Too Many Addiction Treatment Centers are Under Capitalized
by Jim Peake
In our experience too many drug rehabs and addiction treatment centers are undercapitalized. We get a lot of phone calls asking for more admissions and very little resources to make that happen. At least once a week and sometimes several times a week we get phone calls from treatment center owners who require more patients but can’t afford to make the phone ring. All of the capital and the thought went into the “beautiful house or facility” but very little has gone into the operations, staffing and marketing of the business.
Unfortunately, it costs money to get your business in front of the right people. You will either have to pay salespeople, SEO and PPC experts and website developers and designers like Addiction-Rep, Radio, TV media buys. At the end of the day you will have to pay someone or have a big union contract bringing in a steady stream of patients.
We can’t tell you the number of times we have heard the rehab owner tell us they just bought a new parcel of land and are building a 20 or 40 room annex (that is 40 or 80 ADDITIONAL BEDS) and they are going to want to fill it right away. We ask them, “how much have you added into the marketing budget?” Typical answer is “nothing.” Our reply is something like, “how do you plan on filling those additional beds?” The look on their faces is priceless. Most haven’t even considered increasing their marketing budget. This is a huge problem.
This is exactly why you are seeing bigger players entering the space who are well capitalized and have the ability to buy media impressions or purchase digital assets as well as fully fund, staff and provide operations resources required to keep a business solvent.
So, if someone were to ask, “how much does it cost to start up a drug rehab,” we would tell them that they have to have the fixed costs identified in the proforma and we recommend that they have at least 18-24 months of operating costs (liquid) set aside to make sure that they have enough time to work out all the kinks of starting a new business.
Plan ahead and put together a flexible financial model that you can live with for the next 18-24 months if you are just starting out with a new addiction treatment center. If you need help doing this we can assist you but it does cost money. Expect to budget between $20-$50K in consulting fees.
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