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Our Increasingly Risky Business Model

By Jeffrey Shields posted 22 days ago

  

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Numerous factors are pushing independent school leaders to rethink our traditional business model, particularly tuition pricing and financial aid. Change is in the air.

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Jeffrey Shields, FASAE, CAE
NBOA President and CEO

Over the last decade the traditional business model for independent schools has faced unprecedented pressures. In fact, it has put some schools at risk of closure, which may have been unthinkable several years ago. As independent school leaders know, the model consists of several primary components: heavy dependence on tuition as the key source of revenue, tuition price that does not cover the actual cost of the education and services provided, affordability for “full pay” families arguably limited to the top 1 percent within most markets, and an ever-growing lead expense category, namely, salary and benefits. Costs of the latter, such as health insurance, are challenging to manage and still may not be competitive with other education employment options in the community.

What could potentially be a time for handwringing has become a period of reimagining the present in order to secure the future.

We in the U.S. are not alone. Brexit’s approaching deadline is forcing U.K. independent schools to re-think their business models. Administrators there expect the number of E.U. students enrolling this fall to drop significantly in anticipation of the U.K.’s departure from the E.U. The political landscape here in the U.S. has also had a chilling effect on international students, particularly from Asia. In both cases, international student enrollments and the full tuition that accompanied them were a breath of hope for a challenged business model. That’s the bad news.

The good news is that to address these forces, independent schools have been forging new paths, reinventing their approach to tuition revenue and creatively re-thinking financial aid and other levers that widen the enrollment funnel. Many have doubled down on their schools’ distinct value proposition. What could potentially be a time for handwringing has become a period of reimagining the present in order to secure the future.

The proud, long-held tradition of our schools is to chart their own course in and outside the classroom, and these innovative leaders are not looking for a one-size-fits-all approach. Some examples include the “Family Individualized Tuition” program at The Gordon School, restrained tuition increases at The Gunston School, and a top-to-bottom review of revenue and expense levers at Saint John’s Preparatory School in Minnesota. I’m proud to say these schools are featured in NBOA’s Summer Webinar Series, available live on selected Thursdays and afterward in the webinar archive. You may also be inspired by Montgomery School’s bold strategic plan that includes a tuition reset to better align with its competition. And by Indian Creek School’s development of a successful indexed tuition program it calls “flexible tuition,” spearheaded by former Head of School Rick Branson and former business officer Linda Dennison (both new members of the NBOA Board of Directors).

The pressure is real, but so is the response led by independent school leaders providing numerous examples of challenging the status quo. They are rejecting the risk of our traditional business model and creatively looking at their schools enterprise-wide to better secure the financial resources they need in order to educate students and deliver their mission in perpetuity. The question is, is it time for your school to chart a similar course?

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Follow NBOA President and CEO Jeff Shields @shieldsNBOA.

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