For more than 40 years, David Slack has relied on market research to help determine when, where and how Life Plan Communities should grow.
As a former CEO of a multi-facility organization, executive director, banker and consultant, David has seen market studies play a defining role in decisions involving expansions, new locations and major capital investments. His perspective is direct: Market research is not a formality. It is the foundation for determining whether a project has the potential to succeed before millions of dollars are committed to design, approvals, financing and construction.
Love & Company sat down with David to discuss what he has learned over 40+ years of using market research to develop and operate not-for-profit Life Plan Communities, why he considers it “cheap insurance,” and what providers should look for in a market study before deciding whether to move forward. The following are excerpts from that interview.
Tim: From a provider’s perspective, which of your experiences really stand out either positively or negatively about the role research has played in growth strategies you’ve seen?
David: A great example that comes to mind is Frasier Living in Colorado, where Colleen Ryan Mallon is the chief strategy officer. Frasier Living is exploring growth and had two different possibilities they were exploring with Love & Company. Sara Montalto was the representative on Love’s side, and Colleen Ryan Mallon is a fabulous market researcher in her own right, who is experienced interpreting research from her time at Kendal and Goodwin Living before coming here.
So, Colleen, Sara and I discussed some opportunities, and one in particular had Frasier pretty energized to pursue. On the surface level, this market seemed to stand out, but when we looked closer at the data, it proved to be a lukewarm opportunity. It was weaker in many respects than we wanted it to be. Working with Sara and Colleen, we talked it through and concluded, “Let’s keep looking.” And, in another situation, the market research really was as strong as we hoped it would be.
And that’s the point. For some projects, the market research can stop it, and it should. In other projects, it gives it a green light to take the next step. What I liked so much about Frasier Living’s process was the depth of discussion we had about the data Love & Company had produced. We really focused on asking, what did it mean? What would be the implications if we moved forward?
We all have done so many projects over the years, so we all have experienced how different markets have their own idiosyncrasies. So, we all had perspectives on the critical issue: Is the primary market area strong enough to support what we want to do?
Tim: In your experience, what differentiates the best market studies from others?
David: The first thing is knowing what to look at and making sure you have an experienced senior living market research firm, not just any market research firm.
Second follows from the first. It’s the interpretation of the data and the willingness to say, in writing, “If this were our project, here’s what we would do.” Here’s how many units we would create, at what price, at what size, with how many two-bedrooms and how many one-bedrooms.
Anybody can produce data. But having the requisite expertise and experience to state in a report, “Given this, we believe this route looks the most successful, and here are the next steps to confirm that,” is what matters.
Beyond that is the level of discussion of what the data means and how to interpret it in a way that can create a successful project. Inexperienced firms can’t do that.
Tim: What are you seeing as the key issues in senior living growth right now?
David: Right now, the aging population is growing in almost all markets. But they’re not all equal. There are many idiosyncrasies between one market and another. Home values are not growing amazingly well in every market. So market research that asks the right questions is critical. I think of it as valuable and cheap insurance to take growth to the next step.
Not every project is perfect. You still have to get the pricing and the product the marketplace wants. Every architect can design. Every contractor can build. Every financial feasibility firm can do that work. But it’s an art to interpret the market research and translate it into a pre-sales campaign that will be successful. When I explain it to clients, I tell them I think the market research and pre-marketing are the critical path, period.
Tim: You said, “It’s valuable and cheap insurance.” Are you calling market research a form of insurance?
David: Almost every project is $100 million or multiples of that now. Up front, you want to know as early as you can whether this is the right market to risk $100 million or $200 million.
These development projects also take so much time. Think about the approval processes typically involved once you find a site to build. One place I’m dealing with takes two years. With that slow approval process, you need to know if you have the right market before you spend two years getting approvals.
If it’s a $100 million construction project and you pay 80% of architect fees before financing, that typically is around $5.6 million. You’re going to spend that before financing. The project better be the right project. You don’t want to back out after spending $5.6 million with an architect and who knows how much more with city approvals.
So yes, $30,000 or so on a reliable study is a cheap insurance policy. And by reliable, I mean having reliable interpretation.
Tim: If you had one key piece of advice for providers seeking to grow, what would it be?
David: If they haven’t done this before, they need to get a really experienced team to work with.
We’ve all been through many projects. But I still run into organizations that say, “We have a great architect here in town. He comes to all the meetings.” But maybe that architect only worked on assisted living 20 years ago. You need the most current and best experience you can get in every slot: architect, contractor, market research. And you start with the market. That’s the beginning.
Tim: Any other advice you would share with not-for-profit providers that want to grow?
David: One time, years ago, I wrote an article called “The Will to Do It.” As an owner, you have to be willing to go on the line, stand behind it and make it happen.
There will be many tough decisions. If it’s not a good market, then you don’t want to make it happen. But if it is a great market and you have a plan that looks like it could be successful, you have to stand behind it and force it forward.
Time is expensive now. Every month you go slow is expensive. Study it seriously before you say go. But once you say go, go after it full speed. You can’t afford to do it halfway.
Interested in talking more about market studies? The best place to start is to call Wayne Langley at 925-481-8904, or email him at wlangley@loveandcompany.com to set a time to talk. To learn about four research fundamentals that avoid costly project mistakes and redesigns, watch this webinar.
