With care home finances under constant review, it’s important to maximise revenue in order to maintain operations and ensure future growth and profitability. This article looks at some of the key measures which can help care homes to thrive.
The care sector continues to face significant financial pressures from rising operational costs – energy bills, food expenses, and staffing have all increased substantially. As one of the UK’s largest employment sectors, with 1.7 million people in the workforce, the care industry has been particularly impacted by the Employer National Insurance contribution changes in April 2025, creating additional cashflow challenges for many care homes.
Given that approximately half of care home residents aged 65 and over fund their own care, and with limited certainty around local authority fee support, it’s crucial that independent care homes take a strategic approach to their business finances to ensure continued profitability. While discussing care in financial terms can feel uncomfortable, the reality is that without sustainable profits, many care homes face the risk of closure.
Essential KPIs Every Care Home Should Track
As care homes work to rebuild following the disruption of the COVID-19 pandemic while managing increased costs, focusing on the right financial measurements is vital:
- Revenue by service line – the service generating the highest income may not necessarily deliver the best gross profit margins.
- Utilisation rates – are you maximising the potential of your existing resources and investments?
- State vs. private funding mix – understanding the ideal balance between these two revenue streams for your business.
- Operating cost per bed per day – breaking down costs to this level helps identify exactly where efficiencies can be made.
The Importance of Operating Cost Per Bed Per Day
Calculating your cost per bed per day gives you clear insight into the revenue impact of vacant beds and helps evaluate the potential return on investment when working to increase occupancy levels.
Since property costs are largely fixed, empty beds represent a significant financial drain. Current industry benchmarks show care homes achieving an average occupancy rate of 90%, with nursing homes at 87%.
Learning from other private healthcare sectors like dentistry could offer valuable strategies – such as providing short-term placements for respite care or day services on otherwise empty beds. You might also consider optimising your staffing structure or using your property for additional revenue-generating services. With proper data analysis, you can model these options and make informed decisions that benefit both your commercial performance and resident care quality.
Industry projections from Savills suggest the UK will require an additional 144,000 care home beds over the next decade to meet demographic demand. With this level of market demand, failing to monitor and actively improve your occupancy rates means missing significant business opportunities.
Establishing Effective KPI Monitoring
It’s important to define your key metrics and review them consistently. The traditional approach of annual financial reviews doesn’t suit the dynamic nature of care home operations. You need access to real-time data to understand how operational changes are affecting your performance.
Using appropriate baseline data, Simpkins Edwards typically deliver quarterly reports that include forecasting, benchmarking against industry standards, and ongoing KPI monitoring, all customised to meet each client’s specific requirements.
For more information about implementing KPI reporting systems and how they could benefit your care home operation, please get in touch with Jo Tope, Partner, and Lisa Wonnacott, Director, at Simpkins Edwards.
References:
Care home prices 2025 | Do I have to sell my home to pay for care?
2024 was ‘year of growth’ for UK care market says annual report
Contact Information:
Jo Tope | 01409 253 620 | jtope@simpkinsedwards.co.uk
Lisa Wonnacott | 01837 318 117 | lwonnacott@simpkinsedwards.co.uk