Claude

I have collected a list of 13 warning signs that trustees need to have in their knowledge toolbox about the strength of their enrollment strength and net tuition revenues. Do these signals show an impending financial problem for your school? Although I have not done my research on the top reasons for school closings, including small colleges, I would suspect that there were signs of deteriorating net tuition revenues. I would also venture to say that someone was asleep-at-the-wheel. I would suggest that when a financial problem appears, neither the leadership nor the culture of the school can adapt to a new and viable business model. These signs are not in any order, and one or two alone may not show a problem. However, they may reflect future deteriorating conditions. Ask the question, “Can the school sustain a viable financial position with the current net tuition revenue projections?” Below are 13 warning signs: Someone in the leadership says, “If we had more financial aid, we could bring in more great students.” Thoughts: This could be a very positive statement. However, it could be a warning sign that the effort toward successful recruiting of full-pay families is not meeting expectations. The net tuition is shrinking, but the enrollment isn’t shrinking. Thoughts: This might imply that you are getting less and less income per student. If this isn’t a planned occurrence, you could find yourself with insufficient income in just a few years. The number of full-pay applicants is shrinking–domestic or international.  Thoughts: This is the death touch; it’s the most obvious and it can be a singular red flag for an impending financial problem. When the full-pay applicant number decreases, the quality of the pool is more likely to decrease, which will affect the quality of the program and create a snowball effect. You’re a boarding school, and 30% or more of your students are from one particular country. Thoughts: It’s not likely that a boarding school in the United States is in a strong position if 30% of its boarding population is from any one country other than the United States. This high number affects compositional strength, which affects the quality of the student body. Enrolling these students is probably an income-generating strategy when the full-pay domestic market is not there. This strategy requires an exit protocol to go along with it. Day schools can get caught in the large increase of international students from one country, too. Only the business office understands the need for net tuition revenue.  Thoughts: When the community doesn’t understand the need for net tuition revenue–particularly at the various levels of leadership throughout the school  – it makes it difficult to solve the weakening net tuition revenue problems. The employees will know when facilities aren’t getting painted, furniture isn’t being repaired, and the composition of the student body is adversely changing. It’s best to keep an interested community. Why? Increasing revenues is going to require a community effort, not just one office. The admissions office is bringing in 20% of your revenue after the start of school.  Thoughts: Schools that need over a year to bring in their population for the next year are struggling already. There are so many problems on different fronts from composition to the hiring of faculty and program implementation. It’s a very strong signal of financial wariness. Your attrition is above 15%. Thoughts: Replacing 100% of your graduating class each year can be challenging for many schools. However, the need to replace the attrition of 15% of the students compounds the problem. Is it because the quality of education is less than what is acceptable to the applicants or parents? Your brand is losing its position from this pernicious word of mouth. With a weakening brand and having to matriculate a high percentage of your student body each year, the school is likely already in financial trouble. Your fundraising dollars are flat or going down. Thoughts: There could be a lot of reasons, but among them would be enrollment issues. The educational experience does not exceed expectations. No one is talking about the importance of full-pay families in your trustee’s meetings.  Thoughts: All trustees should have a conversation about the full-pay families who inevitably keep the school going. Tracking the full-pay numbers for admission and advancement purposes should be a relatively regular report of interest to trustees. The discount rate is rising, and the non-tuition revenues (mostly fund-raising) are not rising faster. Thoughts:  For most schools to be in a financially sustainable position, both the discount rate and the non-tuition revenue should rise at the same time. This usually means that the net tuition revenues are increasing, and the delta isn’t being covered by other funding sources. There is a reason to take notice. Customer satisfaction seems to be flat or moving downward. Thoughts: Schools can overlook the feelings of the customer. However, I think it is bad business, even in a strong market. I don’t think the customer is always right, but I think they are right many times, and schools need to be paying attention to the consumer who is shelling out all of this money for a discretionary experience. Trustees should look at the satisfaction data and ask for it. If you are told that there aren’t enough full-pay families to recruit, Thoughts:  Once they make this declaration, you are in financial trouble. Now it’s time to call people together and determine how you are going to change that tune. “Can’t” is not a sustainable solution to the net tuition revenue challenges. Surely, it’s not only an admission office problem. Carney O’Brien, a former admissions colleague and former head of school at Washington Montessori School, describes this final signal as “funding out of fear.”This is when a school uses merit money to get a full-pay family at a discount.  Thoughts:  When the full-pay family says that they would like more money, the school gives it to them, because of the fear of losing them. When you