Jul 24, 2017

Financial Forces and Their Impact on Indy Schools

I’m really sorry to say this, but the last time I checked, independent schools and colleges have historically been pretty solid at the whole teaching and learning paradigm. Not that we can’t improve – we can and we should. But, our teaching and learning environment is not an existential issue threatening our very sustainability.  It actually turns out to be a strength. 

Our financial context is our existential threat.  Just a few weeks ago, I wrote about the calm before the financial storm in the private school industry.  For independent schools, I believe we are in the early stages of a redefined industry. All of the indicators would tell us that independent schools are a declining industry sector. We see softening demand, increased financial aid, declining enrollment, diminished net revenue, and fewer students being served across the nation. There are few markets of growth and virtually no independent schools are just humming along like a decade ago. The financial pressures are mounting and, at bare minimum, everyone on campus is working harder.  We are in unknown territory.

Our collective industry answers have been incremental, at best.  Most schools have focused on what most economists would call optimization, trying to increase incremental net revenue, slightly reduce costs, and find simple ways of saving money.  Most schools have had to reinterpret their mission to accommodate a wider array of learners, creating a new tension on campus.  It may seem like a lot, but it is incremental and simple optimization.

History tells us that when there is a market contraction – a lessening of demand for a product – providers respond in a variety of ways. Companies may alter their pricing strategies (lower the price), create new products as revenue streams (line extensions), collaborate with others, or they may consolidate their offerings. We are in a market contraction.  Optimization will not solve our problems.  We have to change. 

Our next series of blog entries are going to focus on four potential solutions to our financial woes.  They will require a new way of thinking; a new business model.  And, they will require significant change.  However, independent schools and colleges can make these changes, as they have choice.  Their greatest asset is their independence.  It is time to call upon and leverage that asset. 

Leave a Comment