficiently.
Here’s breakdown of median sales per full-time employee by revenue ranges, courtesy of the 2018 Home Care Benchmarking Study:
Note that size and growth of an agency are strongly correlated with high sales per full-time employee. Calculating this figure for your own agency and comparing it to this graph will help you identify if you are losing too much to overhead costs.
How do I calculate it? Divide total revenue (or 12-month trailing revenue) by the total number of office staff you employ. (Count part-time employees as .5.)
2. Client Acquisition Cost By Referral Source
What is this? This tells you how many dollars it costs you to get a client from a particular referral source.
Why is it important? This provides proof of which sources bring the greatest ROI. Many agencies inadvertently pour money into the wrong sources because they fail to effectively track the costs and benefits of different sources and prioritize based on this information.
How do I calculate it? Divide the total cost of marketing through a particular channel in a given time period (be sure to include the hours spend by your team in this calculation) by the number of clients acquired from this source in the same period.
Note: the more specific you can make this number, the more useful it is. For instance, it’s good to know the client acquisition cost for referrals from medical professionals as a whole, but calculating it for different organizations or institutions, where possible, may be even more useful.
3. Caregiver Acquisition Cost By Recruitment Source
What is this? How many dollars it costs you to find and hire a new caregiver from a given recruitment source.
Why is it important? Like calculating client acquisition cost, this reveals which channels will yield the greatest ROI. Sometimes, these results are surprising.
How do I calculate it? Divide the total cost of advertising and hiring through a particular channel in a given time frame divided by the number of caregivers hired from that source in the same time period. Again, be sure to factor in all associated costs, including time spent by your team to interview caregivers.
4. Inquiry-to-Admission Ratio
What is this? The percentage of people who inquire about services that go on to become clients. Also known as sales-to-close ratio.
Why is it important? While it seems like a small number, all of your marketing and referral efforts are filtered through the inquiry-to-admission process. If there is something in your process that is causing people to not decide to use your services when in reality they would benefit from them, a low inquiry-to-admission ratio would reveal this. Increasing your inquiry-to-admission ratio will typically increase future revenue growth by a similar rate.
This graph from the Home Care Benchmarking Study displays median revenues of agencies who track every inquiry versus the median revenues of agencies who do not. We’ve done the math for you: that’s a difference of $489,000 in revenue per year.
Likewise, this graph shows the median revenues of agencies with an inquiry-to-admission ratio of greater than 45% versus the median revenues of agencies with an inquiry-to-admission ratio of less than 45%.
How do I calculate it? Divide the number of clients admitted in a given time frame by the total number of people who inquired about services in the same time frame.
5. Caregiver Turnover Rate
What is this? The percentage of your caregivers that quit or are terminated from your business in a given time frame.
Why is it important? Tracking this number provides insight into whether you are becoming better or worse at retaining caregivers, and whether your agency is more or less effective at retaining caregivers than the industry as whole, which has an annual turnover rate of 67% as of 2017.
How do I calculate it? Divide the number of caregivers who left your agency during a given time frame (the previous year or 12 months trailing) by the total number of caregivers you employed during the same timeframe.
Running a Home Care Agency: Information Leads to Action
While they may not be the only metrics you should track, these five metrics will help to give you a good idea of how well your agency is doing and if there are issues that require your action.
In past posts we’ve talked extensively about Net Promoter Score® and Caregiver Engagement Score. These are two other very important numbers, that help you understand the experience you provide to clients and caregivers and track how likely they are to refer others to you. They weren’t included in this list because, unlike the number of above, which can all be calculated using internal data, Net Promoter Score® and Caregiver Engagement Score require feedback from your clients and caregivers that is difficult to gather on your own.
To learn more about Net Promoter Score® and Caregiver Engagement Score and how these metrics can help you improve and expand your business, schedule a consultation with one of our specialists. It’s quick, easy, and free.
Have you had successes or struggles tracking any of these numbers for your agency? Talk to us in the comments below!