Opportunities 2015

Opportunities 2015: Make big money from smaller markets

The founders of health-care firm Nurse Next Door used to turn up their noses at tiny markets. Now they seek them out

Illustration of a magnifying glass finding money

(Illustration by Dale Edwin Murray)

John DeHart and Ken Sim would have lost out on an opportunity to build their home health-care business if a tenacious franchise partner hadn’t pushed them hard to think about Comox, B.C. The co-founders of Nurse Next Door, which provides a suite of at-home health-care services primarily to seniors, had established operations in major cities like Vancouver, Toronto and Calgary when they got a pitch about five years ago to set up shop in the small Vancouver Island town. Comox had only about 6,000 seniors, which didn’t seem a big enough market to DeHart and Sim. (Their smallest franchise at the time was in West Vancouver, with an estimated senior population of about 11,000 at the time.) So they said no.

But the potential franchisee was persistent. He thought he could use Comox as a base to serve more remote communities on the island. On his fourth pitch attempt, they relented. “We said to him, ‘OK, you go try it, but we don’t think this will work,’” recalls DeHart, the company’s CEO.

The results he delivered in his first quarter of operations were so impressive, DeHart and Sim realized they had underestimated the potential of smaller towns and cities, and decided to branch out to promising communities like Thunder Bay, ONT. and Delta, B.C. Based on three to four years of data from their smaller locations, they found that these franchise partners were outperforming the Nurse Next Door locations in larger cities. “If we looked at the penetration rates those franchise partners were gaining—the percentage of the senior population they were caring for in their communities versus in these big cities—we were seeing multiples of 10,” says DeHart. The smaller market franchisees were also generating approximately 40% more revenue in their first six months. The numbers convinced the co-founders to rethink their Canadian expansion plans.

“To build a brand in a smaller community is far easier to do than in a big city,” says DeHart. “You don’t have to spend as much money. You’ve built relationships; people know who you are. It’s easier to be recognized and known, and become part of the community.” The franchise in Comox, for instance, was able to test radio ads because of the low cost of buying airtime. And print ads there and in other smaller municipalities are far cheaper too: A quarter-page ad that runs from Monday to Friday in the Toronto Star would cost a franchisee $15,010, whereas the same ad in Thunder Bay’s Chronicle Journal would total $388—and also appear on Sunday.

As Nurse Next Door established themselves in minor communities across the country, they were also entering the U.S. DeHart and Sim had planned to focus their expansion south of the border on the country’s biggest cities, but as they saw smaller communities in Canada experiencing exponential penetration numbers, they started to shift their strategy. Though they’ve launched franchises in metropolises like Chicago, they have seen better results in relatively tiny locations like small-town Delaware. “That little Delaware business is probably 10 times the size of the Chicago business,” says DeHart.

As demographics change over the next 10 years and more Canadians need at-home care, other markets that Nurse Next Door once considered too small could hit critical mass. “Today it’s a business case, why we’re in smaller communities, but it’s shifting into a demographic case,” says DeHart. “I think that’s good for us strategically because it allows us to start to make a footprint into the remote communities, which is pretty strategic from a health-care perspective.”