Home Care U | How to Manage Margins, Cashflow, and KPIs for VIP Private Pay Clients (Justin Currie Pt. 2)

[ 00:00:03 ] Hello and welcome, everyone, to Home Care U. It's great to be with you. Thanks, everyone, for joining us live, and those of you listening to this afterward, it's great to be back. I'm your host, Miriam Allred, Head of Partnerships at Careswitch. We're going to get right after it today, no housekeeping, no nonsense. We're going to get right back into it. I'm really excited to have Justin Currie back for part two. I hope everyone enjoyed last week's session where we talked about all things VIP, private pay clients. It's a pretty specific episode, one of Justin's fortes, and we're going to continue down that same train of thought today and talked about managing margins and cash flow, and KPIs specifically for VIP private pay clients.

[ 00:00:44 ] So really excited to get right back into it today, Justin! I know we did kind of an extended introduction of your background last week, but for those who haven't listened or will just listen to this episode, give us kind of a quick teaser background of yourself and your journey into home care, what you're up to today. Yeah, so just a quick background is I came down from Canada originally to start up my home care agency because my fiancéé lives down in Pennsylvania, so that's where I started my agency. We became pretty Successful, pretty quickly, Wellsprings Home Care is the name of the home care agency, and we saw a lot of success with that. And I started kind of sharing my story on TikTok, actually, and it just started as kind of a passion project; I enjoyed talking about business and things like that, and it started to really pick up a lot of momentum.

[ 00:01:31 ] I had a ton of people reaching out to me and I was trying to help them out and get through some challenges. So ultimately, that led me to the launch of Masters of Home Care as well. So what I'm doing with that is I'm taking all the strategies, systems, everything that's working in my agency and I'm Helping other home care agencies implement that, so I have a lot going on with the agency and then also with Master's of Home Care, but it's a lot of fun and that's where my passion lies, I love helping seniors, obviously, but I also love helping others, you know, become successful in their own business, amazing. You're a busy guy before we jumped on, I was telling just saying to you how brave you are to kind of tackle two different businesses, two different projects all with the same vision, you know, end goal and helping as many seniors as possible, but you're busy and you're doing a lot, a lot at once, but kudos to you.

[ 00:02:20 ] Before we get into margins, cash flow, all of these kinds of bigger topics, tell us a little bit about what you're doing and what you're about, your journey getting into private pay and kind of the VIP private pay space. I think maybe everyone aspires to some sort of business structure like that, but what kind of was your journey getting there and how and why has that been so successful for you? Yeah, so the journey it had multiple variables, but it really started out with identifying a gap, right? Like as a business owner, you should always try and try to find a gap that's underserviced or underutilized and what we did is we found a really large gap

[ 00:02:57 ] between medical home health care and non-medical home care and what we did was essentially try to close that gap by just offering a much higher level of service so we have you know we talked about it on the last episode but we have minimum experience requirements for all of our caregivers very extensive screening process so we tried to build up the agency so we were a lot closer more closer aligned with a home health care agency rather than the traditional home care agencies so we've really came in and we've been able to build that gap and we've been able to build that in and tried to close that Gap oh, sorry notification came up on there, so we tried to close that gap and it's been really, really successful because there is a huge demand for it, and it's a program that's not for everybody.

[ 00:03:42 ] You're obviously going to say no to clients, but it was a really underserved area, you know. There's no shortage of agencies that are offering hourly care you can call Care.com, there's millions of options out there to get you know just standard home care services. So, that's why we created these VIP these elite packages are for that small percentage of people. You know, our market isn't uh isn't huge right. We're at five to seven percent of the people in our market that are actually going to, going to fall into the category of our avatar for these services, so we've just became a lot more, lot more niche and really identified that that small percentage of people but a high demand for, for the service.

[ 00:04:25 ] Great synopsis to reference people back to the last episode your journey here was relatively extensive, you know as a new home care owner, you know years ago you tried and tested different avenues and made your way here, so I don't want people under the assumption, you know, you started here and you landed here and you've, you know, been wildly Successful, you too had a tough experimental first year and naturally made your way here as you said, identifying the gaps, finding the needs, building out a service model that is conducive to these to this you know clientele, and you know the market. Let's talk about profit margins so typically, you know, margins are pretty good and typically higher with private pay.

[ 00:05:06 ] Let's talk about you know healthy margins for private pay clients what have you found to be kind of the sweet spot or successful gross margins for private pay clients? Yeah, so before I start into kind of where our margins are at and where we try and get everybody in our program when we first started, we were kind of like, 'Oh, we're going to do this again.' But when we first started the VIP private pay program, it was its sole purpose wasn't just to increase our margins and make these massive margins. The main goal of it was to offer just an outstanding level of quality. You know how can we get a very high-quality service where we can you know manage call-offs? Where we can have more management in place for caregivers that was the main goal of the program, so our margins are quite a bit higher than industry averages.

[ 00:05:54 ] But you may find, you know, pockets of agencies out there that are a little Bit more high-level, but you're that have the same margins or maybe even a little bit higher, because that ultimately wasn't our main focus starting out. But now that we've proven the system, everything's working really, really well, we have an initiative in Q4. And that's where we're going to start to really start to look at the margins and see how we can increase those a little bit for our clients as well. So, with that, our average profit margin, net profit margin for my agency and for some of the agencies that we're bringing up through the program is around 15 to 17% net. And I'm not sure if you looked at the numbers in the in the HCP study, the most recent one, but an average agency, which is about 1.5 million in revenue, somewhere around there 1.6.

[ 00:06:42 ] And their average margin is about 7.8% net profit. So, when you calculate it out from the study, that's about what an average agency is running at. And traditionally in home care, that was an okay margin, right? Because you offered on high volume, lower margin type of services. And now that might work for a $10, $20, or $30 million agency. Unfortunately, when the average agency is around 1.5 or 1.6 million, that tells me that there's a lot of agencies out there that do not fit into that category. So really, really hard for a small agency or even, you know, $2 million agency to operate in that 7, 8, 9% net profit range. So right now, our net profits are around 15 to 17%. Can we talk? Yeah, great, great information.

[ 00:07:40 ] I'm glad you referenced this study as well. Let's talk about gross. And then we'll like dig in a little bit deeper here. As far as gross goes, what's healthy? What's average? What are you seeing? Yeah, so with the HCP study, 38 to 39% is the average gross margin. So, on average, we're a little bit above that we're about 42 to 44%. Depending on service offerings, depending on location, depending on you know, what caregiver rates are in the area, there's a lot of variables that that apply geographically to different agencies. And but in in that we are a little bit higher than the than the industry average. So, I think you're definitely going to see agencies that do have a higher gross margin than that. But that's where we're at right now.

[ 00:08:29 ] And I mean, so we have we run really healthy margins. But that's not the main goal of the program. It's to have very healthy margins, but also to, to obviously offer that that much higher level of quality. Yeah, and I'm glad you're citing that because as we know, with a premium price comes a premium service, that premium service comes with its own cost. So even if you're charging more, and you have a higher, you know, you're aiming for a higher margin, there's maybe more expenses. So, let's talk about the cost of providing a high-quality service. When we calculate net, we're, we're factoring out or deducting all of those costs. I don't know if you have this offhand. But what does kind of the breakdown of you calculating net look like?

[ 00:09:15 ] What are you? What are those deductions? What are those costs that you're focused on? So, the main costs are basically the same as any other agency. I mean, all your operational costs. So, we're, we're taking out recruitment, retention, we're taking out sales and marketing, operating expenses, so any fixed expenses, like your rent, your office software, things like that. So, really, it doesn't look any differently as far as the breakdown of it. But some of the factors that we really consider when we're trying to adjust our net profit, like, you know, what we are levers that we can pull in order to increase that are, you know, one obvious one is client rates. One that's not as obvious, a lot of experienced business owners know this.

[ 00:09:58 ] But client retention is a massive, massive one for profitability. And especially in the private pay space, you tend to see a little bit more turnover in that sense, just because people are paying out of pocket. So, we've had a really big focus on that client retention. And the last I would say for pulling a lever to be able to do that is billing and collections efficiency. So, with private pay, hey, really the sky's the limit with what you want to do with your payment terms. And with Medicaid, with, you know, if you're working with Medicare, things like that, unfortunately, your hands are kind of tied, right? I mean, they'll pay you when they want to pay you. You know, if you get everything in on time, you still aren't 100% on when you're going to get paid on that.

[ 00:10:43 ] So just dialing in those payment terms has really helped us out as well. Yeah. Before we touch on payment terms and kind of go down the cash flow route, you mentioned client retention, which is huge. And I am curious, is for these VIP clients specifically, are they typically on services for longer maybe than other home care clients or shorter? Do you know, or what have you seen regarding like average length of service and or like average lifetime value is another KPI that we talk about in home care. What are you seeing for those for these VIP clients? We're seeing an increase, but that didn't come naturally. At the beginning, we did see a high level of turnover, right? Because there's a lot of quality things that we had to dial in with the system.

[ 00:11:34 ] So once we improved our service delivery, then we were able to kind of really look at that and essentially, we're paying our staff extra because they're doing increased care management visits. We're paying our caregivers extra. There's a lot of variables that come into play and a lot of costs that come with that. So, we have improved a great deal of the client retention with our VIP program, but it's still not anything near what you're going to get with like a Medicaid or a VA. So, to be totally transparent with that, it is, it is still private pay. People are paying out of pocket. So, you still will see that a little bit higher turnover. Okay. You referenced just a couple of things right there about like, you know, increased care management, any other to use your term, like levers that you have pulled to impact client retention.

[ 00:12:21 ] It's very intentional and takes a lot of work to retain these clients. What, what all has proved successful for you all in increasing client retention over time? Yeah. The number one is relationship building. So, I think if you listen to the initial podcast, what we're doing is we're having our sales rep go out and form relationships with the clients and make sure they're taken care of, gaining valuable feedback. And we do that. That's, that's a huge differentiator. But we do some things behind the scenes as well. And we have a full client system, an automation system built out. So, it's going to send them messages on their birthday. It's going to, when they first sign on and as a client, it's going to send them all the information that they need to know, and everything's automated.

[ 00:13:08 ] It's all signed off on. And really, it's really, I guess a multifaceted approach is where you're doing a lot of face-to-face. So, we're doing about 10 times the face-to-face as a normal home care agency. But we also have a lot of automations and a lot of touch points on the back end as well. Yeah. Which goes a really long way. Obviously, the caregivers are in their homes regularly and that's, you know, one face, you know, daily touch points. But I think what you're alluding to is a lot more communication and touch points from the office that are both personal and automated so that it's just, you know, as much communication as possible to keep them comfortable and, you know, connected to the office in that regard. Is that fair to say?

[ 00:13:52 ] Yeah, it's fair. And one thing I'd like to say, this actually came from my fiancéé, somebody she works with, but they said it's hard to hate up close. So, you know, through texting, things can be misconstrued. You have a lot of challenges. You have a client who thinks is angry and all it really takes is a conversation, you know, on the phone's good. Face-to-face is much better. So, it's hard to hate up close. So, get your staff in front of them, make sure your staff's personable. And, you know, they build that relationship because that's going to help them. And I think that's going to carry that relationship a lot further than, you know, sending a text message. Emails and stuff like that are helpful, but it's just part of the whole system.

[ 00:14:30 ] Yeah, I love that phrase. And that's always the catch-22 is in this, you know, tech-crazed world, it's so easy and convenient to send an email, send a text. But if you really do want to go above and beyond and build these long-lasting relationships, you've got to do the work. You know, you've got to get out there to the home, even pick up the phone and make a phone call rather than send the text. It's just little tweaks like that that go a really long way when it comes to both client and caregiver retention. And so, it sounds like you all are working, you know, really heavily on that and seeing some of the early, early rewards, which is great. Let's, let's keep going down the path of cash flow.

[ 00:15:06 ] Like you mentioned, like payment terms and collections, all of that is such a key part to profitability and to increasing those margins. Let's start a little bit high-level. Have there been any cash flow challenges that you've encountered with private pay? Again, typically obvious that like private pay has good margins and, you know, it's typically healthy, like profitability, that's all relatively like streamlined and straightforward, but any, I don't know, do you want to demystify like any challenges or things that you've struggled with when it comes to private pay billing and getting these clients to pay? Sure. So, we, we put a few rules in place right off the start is that they have to sign up for auto payment. We do not accept check payment.

[ 00:15:48 ] So those were two right off the start, because I know a lot of agency owners are, it's just a lot of issues with check payment. I mean, it's they; they either send the mail them out the invoice, they don't get the invoice. So, they're not sending the check, or the check gets lost in the mail. It really is, is, I mean, it's, it's destructive to your agency to be dealing with those billing issues all of the time. So we looked at it and we made really rigid standards on what we were going to do, because we looked at the potential of the percentage of people that we were going to lose, because we have those rigid standards was nothing in comparison to being able to not have, you know, any of these issues or, you know, any of the billing complexities, any of these late payments.

[ 00:16:33 ] So, with private pay, it is way over and above, you know, when you're looking at it from a cashflow standpoint, better than any other option out there, whether that's, you know, LTC, VA, Medicaid, you know, any other insurance type provider that you're, you're working with, they're always going to have some sort of, a delay. And, you know, even like VA, I mean, they've gotten a lot better. They're doing a really, really good job at just getting consistent, consistent payments coming out. But, but that's kind of where we were at was, we just, yeah, we really made much more rigid standards. Are you turning away any new clients with that rule of no checks? Or are you able to talk people around that pretty easily? I'm just curious.

[ 00:17:18 ] I don't think we've ever turned a client away. I think we maybe, over the past four years, I think we maybe gave in to about two clients. And in those cases, we took a two-week deposit and everything on that and made sure that our, our risk was managed in those situations. But we get very little pushback when you're, when you're going after the type of avatar that we're going after and teaching others, others how to go after, you start to see that challenges that used to exist don't often exist anymore. You know, they, with, with the affluent, I mean, they want convenience, right? And what's more convenient than auto-pay. They don't want to be writing checks. They don't want to be getting invoices in the mail.

[ 00:17:59 ] So you're working with a different type of client, and it does eliminate, and in some cases just reduces, you know, some of the challenges that you see before. A hundred percent. And oftentimes we hear there may be clients that are grandfathered in, or, you know, people that have been paying by check forever. And of course, there's exceptions to every rule, but I like the way that you put that - we got really clear and wrote our own business rules. Like these are the non-negotiables that we're going to hold ourselves to. And like you mentioned, it's, it's natural with these high, you know, VIP clients, but I think it's just a, you know, rule of thumb, best practice for home care in general, you know, making things as easy for you as an agency to be profitable, but also making things as simple and smooth and easy for these clients.

[ 00:18:45 ] And in their mind, that may be a paper check, but how do you go, you know, help them get set up on auto pay? And then it's, hands off for both of you, which is really the ideal scenario. So, it was just, was just curious. I do hear still of too many people paying by check. And so, I was curious if you've ever turned away business, but again, I think it's pretty easy to like talk people around that and come to common ground there. Yeah. And I, at one point, I wanted to touch on too, is this wasn't all just masterminded immediately. It was actually a little bit, uh, uh, because of necessity at the start of my agency. So, as you know, I immigrated down from Canada at that time, I couldn't even get so much as a cell phone.

[ 00:19:25 ] You know, I couldn't put my name on anything because I had no history. They wouldn't look at Canadian, you know, my history in Canada, as far as finances. So, with that, I mean, I couldn't get any business funding, right. I could start the business and everything, but there was no support as far as funding. And I think something like 80 or 82% of businesses fail because of cash flow issues. So that's something I knew that I had to dial in right away. So, I read a few books on it, and I got really, really, like I said, rigid with my, my standards and my payment terms. So, it was a little bit out of necessity at the start, but it worked out to, to, you know, just work really well in the agency for a long, long period of time.

[ 00:20:04 ] You mentioned it in this so far today, and you mentioned it a couple of times last week, just about making, being risk-averse and knowing your internal costs and headcount and what the costs and things look like. Um, you just referenced right now, like a deposit. And last week we talked a little bit about this, but what has been your approach to being risk-averse when it comes to these payment terms and holding people accountable? What are some of the other things you've put in practice to be as risk averse as possible when it comes to bringing on these clients? Yeah. So we touched on it a little bit in the last episode, but, um, the startup fee has been a major, major differentiator for us as far as risk-averse, because that is just kind of a, it's a problem that goes, I know like some of the bigger agencies, they noticed this for sure, but a lot of people there, they're taking on any client they can, and they're doing it from a marketing standpoint, right?

[ 00:20:57 ] It's like, hey, if we take on this client for three days, then they're going to keep sending us clients, right? When in reality is they're going to keep sending you the type of clients that you're accepting. If they know you're accepting these types of clients, they're going to keep sending you those clients that way. So that is something that I think goes a little bit unnoticed in the industry is how much you're losing. What's your break even, you know, after you bring a new client on, what is your break-even hours? How many hours do they need to be on service? And have you done an analysis of how many clients actually make it to that point? Right? So, you have to look at that and look at what, what you're losing on the front end.

[ 00:21:37 ] And we looked at ours and we did, we had a lot of rehab clients, you know, clients that just, just needed us for a week while a family went on vacation and we wanted to help them, but not at the, you know, not at the expense of our business. Right? So that's why we started having the startup fee, which has made a huge difference. And we talked about it before, but it's a little bit of a pre-qualifier, right? Because they have to be committed in order to pay that. And then if they do just want a week of services and they're okay paying that startup fee, then that's great because we get paid for our resources, right? It takes a care manager. It takes, you know, your scheduler, it takes a billing.

[ 00:22:17 ] It takes probably your office manager going to be involved. There's a lot of behind-the-scenes stuff that I don't think a lot of people are looking at with regards to costs for starting up a new client. So, I would say just getting on top of that, that's been probably one of the biggest game-changers is just making sure we have those short-term, you know, hours covered. I think that's a great call-out to everyone listening to this. If you don't know today, you're breakeven. I think that's a really good place to start. Get really clear on that. So, you understand, you know, what that looks like and what you need to meet when you bring on these new clients. Referencing the startup fee, and we've also referenced the term deposit.

[ 00:22:52 ] Are those one in the same or do you have two different payments up front? No. So the deposit is we only use the deposit in those couple situations where we had to use check payment. And that's just to control the risk, right? Because we're not in control of them sending the check in. So that's the way to manage that risk is just having a two-week deposit. But in general, we do not call the startup fee a deposit because they do, forfeit that. So, if they end services after a week or two weeks, then they forfeit that startup fee. But I had mentioned before that we do a loyalty program for that. So, if you have a $2,000 startup fee, we pay that back at 10% per week until it's fully paid.

[ 00:23:36 ] So if they're at week five, they're going to lose, you know, half of their startup fee, but they're going to get half of it paid back. So, it's a loyalty program over time. And you will retain some of that, especially with private pay clients. Definitely retain a lot of that startup fee. I think I said we're around 37% retention with that startup fee. So, it's kind of protecting us on those short-term cases and they're actually profitable for us. Yeah. I know we talked a lot about this last week. I think it's so interesting. That's why I'm like prodding here again. But yeah, if anyone is curious and wants to like to learn more about this, we covered it again pretty in-depth last week because I was interested and intrigued because I don't hear a lot of owners doing kind of this type of startup fee and then the loyalty program and paying it back.

[ 00:24:19 ] It's really interesting. Let's talk about like how you manage late client payments, even with auto pay, maybe that happens infrequently, but if, and when you encounter late payments, what's your approach to handling that? Again, so it's the type of clientele you're working with. So, with, with the type of clients we're working with in the VIP program, you don't really have a problem. I mean, if there's a late payment, it was probably like a tech issue or something like that. And then we get on the phone and the good thing about, um, we're doing our three-day payment term. So, if they haven't paid, we know about it right away. Right. Whereas with check payment, I mean, you're two weeks, you don't get the check and then you're another week, you know, talking to them, waiting for it.

[ 00:25:02 ] So you can be weeks or months out from actually receiving that payment. Whereas we're going to know in three days, you know, in that fourth day, we're going to know who paid or who didn't pay. And then we can, we can talk to them right away about that. And usually, you know, if you do have a problem like that, it's usually a, like a brand. It's not somebody that's been with you for a long time. So, the startup fee also basically manages that risk as well because you, you have, you know, that $2,000 startup fee. Okay. They didn't pay one invoice. Well, you can catch it before you lose anything, right? If they don't want to, if they don't pay you, you know, within whatever timeframe you give them, maybe the next week, if they don't pay you, you would have to cut off services right away.

[ 00:25:44 ] But then you have that startup fee and that will, you know, depending on their hours and everything, it'll manage a lot of that cost. Got it. Got it. Yeah. That all makes sense. Let's talk about the autopay specifically. I'm digging in here a little bit. We all know the beast, which is like manually reviewing shifts, getting them on invoicing and then invoicing. Like that's just a nature of this business. It's happening for some daily, for some weekly, for some, you know, bi-weekly. One of maybe the pitfall with autopay is making sure everything's perfect before that. That invoice goes out and making sure before, you know, they actually get charged. Have you found, I don't know, any, any pitfalls there with just making sure everything's perfect before that charge happens or, you know, when mistakes happen or things change, you know, clients are coming back to you for refunds.

[ 00:26:38 ] Walk me through just what you've seen there as far as reviewing the shifts, making sure they're perfected to make sure the auto pay is successful. Yeah. So that's something we have a pretty lengthy conversation with them about, there's certain points that we hit on when we're doing assessments and before we sign a contract. And one is explaining that you're, you're going to be invoiced on Monday and auto pay is going to be applied on Thursday. So, you have three full days to review that invoice before autopay will apply. And even after that, we let them know, I mean, even if there is a challenge after that, then we just figure it out. Right. I mean, if we were, if we were in the wrong and we had an issue, well then, we'll make it right.

[ 00:27:16 ] Whether that's paying them back or deducting it from their next invoice. And again, it goes back to the type of clientele you're using is we typically have more forgiving clients, you know, that are going to say, okay, yeah, no problem. Totally understandable. You know, you made a clerical error, not a problem. And yeah, we'll get that fixed for you right away. You know, apologize for the inconvenience. So that's, that's again, you know, when you're dealing with those types of clients, they're, they're typically a little bit more understanding because they, you know, they're, they're not spending down their savings or anything like that. They, they have the money to pay. So, it's not as critical for them.

[ 00:27:53 ] I think an important call out though, here is it sounds like you send the invoice, like you said on Mondays and then the auto charge isn't happening until Thursday. I've seen a lot of businesses where those two things happen like simultaneously, where they're charging and sending out the invoice at the same time. But it sounds like you all are sending out the invoice for their manual review and then auto charging. Has that always been the case or was there kind of some trial and error to get there? No, I don't think I would trust billing enough. Like, I mean, there's, there's a lot of variables. So, there's, it's easy to make an error. Usually, we'll have one or two on each pay period, especially as the agency grows.

[ 00:28:31 ] So we, we haven't tried the same day auto pay. We've always, we've always given them that little bit of leeway because the main goal for us is to make sure that we collect right before we're paying caregivers. And before we, we run into challenges where okay it's been three four or five weeks and they haven't paid yet that’s what we’re trying to avoid. Right So doing you know we’re trying to avoid that So doing the auto pay on Thursday that’s still that still addresses that challenge Yeah absolutely Any other topics that you can think of just regarding cash flow that you want to bring up here? I know I’m kind of taking you in a few different directions here but any other points that you want to hit on when it comes to managing cash flow or cash flow variables?

[ 00:29:10 ] Yeah, I would say be, be extremely careful. There's a lot of agencies that I see, and they come in the industry and all they want to do is Medicaid, right? Or, you know, they want to do, you know, they want to do, you know, they want to do, you know, maybe they're just working with the VA or anything like that. Make sure that you understand the payment terms, right? Because with my agency or anybody that's doing private pay and they have a quick payment term on that, they're always going to have money in the bank, right? To pay, to pay their staff, to pay their caregivers. They don't have to worry so much about funding. We've actually never taken even a dollar of funding in my agency. So, it's all been customer-funded because of this, this system and just be prepared.

[ 00:29:46 ] And because of the metric I gave you before, 80 or 82% or something of businesses fail just strictly because of cash flow. It's the biggest thing that'll sink a business. So, you better be paying attention to that. And if you're going to do, you know, Medicaid or some other type of insurance payer, understand how long it's going to take you to get paid in general and be prepared for even more than that. When you have, you know, billing complexities, there's a good chance that they're going to send that back to you and say, you know, denied, you know, you have to resubmit. Okay. Now we're another two weeks or a month out, right? So be very, very prepared for that. Maybe that looks like a line of credit.

[ 00:30:26 ] Maybe you have cash on hand in the bank that you can, you can use to kind of float payroll, but just understand that cash flow looks a lot different when you're, when you're waiting on payment, and you have no control of when that payment comes in. So be, be really cognizant of that. I'm glad you brought this up, this kind of diversification and understanding every payer. We talked about it in the last episode that you did kind of diversify at the start, you know, taking anyone, everybody figuring it out as you went and then have kind of worked your way towards private pay. There's a lot of talk about this right now, especially with all of the Medicaid ruling that's, you know, up in the air and being talked about.

[ 00:31:04 ] And so people are maybe feeling fearful or anxious of the future with Medicaid. I guess a question to maybe put you on the spot a little bit. Do you think you'll entertain other payers personally, like other payer sources in the, in the future, or do you think you can scale as big a business as you want just in private pay or what's your vision of just, you know, you can, you can scale a large successful business in private pay. Can you, you know, take that to the ends of the earth or at some point, do you think it's, you know, you'll have to take on other payers at some point? Yeah. And sorry, I don't think we covered this in the first episode, but we do, we, we have about 20% VA clients on, and we have, you know, we have, you know, we have a lot of, you know, we have probably about 5% LTC clients.

[ 00:31:50 ] So not a lot, but so we've diversified about, you know, a quarter, obviously of our payer sources, but I would never recommend, you know, jumping all into one strategy, right? Because things can change even though private pay, I mean, it's relatively unaffected by government changes and, and regulation and things like that. There is still, still risk, I guess, involved when you only have one payer source, no matter what payer source that is. So, I would always recommend, you know, if you're a private payer, you know, if you're you know, taking on other, other insurance payers, but making sure they fit into your strategy. So, for us right now, it looks a little bit different in each state, but for us in Pennsylvania, we have this high level of care where our rates are quite a bit higher, but we can also send, you know, our caregivers at their rates, we can send them out to help VA clients.

[ 00:32:39 ] So we take a little bit less margin on the VA clients, but we're happy to do that, right? Because they're, they're really good to work with. We get to help veterans, and, you know, that's kind of the name of the game. We want to help as many people as possible, but they, they actually kind of fit into our strategy as well. And same with LTC is we can get the rates where we want them to be, but you have to make sure that you're, you're making your margins. It's really tough to have, you know, VIP private pay, and then also have Medicaid reimbursement as well, because that's a, that's a different type of caregiver. Yeah, really, really good points. And I'm glad, I'm glad you mentioned that of just kind of what your diversification looks like.

[ 00:33:17 ] Because I think I was going to say, I think it's a really good question. I was a little bit unclear on that. Can we talk a little bit about rates for a second when it comes to caregiver pay rates? In my mind, and maybe in the minds of people listening to this, if you're, you're charging a premium rate, you're paying a premium rate, you mentioned only hiring at this point caregivers with experience. And so, you're bringing in already this like skilled pool of, of talent. Are you paying a premium? Or I'm just curious, how much higher than your market, your competitors are you paying? Is it, as high as maybe some of us would think, or it's not that high? Or what can you share on just creating kind of premium pay rates as well? Yeah, so we are paying them a premium.

[ 00:33:58 ] So we, we were the highest paying agency in our area. But there's kind of multiple factors to that. Like I had mentioned, our initial goal was not to, you know, maximize margins as much as possible. It was just to build up the quality of the service. So, with the caregiver, with the caregiver rates, they're a little bit higher, but we're also investing a lot more back into quality. So, one, one example of that is that costs us quite a bit, but it's working really, really well is we had all the caregivers come back in. They did a reorientation on everything. We updated all their trainings and everything. We had them sign a new agreement. And with that agreement, we, we offer a $1 an hour bonus for all hours worked in the pay period.

[ 00:34:39 ] So if they have no call off there, they haven't been late. It's pretty tight standards because obviously we need them performing because it's a very costly, costly venture. So, so that's been really helpful. And the caregivers love it. I mean, they were super excited about that. And the first, the first couple of pay periods, there was, you know, 10, 15 of them that were, you know, late, but they always had an excuse and everything. And they were wondering why they never got their bonus. And so, they were calling in right away and about half of them have got right on board with it. And they're like, 'We want our $1 an hour bonus.' So absolutely comes at a cost, but these are some of the things that we're doing to try and make sure that we can get as high, a higher quality of service as possible.

[ 00:35:25 ] And that's going to, that's going to command higher rates. I want to dig in here a little bit. You mentioned having them come back in and also sign another agreement. I think I'm latching onto this a little bit. I had Emily Isbell on a few weeks ago and she wrote this book. And one of the things that stood out to me in her book, and in all her experience, building really successful agencies is agreements, and getting people to sign things to hold them accountable. And so like, A, was there pushback when you brought these people in and had them re-sign something? And B, I think you were just, you were talking about what they were signing, which is like signing up for all these kinds of like policies, procedures, bonus structure.

[ 00:36:04 ] Was that kind of the extent of the agreement was just spelling out some of these changes? Yeah, it wasn't anything. I guess there wasn't anything new other than the bonus on the agreement really for us. So, in our situation, it was no problem at all. I mean, they were super excited to sign it because that was a dollar an hour they didn't get before, right? So as far as specific accountabilities, we go through the orientation, and we do a test and everything for them. We don't get them to sign off on anything, but we will hold them accountable on a day-to-day basis, right? So, our scheduler knows our policies inside and out. She knows what's acceptable as far as, you know, call loss, showing up late, things like that.

[ 00:36:44 ] So she's on them right away. I think a lot of agencies, they can let that get out of hand because, you know, it happens so frequently, you know, when you're working reactively, it's happening every day, right? And it's like, how do you stay on top of that? I'm trying to staff this shift. How am I going to call this caregiver and, you know, let her know that she's on her last warning or, you know, whatever. It's kind of like a secondary thought. So, once you bring control back to your agency and you're working proactively, you have the time and the resources to be able to do that. And so, you know, it's kind of like a secondary thought. To be able to control these kinds of things, right?

[ 00:37:17 ] So that way you can talk to them, you can track their lates, you can be reviewing the report on a weekly basis to make sure that all your caregivers are performing up to standard. And that really helps you stay ahead of it. I want to go a little bit deeper here too. We're talking about, we talked about client retention. I want to keep talking about caregiver retention because these are initiatives that help people stay. These bonuses, these incentives. Like you said, it wasn't hard to get them to sign this agreement because it was benefiting them. So, can you break it down a little bit further of what exactly you're paying that dollar extra for? You mentioned a couple of different things.

[ 00:37:54 ] Is it, yeah, just exactly what it is that enables them to get that dollar an hour extra and then how you pay that out? So, we do have verbiage that says it's discretionary, you know, to the office staff and whether they think, you know, that it's deserved or not. But some of the variables are going to be like client feedback. You know, what are your clients saying? You know, late call-offs, communicative, you know, are you communicating with the office? If we're messaging you, are you communicating? So, a lot of the just the general challenges that we have. So, some of the bigger challenges that we, that we had originally, that's what we listed on there as variables. There's, there's other variables that come into play, but I mean, those are the main ones.

[ 00:38:35 ] It's like, what are the, what are the three to four top things that you're struggling with? Put those on there, right. And, and have them, have them address those right there. And then how do you pay it out? You're looking back at the past month and ranking them on these things, or what does the actual execution look like? So, we do it bi-weekly per pay, per pay period, and our scheduler keeps track of it. So, she has, she's old school. She does a spreadsheet of it. And she'll track that. So, she'll basically start with everybody on the list. And as there's a problem, she'll just remove them from the list for that pay period. And she'll, she'll write down the reason and everything in case they ask about it.

[ 00:39:14 ] But, but yeah, she, she tracks all that. So, it is, there's a, there's a little bit time intensive, I guess you can say, but I haven't found a way to automate it yet. I would love to be able to, but I haven't got that advanced yet. Again, but just, but there's like you're saying though, even if it is a little bit manual in the office, checks and balances, it's, it's worth the scheduler's time because it, you know, incentivizes, and motivates the caregivers. And I think that's great that you're doing it every pay period. You know, they're, they're not waiting a month or three months for a bonus. It's there's bonus opportunities, every single pay period. I'm sure that's been a big, just like morale boost for these caregivers.

[ 00:39:54 ] You know, when we think of bonuses, I think typically like a month or a quarter, you get these bonuses, but every single pay period, there's just another level of motivation and incentive there. Yeah. And I think it's important to note as well. So, the mindset with this demographic is typically very short-term, right? We've offered benefits, 401ks, everything like that. There is almost next to zero interest in that. We have only a handful of people on the 401k and it's so valuable, but some people, they don't see that long-term benefit of that. So, what we've done is we've basically just tried to shorten everything, you know, as much as possible. So, I mean, we can't really go any shorter than the pay period. So that was the shortest we could go with.

[ 00:40:39 ] So that's what, that's what we started with, but I think, yeah, that that's important is just talking about the mindset and that it is very, you know, a little bit shorter than, than general population. Absolutely. That's great. Let's, let's talk about maybe one of your favorite topics, which is KPIs. I know you feel really strongly about tracking measuring as obviously as the conversation we're having just about tracking, you know, down to the call-outs and the lates every single week and bonusing on them. Um, let's talk, maybe zoom out a little bit about maybe just some of the core KPIs that you feel every business owner needs to be tracking. And then we can get into, um, any, maybe less common KPIs that you found really useful for you and your business.

[ 00:41:20 ] So I'll kind of just throw it out in general at first, what are some of the KPIs that you feel strongest about? Um, so, so I'd say a lot of like the general ones would be like your revenue, your gross and net profits. Uh, and then as far as like caregivers and clients, you want to be looking at, at the turnover, at the retention of that. Um, so a lot of the standard ones apply to us as well. I would say the one really outside one that I look really, really closely at this, this is probably like my number one and full disclosure, I'm really bad at tracking this stuff, but I have a team member who's really, really good at this.

[ 00:42:01 ] So she, uh, she tracks all this data for me and gets me the numbers that I need. And so that is LTV to CAC ratio. And for those that might not be familiar, that's lifetime value of the client. And then CAC is customer acquisition costs. So, when you're looking at that ratio, a lot of people don't look as closely, you know, you might look at the retention of your client or the lifetime value of your client, but are you looking at that in comparison to how much it's costing you to bring a client on, right? Are you throwing in your sales and marketing, um, any costs associated with bringing in that client. And it's important to look at that ratio because if you're less than, you know, it depends on agency obviously, and how profitable you are and things like that.

[ 00:42:47 ] But in general, we, we look at it as about three to one lifetime value to CAC is a, is sustainable, right? We're not going to grow. We're not going to, you know, nothing crazy is going to happen. We're not going to die. We're not going to go out of business, but that's just kind of sustainable. So, where we want to be is five to one. Is where we're, we're looking to grow, right? And like I said, this is going to change a little bit in every agency, but we look at five to one as our growth number. So, what we aim for, we always aim as high as we possibly can, but we actually aim for about like six to seven, six to seven to one, if we can.

[ 00:43:25 ] So that's, we, we look very closely at that and that's going to tell you a lot about your business because the rest is all really just like managing operations, right? So, if you can increase that ratio, you're, you're going to have a very healthy business. I'm glad you're bringing up CAC because this is something that I want to talk about, which is this client acquisition costs. You can also think about it in terms of caregivers, like your caregiver acquisition costs, again, ratio, like same concept here. I'd imagine your client acquisition cost is higher because of who these clients are and the work that it may take to find them and get them. Or is that sound accurate? You, your client acquisition costs may be higher than maybe industry average, or is that not necessarily the case?

[ 00:44:12 ] It is for sure. Yeah, no. And that's, that's a good assumption. Yeah, go ahead. No, and I was just saying, yeah, going after these clients, just because there's such a small percentage, you have to refine your strategy a lot more. It takes a little bit more time to go after them. You're going to have to say no to some clients. So just in general, that's going to obviously increase your, your cost of acquisition a little bit. And then if you think about it in terms of the ratio, you know, if you're, you're looking to achieve a one-to-five, one-to-six, one-to-seven ratio, if that, if that CAC is high, that lifetime value has, well, the margin, the rates are higher. But that's not the only thing: the average lifetime value is also going to be relatively high.

[ 00:44:57 ] Could you share maybe like average length of service for a lot of these clients that you have? Are we looking at, well, I don't know, I could throw out numbers, but I guess what's kind of average length of service? Um, geez, I would have to look at, I could try and pull it up while we're on here, but I don't know right now. I'd have to look at those numbers for you. Like I said, I don't collect that data. I just review it kind of every, every bi-weekly period. Um, so yeah, I can't give you an accurate number on that, but it is the average length of service. We look at it basically pertaining to VA clients. We put them in boxes. So, VA, LTC, and then also private pay, and obviously VA and LTC, they're, they're the longest.

[ 00:45:36 ] We get the most value. We get the most value out of them over, over time, but we actually get close to the same value from our private pay clients over a much shorter duration. So even though, even though our churn's a little bit higher with private pay, we're still getting our revenue in. Yeah. So, the principle applies here. I know I'm putting you on the spot for specific numbers, but I think the principles apply here, which is, um, identifying your CAC, you know, if you're not doing that, identifying your long, uh, your lifetime value. And then I like this ratio concept, which is, you know, if you're not doing that, you're not doing that. Which is CAC to lifetime value. And then you just took it one step further, which is that ratio per payer source. So, you know, what is that for private pay?

[ 00:46:16 ] What is that for VA? What is that for LTC? And like you said, it'll, it'll vary because the rates and the variables are different, but identifying that for each payer, payer type. Um, I think, I think this is great. Um, again, I wanted to talk about CAC, so I'm glad you got here. Um, you mentioned this being maybe kind of like outlier that you feel strongest about is most important. Any other, uh, KPIs that pertain to like VIP clients specifically, again, you mentioned there's kind of the standard KPIs that we talk a lot about, but any other outliers or other KPIs that you have found useful? Um, I would say there's no specific ones. I mean, you're still looking at the same data, right? You're looking at client retention, lifetime value.

[ 00:47:01 ] So it really is the same metrics. You just kind of have a higher standard for those metrics, right? You want to have those numbers higher. So, there's no like, you know, hidden metrics or anything like that. It's really, you're still just looking for, for profitability and retention. I mean, those are, those are kind of your key indicators for, for your clients. So not, not a lot different. I'm sorry. I wish I could give you like a smoke and gun answer for that, but, um, it really is the same. It's just a different standard for it. No, that's okay. I'm not, I'm not vying for anything specific. Just want to make sure I'm not missing anything. I think the other thing that comes to mind, um, you think about like billable hours, per non-caregiver, like per office staff, you all are offering this premium service, which comes with just more work, more, you know, time-intensive tasks and work on a daily basis.

[ 00:47:51 ] Um, I'd imagine you're monitoring that, you know, how many hours per office staff, um, maybe how many hours per scheduler. Um, and again, maybe assumption here, you might be lower than some of the industry averages again, because of the premium service that just takes a premium amount of work. Are those things that you're tracking, maybe hours, billable hours for schedulers or billable hours for other people in the office and kind of monitoring those closely. Yeah. The biggest thing we do right now. And, and I mean, we don't track them that specifically in there. What, what our main indicator is, is we just take our revenue and divide it by our office staff. And that's going to give us, you know, whether we're close to industry average or not, um, we try and keep the percentile.

[ 00:48:36 ] You know, relatively close to what industry averages are. That's kind of our benchmark. And then we can adjust them from there, but that's really the metric that we look at for office staff, because it's, it's very quick and easy, especially if you're growing, you're adding new office staff quite often, it can get pretty in depth to be tracking, you know, specific hours and, and, you know, metrics like that. I think it's, it's great data. It's, it's not something that we're doing that we think is going to like really to move the needle right now. We're looking at kind of overall profitability and then overall team. You know, what, what, what are we making revenue per, per team member? Mm-hmm. Yeah.

[ 00:49:10 ] I think it's an important thing to track as you scale, you know, it's easy to bloat the office quickly because you feel the growth and you feel the growing pains and you want to hire, um, but that can get out of hand quickly and you can actually kind of bloat the office, um, relatively easily, because again, there's just always a fire that needs to be put out and you want to hire to that. But that's why I ask, you know, how closely are you tracking, you know, the, the contributions of every office staff. But I think, like you said, really easy way to go about that is like revenue divided by office staff to calculate that number. And then you can break it down further than that if, and when you need to.

[ 00:49:44 ] Yeah. And I think it's important to note as well, each, each one of my staff members has their own specific metrics. So, we, we split those out across the team. Um, and it's basically whoever's more closely related to that metric. So, we have quite a long list of metrics that we track and KPIs, and what that's, that's how we deliver them because everything's moving right. And in an agency, you start with one person, and then you have two, and then you have three. So, we're wearing different hats, and everything. So, it'd be great to say like, 'Hey, these are scheduling tasks.' These are care management tasks, and just really split them up and have perfect boundaries. That's not really the way it works in home care, right?

[ 00:50:23 ] Because a lot of people are helping out in different areas. So, that's what we do is we try and divvy them up appropriately and we'll just do whoever's the most closely involved with that, with that specific metric. Yeah. If, if only it could just be so cleanly divided as it is maybe in other industries or other businesses, but home care, you know, everyone's wearing multiple hats and helping out in different areas. And there's just so much overlap, the client to the caregiver, to the schedule, to the billing, like there's just so much overlap that's natural in this business. And so, navigating that isn't always the easiest, but like you said, just identifying and writing, you know, as clear as you can, accountability and kind of org chart is the best way to go about that.

[ 00:51:01 ] Um, I know we're close to time here, which is crazy. Um, I want to give you a few more minutes to talk about Masters of Home Care. You have built a successful business, have learned a lot, you know, have worked out a lot of the kinks. And so, like you mentioned, you know, a few years ago, you started putting some of this out on TikTok and you've just kind of developed your own following and people are interested in working with you. Um, tell us a little bit more about Masters of Home Care and the programs that you offer and who it's best suited to. Yeah. So, we have the three different programs in Master's of Home Care. Um, we don't deal with licensing.

[ 00:51:34 ] We do have like a free launch program that we'll give to people, but we're, we're looking for active owners and what we're doing. It doesn't matter if you're just starting, you don't have a client yet. We have a kickstart program for that. Anybody over $500K in revenue, typically they'll fit into the grow program category. And then we have our top category is the partner or the advisor program. And that's, that's really more of like a partnership. Like I'm, I'm really like on the board, helping out, helping scale. So that one's, really, really in-depth. So, we have three different programs that kind of fit all different types of active owners, depending on their situation, right? Because everybody's in such a different situation.

[ 00:52:13 ] So with that, with the, with the grow program and the, and the advisor program, those are the programs that we're helping people implement and scale with this private pay strategy. So, the VIP private pay strategy is essentially our, our expertise. Like Miriam had said, we've been working on it for a lot of years. We've spent a lot of money trying to, to refine and perfect it. And now we're helping others implement that in their agencies. So, the one thing I wanted to say is, you can always go to mastersofhomecare.com. You can book a call. I believe Miriam was going to put that in the show notes, but the one thing I wanted to do for your, for your listeners, Miriam is, for our Grow program, which is the program with the most value.

[ 00:52:55 ] That's what most people go with. With that, I'd love to offer, you know, for the first five people that, that decide to purchase, I want to give 70% off. And I believe you were going to put a link in the, in the description below. So, if anybody's interested in that, that 70% off that program, come and jump in. We'll get you on calls right away. I'm on calls every week with the group. I have a masterclass every month, and we're really helping people scale with this strategy. So, feel free, feel free to join up, and I'd love to see you in there. Awesome. I'm dropping it here in the live Zoom room because we do have a group of attendees on.

[ 00:53:32 ] So I want to make sure they get the first opportunity; these people are going to be lucky. They're going to be the first, first up to get this opportunity because everyone else will have to wait until the podcast comes out. But that's awesome. Just to recap, it's the Grow Program, which you said is for agencies doing $500,000 and above. Is that correct? It is, it can be implemented for, for it's basically the kickstart program plus the profitable client pipeline. And that's where we're teaching the VIP strategy. So, if you if you jump in the grow program, you're essentially getting access to everything. To clarify that. And I think, um, people, your, your core differentiator is this VIP profitable client pipeline. I was going to tee you up.

[ 00:54:14 ] I want to, I want you to sell yourself a little bit more. There's a lot of consultants in this space. There's a lot of people, you know, offering different type of coaching and consultative programs. I wanted to ask you, you know, like what is your core differentiator. Is it that, or what else would you say, you know, differentiates you from others that are doing something similar? Yeah. So, I would say there's two cores, two core differentiators. One is that I currently own a home care agency and I'm involved in that. I do have somebody that runs the agency for me, but I'm still very involved in the strategy. I know what systems, what processes are working, what strategies are working. So that's how we're testing everything out. It's like a testing ground.

[ 00:54:52 ] We make sure it's working and then we bring it over to Master's of Home Care and help others implement that. So, I think, uh, you know, I met a lot of other good consultants and everything as well. I've worked with some of them over the years. Um, but I'd say that was one of our biggest differentiators is that we're, we're active and we're current with the agency. And the second is our profitable client pipeline. So, I haven't seen this anywhere else with the strategy on how to obtain VIP private pay clients. And we've worked with some pretty big wigs in the, in the industry, not just in home care. I don’t know if anyone’s Alex or Mosey, but we worked, uh, he, his, uh, VP of business development helped consult with me on this program.

[ 00:55:31 ] So it was, uh, we definitely, we had some high-level people on it and it took a lot of time to build, and we’re really excited to help others, you know, implement it in their agencies. So. Thank you for sharing that. And I, I echo the sentiment that you are still very active in running and operating your own business. And I think that’s a huge, a huge plus because you’re not, you know, you haven’t been out of it for years and years. It’s like, it’s still very near and dear. You’re still living and breathing it every day. And we talked about that at the start, you're busy, you're dividing your time, but again, it's all for the best. The intention of helping as many people as possible and built off of, you know, the successful journey that you've had.

[ 00:56:09 ] And I think it's just incredible. Justin, these sessions have been so fun. I've learned so much from you. I just have all these notes below me of things that I've learned. And I think our audience is going to get a lot out of this as well. So just to recap, like Justin mentioned, I've dropped that link and that discount code right here in the chat and zoom. But for those of you listening to the podcast afterward, that will be available in the show notes. So, wherever you listen to this on Spotify or Apple, you can find it on our website, we'll have this link with this discount code. And for anyone and everyone listening, connect with Justin on LinkedIn. He's sharing so many insights and updates almost daily, maybe every single day.

[ 00:56:45 ] And so if you want just kind of these quick nuggets and resources from a tried-and-true expert, follow him on LinkedIn, connect with him, reach out to him. I can't recommend him enough. Awesome. Thanks so much, Miriam. This was a great time. I appreciate it. And thanks to all the listeners. Yeah. Well, thanks for being here, Justin. Hard to staying connected with you, especially over the next few months. I know you've got a lot going on, but we'll stay connected. And just want to thank everyone for being here live. And I hope everyone has enjoyed this session. We'll see you all back same day, same time next week. Take care for now. Thanks.

How to Manage Margins, Cashflow, and KPIs for VIP Private Pay Clients (Justin Currie Pt. 2)

Show Notes

Managing VIP Private Pay Home Care Clients FAQ

What are the benefits of focusing on VIP private pay home care clients?

What are some key strategies for attracting and retaining VIP private pay clients?

What are some financial best practices for private pay home care agencies?

What should I do if a client is late on a payment?

How can I improve caregiver retention when offering VIP services?

What are the most critical KPIs for home care agencies to track?

What is CAC, and how do I calculate it?

How can I use KPIs to improve my agency’s performance?

Transcript