How to buy a care home?

| 2 min read

There are a lot of things to consider if you are thinking about buying a care home. The care home sector has faced considerable challenges due to political and demographic trends. That is not to say that there is no benefit of pursuing this business opportunity.

Overview of the sector

The UK has a rapidly ageing population and the demand for elderly care is very likely to grow in the coming years. Elderly care homes are all across the country and there are nearly half a million elderly people who are living in care homes. This figure is likely to rise in the future which shows that this sector is certainly fertile ground for business owners.

The Care Quality Commission

In England, the governing body for care homes is the Care Quality Commission (CQC). It monitors that care homes are running to the legal requirements and the good practice standards set out in the Health and Social Care Act 2008.

The CQC has changed the way it works due to the global pandemic. Click here to find out more.

Your business model

If you want to purchase a care home, you will have to come up with a financially viable business model.

You want to know how many local authority placements you can afford and what kind of care you will provide.

Care homes are not necessarily for catering to the elderly. There are many different kinds of patients who require care home: homeless, people with learning disabilities, patients who have autism, to name a few.

You should also note that buying a care home can take time because you want to do your research before jumping into it. You will have to consider funding options carefully. Spend some time looking at the funding that each sector gets. It is significantly affected by postcode, the provisions you have and a lot of other factors. Speak to providers, directors of social services and people in the NHS.

Further, there are two types of people who usually buy care homes. They are either people who have worked as nurses, social workers, GP’s and looking to get into the business themselves. Or they are people who look at care homes as a profitable business. If you fall into the latter category, it is absolutely vital that you have qualified staff.

Cost and standards

Care homes typically range between £500,000 to £2m. However, there are care homes that are valued below this range and which make healthy profits.

While care home business can be lucrative, you will have to stick to the highest standards when you run one. Apart from meeting the general standards, you will also have to cater to the needs and problems of each resident in the care home.

Care homes are not all about giving the patients the right drugs and feeding them properly. Patients also need stimulation such as day trips, light exercise programmes, library services and social events.

Marketing your business

While there is a lot of opportunity in this sector, there is also increasing competition. Therefore, you will have to promote your care home well to make it successful.

It is vital that you are targeting people ages between 45-90. Further, you want to target young people who are making decisions on behalf of their parents or researching for their own parents or relatives.

Potential customers want a detailed description of the facilities and the care that is being offered. You will have to invest in a website and social media profile. Most of all, the success of the business will depend on your desire to make a difference, careful financial planning and being business headed.

Due diligence

The process of due diligence is one that provides a thorough investigation into a proposed investment transaction. It means you check the investment worthiness, and assess the full claims made by the owner. This check is usually performed by a solicitor and accountant who act on behalf of the buyer. A large portion of due diligence will involve checking financial statements and accounts.

Click here to find more about due diligence.

If you buy wisely and do a thorough research of the background and potential of the business which attracts your interest, you will get immediate access to the existing base of customers and suppliers. This will ensure that you know what you are getting into.

You need a solid contract

You, as the buyer, will have to produce the sale document. This agreement will have to cover the mechanics of the deal – what is being sold, where it is, how it is to be transferred, and so on. This is where warranties come in. Click here to download a business sale agreement if you are purchasing a care home business.

Warranties which are legally binding promise as facts about the business, which provide information relating to the business. Click here to know about how warranties work and why they are important.

Other documents you need

The starting point for documents are those relating to the sale and purchase – of company shares, or of business assets.

Additionally, you may need assignment and novation agreements to transfer contracts the seller is a party to.

If company shares are being sold, then you will need directors service agreements, board minutes to document approvals to changes, and possibly, a new shareholders agreement and new articles of association.

We can help you find exactly what you need for your circumstances if you contact us and ask.

Last but not the least, you also need to be aware of the legal considerations on the purchase or sale of a business.

Please note that the information provided on this page:

  • Does not provide a complete or authoritative statement of the law;
  • Does not constitute legal advice by Net Lawman;
  • Does not create a contractual relationship;
  • Does not form part of any other advice, whether paid or free.
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