Helen Jude, partner and head of Recovery & Valuation at Landwood Group, shares her expert advice for the care sector.
Since the autumn budget announcement, the care sector has faced unprecedented financial strain, forcing providers to contend with rising costs and tough decisions.
April’s rapidly approaching National Insurance hike has already caused some providers’ costs to rise by £380,000 annually.
For care homes operating on razor-thin margins, this new financial burden is a tipping point that could lead to insolvency without strategic intervention.
For those facing financial strain, there are ways to improve efficiencies, stabilise finances or plan a considered exit.
For operators, these tough financial decisions aren’t just about the bottom line – they’re about keeping services running and protecting the people they support.
We’ve seen firsthand the impact that thoughtful, strategic management can have in such a volatile environment, especially for businesses at risk of closure or loss of licence.
A key part of this process is looking beyond immediate concerns to take a holistic approach to financial stability.
Assessing your value and operational costs
If you believe you are at risk of insolvency, the right expert advice is crucial to navigating this period effectively.
Valuers specialise in assessing businesses, operations and assets to determine their value. While they don’t provide direct business performance advice, their expertise identifies ways to strengthen financial stability – especially when preparing for a potential sale.
If there is anything beyond the property and asset scope they should have a trusted network of insolvency practitioners and financial specialists who can offer guidance on creditor negotiations and insolvency processes.
There may even be inefficiencies which care homes can address to improve operations and value before a sale This can include supply chain issues like overstocking or understocking, and underutilised land, property and assets.
For example, while preparing a large care home group in Oldham for sale, Landwood conducted a comprehensive review of their assets and trading performance. We identified issues like inconsistent staffing, recruitment costs and inflated supplier costs that, if addressed, could boost value and buyer appeal.
This process required a detailed analysis of past trading accounts, recent management accounts and key operational factors – including CQC assessments, resident numbers, weekly rates and staffing costs.
Even if a sale isn’t on the horizon, this kind of insight allows operators to make informed decisions, improve efficiency and better manage their cash flow.
Business sales
If insolvency risks are leading you to consider a sale, understanding the property is as essential as the financials.
Beyond the numbers, key factors like the age of the building, maintenance history, compliance with current standards and potential upgrade costs all influence long-term viability and value. This alongside a detailed analysis of the business operations and costs is of high importance for prospect buyers.
This was particularly evident in an insolvency situation involving the sale of two connected care homes – a 28-bedroom care home in Blackpool and a 58-bedroom care home in Preston.
We conducted detailed inspections of both properties and met with the management team to assess the current trading ability and value of both the property and business assets.
Thanks to our advice and careful marketing of the property, a successful sale was negotiated with a new operator, ensuring uninterrupted business operations and delivering the maximum return to creditors.
When considering a sale, effective marketing of the property and business is crucial. While valuing a site in Warrington, we identified the opportunity to add value by securing planning permission for a part two/part three-storey residential care home with 64 bedrooms.
As experts in this sector we knew a strong development opportunity would increase the site’s appeal. Carefully marketing with in-depth development costs, we attracted serious buyers who saw the site’s growth potential.
Consolidations, downsizes and asset sales
Not every situation points towards a sale. Many care homes are sitting on untapped value in the form of property or underutilised spaces. This is something we regularly help care home owners assess their real estate and assets to identify areas where value can be unlocked.
For care operators looking to downsize, the key is making informed decisions about which sites to retain, sell or repurpose to maintain long-term financial stability. Underperforming or non-strategic properties may be better suited under new ownership, freeing up resources for stronger-performing sites.
Some properties hold potential for alternative uses, such as conversion into supported living or specialist care services, which can provide new revenue streams.
At the same time, operators must carefully manage financial commitments, including debts and lease obligations, to ensure a smooth transition and avoid unnecessary liabilities.
When seeking advice it’s vital to look for specialists with extensive experience helping businesses, including those in the care sector, to navigate complex insolvency and asset recovery scenarios. They should have a team of experts that has a proven track record of maximising value for clients, even in the most challenging circumstances.
In summary, the path to overcoming financial challenges in the care sector isn’t one-size-fits-all. It requires a combination of operational improvements, asset management and strategic restructuring.
With a proactive approach and informed decision-making, stability is within reach.
For more information on how Landwood can support your care home, visit www.landwoodgroup.com.
