Why Private Schools — Especially Independent Schools — Are Failing to Achieve Their Potential

Let’s talk about market share for a moment. Did you know that private schools in America serve roughly 9.6% of the available school age children in a given metro area? And, what is more shocking is that independent schools serve roughly 1% of school age children in America. Most people are surprised to learn that independent schools barely scratch the surface of marketplace penetration, generally speaking. Why is that? And, what can be done about it?

Private schools lament that their business model is broken and therefore unsustainable. But, they follow some uncommon business practices that literally threaten their existence. Consider this nexus of business and see if you can make sense of it:

1. Price: Independent schools price themselves at the highest price point in the market where a tiny fraction of their metro area can afford them, therefore placing severe limitations on their marketplace.

2. Admissions: They also attempt to follow selective admissions, placing yet another limitation on their potential available market.

3. Marketing: They place undue pressure on their advancement and strategic enrollment management people to find “more full pay families” and have aggressive marketing campaigns to sustain their operations. Heck, there are even professional development seminars aimed at finding more full pay families.

4. Diversity: Even though they have severely limited their potential enrollment down to 1% or less of the school age children marketplace, they then try to thread the needle by trying to acquire more diversity in their enrollment.

It is a crazy business model, where price goes up, enrollment goes down, and, most importantly, the overall impact of the industry is severely limited. Honestly, how can you have a tremendous impact on the world through your products and services — and even claim to be somewhat diverse — by serving 1% of a marketplace? I used to call independent schools the “Swiss watch” of the education industry until I learned that Swiss watches serve, as a cohort, a larger segment of their industry than independent schools.

I used to be deeply concerned that we have too many private schools in mid-sized to large markets that are trying to do the same thing and competing for the same, full pay families. That was five years ago. Now, I am worried that independent schools – and, to some extent – all of the high tuition, small enrollment schools out there trying to live in that limited space – are on a path to irrelevance and extinction if they don’t start addressing this limitation in thinking and creativity.

The late management guru Peter Drucker reminded schools that they live and operate in the non-profit space. The mission of non-profits is transformation, not profit, as it is for corporations and not policy, as it is for governments. He would argue that the only reason a non-profit would grow is that you believe the world would be a better place if more people had access to your goods or services.

I have a simple thesis: if the independent school industry wants to thrive and create more impact in the world, it starts with developing best in class products and services that can be scaled and delivered to different audiences. And, if more people had access to independent schools through different modes, my guess is that their impact would indeed spread beyond their existing market share.

As independent school educators gather later this month in Las Vegas for the annual NAIS conference, I throw down an interesting concept: what if independent schools could increase their market share of school age children to at least 5% in a decade? Imagine the impact on the world. That vision starts with developing a different kind of thinking about the limitations of the business model.

I have often believed that independence is the greatest asset of independent schools. It is in their name. Independent schools, as well as most private schools, can choose their mission, their delivery mode, their access points, and the markets they choose to cultivate. Can we move beyond trying to “find full pay families” as the holy grail of their existence and this threading of the needle business model toward true relevance in the coming decade?