Transcript The New Normal: A Game-Changing Model for Financially

The New Normal:
A Game-Changing Model for Financially Sustainable Schools
Patrick F. Bassett, NAIS President
Outline
 Taking the Pulse Nationally: How Are NAIS
Schools Doing?
 All Reality Is Local: Reading the Map
 Case Studies: Easy Street Prep vs. Copasetic
Academy
 Navigating Your Path through “The New Normal”
 Taking the Pulse Locally: Where are Your Schools
Headed?
 If You Think Life Is Hard for You….
Tuitions vs. CPI: Luxury-End Pricing
Mixed Market / Changing Profile
2000-2010 Enrollment Core Sample: Changes in Enrollment
600
62
500
59
184
96
204
205
400
S
c
h
o
o
l
s
2
25
15
34
32
212
98
178
300
49
15
110
200
8
65
100
21
24
19
11
55
65
207
156
124
52
40
51
92
59
78
74
3-years
2-years
1-year
0
10-years
5-years
Lost 5% or Less
Lost between 5% and 10%
Lost more than 10%
Gained 5% or Less
Gained 5% to 10%
Gained more than 10%
No Change
Markers of Success: Giving (Day)
2007-08
Alumni %
Parent %
Trustee %
Alumni
Avg Gift
Parent
Avg Gift
Trustee
Average Gift
Percentile(25)
4%
48%
93%
$135
$556
$2,007
Percentile(50)
9%
64%
100%
$271
$916
$3,670
Percentile(75)
17%
80%
100%
$447
$1,508
$6,288
Percentile(90)
29%
91%
100%
$692
$2,388
$10,667
Alumni
Avg Gift
Parent
Avg Gift
Trustee
Average Gift
2008-09
Alumni %
Parent %
Trustee %
Percentile(25)
4%
49%
93%
$137
$508
$1,936
Percentile(50)
8%
64%
100%
$261
$860
$3,804
Percentile(75)
16%
79%
100%
$427
$1,438
$6,228
Percentile(90)
27%
91%
100%
$612
$2,208
$10,486
Markers of Success: Giving (Boarding)
2008-09
Alumni %
Parent %
Trustee %
Alumni
Avg Gift
Parent
Avg Gift
Trustee
Average Gift
Percentile(25)
9%
32%
87%
$304
$711
$3,067
Percentile(50)
17%
51%
100%
$439
$1,136
$6,334
Percentile(75)
27%
69%
100%
$645
$1,771
$10,306
Percentile(90)
39%
81%
100%
$988
$3,048
$18,454
Alumni
Avg Gift
Parent
Avg Gift
Trustee
Average Gift
2009-10
Alumni %
Parent %
Trustee %
Percentile(25)
8%
28%
87%
$268
$688
$2,912
Percentile(50)
15%
48%
96%
$443
$1,166
$5,455
Percentile(75)
24%
65%
100%
$605
$1,699
$11,076
Percentile(90)
36%
78%
100%
$875
$2,647
$18,814
Top 5% Incomes ($200K+): The X Factor
% Change Top 5 Percent Income Changes (Current Dollars)
Versus Inflation Rate 1947 to 2008
14.00
12.00
10.00
8.00
6.00
4.00
2.00
0.00
1948195019521954195619581960196219641966196819701972197419761978198019821984198619881990199219941996199820002002200420062008
-2.00
-4.00
Inflation Rate
Current Dollars
Map: Our Current & Future Prospects
Case Study #1: Easy Street Prep
 Easy Street Prep is a school of 500 in a very affluent
community: demand exceeds supply for quality
independent schools, and it’s too expensive to build
more schools, given the price of real estate.
 In the down economy, so far, the school’s admissions
seen barely a blip, maybe 5 instead of 7 applications
per opening, but lots of margin there.
 Its high octane board wants to keep driving hard on
tuition increases, capital campaigns, and expensive
renovations.
 Some diversity of race and ethnicity, but not many
Latino/a students in a state whose school-age
demographics is moving strongly in that direction.
Case Study #1: Easy Street Prep
 Strong support for financial aid, but not many middle class
kids in the school (or even “the psychological middle
class.”)
 A growing number of X-Gen board members recently
have been asking for “outcomes” analysis of how students
and the school performs. And Some entrepreneurial parents
wondering if the rather traditional curriculum is as
innovative as it could be.
 Lots of the kids seems stressed all the time, pressured by
their parents and self-imposed expectations for an all-star
resume. Some of those secretly are beginning to dread
school.
 What’s important for the leadership of Easy Street Prep?
Case Study #2: Copasetic Academy
 Copasetic Academy, located in upscale suburbs of an urban area
where the urban independent schools continue to prosper but
Copasetic faces a very different market reality.
 A PS-Gr. 12 school, Copasetic was a school of 475 just eight
years ago, when its lower school admissions started to falter:
At first, the school maintained enrollment by increasing financial
aid and by accepting students with some academic deficiencies.
 Their planning consultant 5 years ago convinced the school and
board that his firm’s formula for financial solvency should be
adhered to: offer great programming and facilities, and charge
what it costs to deliver on that.
 Meanwhile, a lower-cost neighboring K-6 independent school
was becoming competitive, siphoning off some of Copasetic’s
admissions prospects, as was a new magnet school.
Case Study #2: Copasetic Academy
 The result of that plan: exorbitant tuition increases, greater
attrition and fewer applicants: enrollment goes down to 400 now,
admissions numbers were looking weak for the coming year, and
current full pay families were applying for financial aid in
record numbers.
 Market study showed that families with high incomes in the
immediate area of the school were declining in numbers, and
while there were plenty of high income families within an hour’s
drive, the school had not been successful in attracting them to
Copasetic Academy.
 While the school had successfully been using a “net tuition
revenue” approach to filling empty seats, some on the board felt that
one way to balance the budget was to cut back on financial aid.
 What options should the school be considering as it plans for the
coming year and the future?
Has Your School Hit Its Price-Break Point?
 Admissions Funnel Trends?
 Financial Aid Application Trends?
 Demographics Projections for your Area for FullPay Families with School-Age Children?
 Growth of high quality, no-cost or low-cost school
options in your area (public magnets and charters,
parochial schools, other lower-cost private schools,
home-school networks)?
 Top 5% Incomes ($200K+) vs. CPI Trends? In the
context of increased taxes and health care costs for
this group (i.e., less discretionary income)?
A Game Changing Model for
Financially Sustainable Schools
The Value Proposition Equation for
Parents…and Donors
Perceived Outcomes = Value
Perceived Price
PFB Note: For prospective parents, as perceived
price goes up, value goes down unless perceived
outcomes increase proportionately.
For advancement, substitute “giving expectation”
for “price” as the “value-proposition” for donors.
Old Normal: Budgeting for Excellence
 “Old Normal” Assumptions:
our spending spree has no limits to it. We are
America: We spend too much; we assume too
much debt; we save too little.
high tuition increases are necessary to expand
program and staff while at the same time
sustaining both small classes and competitive
faculty salaries.
top 5% income families will always be able and
willing to pay whatever we ask.
all schools in a local market compete on
product, not price.
Old Normal: Budgeting for Excellence
 “Old Normal” Assumptions (cont.):
financial aid the fixed variable; enrollment the
flexible variable.
primary purpose of a board is to maximize
excellence for current students (in many cases,
their own children).
 Traditional Budgeting Process
starts with the needs: “nice to have” column
migrates to the “must have” column.
ends with increasing tuition, usually well
beyond inflation.
New Normal: Budgeting for Sustainability
 New Normal Assumptions:
continued commitment to competitive salaries
and “intimate environments” where each child
is known.
excessive tuition increases have undermined
demand (or will).
mantra: increase “productivity” without a
decrease in quality (i.e., increase enrollment or
decrease staff)
New Normal: Budgeting for Sustainability
 New Normal Assumptions (cont.):
schools compete on prestige (“brand”),
program (“uniqueness”), or price (“best
value”)
enrollment the fixed variable; financial aid the
flexible variable.
primary function of the board, to secure the
future of the school (creating their children’s
children’s school).
starting and ending points of budging process
are reversed.
New Normal: Game-changing Vision
 The New Discipline: Budgeting for Financial
Sustainability (even if you are Easy Street Prep)
committing to increasing enrollment without
increasing staff.
adopting a “sunset provision” of retiring an old
program when introducing a new one so that no
net staffing increases are required (and
deciding which is which by value-proposition
surveying (e.g., The NAIS Survey).
New Normal: Game-changing Vision
 The New Discipline: Budgeting for Financial
Sustainability (cont.)
rightsizing: re-thinking class size or workload
or the number of teacher specialists and
assistants or school size (e.g., Choate:
downsize to become better & sustainable)
devoting 1/3rd of each fund-raising dollar
raised (annual giving, special events, and
capital giving) to endowment, ultimately the
insurance policy of the school that will
guarantee its future: “intergenerational equity.”
New Normal: Game-changing Vision
 Outcome of New Model:
financially sustainable schools, “built to last.”
stable or improved value-proposition.
The Value Proposition Equation
Perceived Outcomes = Value
Perceived Price
PFB Note:
• Option 1: As perceived price goes down (projection
of tuition increases as modest), value goes up, even if
perceived outcomes don’t change.
• Option 2: Up outcomes as up price (“more more,”
including new technology & accountability).
• What’s easier/better to manage: price or outcomes?
What about, “Both”?
Projecting from our admissions funnel
results so far this year compared to last,
our enrollment should be the same or
greater than this year.
41%
1. Definitely
36%
2. Probably
3. Maybe
4. Unlikely
15%
9%
1
2
3
4
Our best marketing strategy for
the future will be to compete on…
1. Prestige (“brand”)
7%
8%
2. Program
(“uniqueness”)
3. Price (“best value”)
85%
1
2
3
Next year’s tuition compared to this
year’s is…
66%
1. Lower
2. Frozen at this year’s
rate
3. Increased by CPI
4. Increased by CPI+1
5. Increased by CPI +2
or more
14%
0%
1
17%
3%
2
3
4
5
In the future we’ll consider a more
aggressive net tuition discounting
strategy to ensure full enrollment
70%
Yes
2. No
1.
30%
1
2
Our school is considering “right-sizing”
by increasing enrollment without adding
staff or by stabilizing enrollment and
reducing staff or by merging.
49%
Strongly Agree
2. Agree
3. Disagree
4. Strongly Disagree
1.
25%
16%
10%
1
2
3
4
If my school were “Easy Street
Prep,” I’d…
1%
1. Change nothing
38%
2. Leverage perceived
61%
strengths
3. Take “school of the
future” risks
1
2
3
The End…
…Is the Beginning
Patrick F. Bassett, President
NAIS (www.nais.org)
Are you prepared
to face increasing
competition for a
decreasing number
of students?
“St. Louis Magnet Schools
offer an EXCITING,
TUITION FREE alternative
for students of all ages
and abilities.”
2009/2010 is the
inaugural year for the
St. Louis Virtual School.
Raleigh, NC
SF-Metro, CA
LA-Metro, CA
Return
NAIS’s Value Proposition Surveys:
Value/Performance Matrix
High Performance
High Value
High Value
Low Performance
Low Value
High Performance
Low Performance
Low Value
Leadership’s Responsibility: To assess all operations on the matrix,
then reallocate resources