Archived: Is Your Private School Business Built to Last?

Much of the allure of private schools is based on their reputation, which they work hard to sustain. All too often, the school leadership maintains a brave front while quietly scrambling, shrinking, discounting, and recruiting full-pay students from wealthy families. Behind the curtain, you may find a small team of inspired rock stars led by the school founders. Armed with degrees, certificates and classroom experience in education, the true believers move from the classroom to the front office — a few may even find their way into the boardroom. Management, officers and directors are typically comprised of parents and teachers including perhaps a lawyer or accountant thrown in for pro bono advice. Although these people with all of their skills are well intentioned and devoted to the mission of the school, the paramount reason schools fail is because of poor business management.

Schools do not perish due to disinterested teachers or underperforming students. For the most part, schools close because they can no longer pay the bills.1 A small nonprofit may have an annual budget of a few hundred thousand dollars a year – maybe as much as one million. Whatever the budget, private schools rarely have managers with the business acumen to run a million dollar operation let alone a multi million dollar corporation. Finance, accounting, economics, contracts and corporate law are not required courses to obtain teaching credentials. Absent a career change from finance or management to education, a teacher would not have the quantitative skills or managerial savvy to anticipate and avoid financial ruin. The stark reality is that enrollment in private schools is shrinking, public schools have a stronger return on investment, and charter schools are struggling to survive.


Private School Enrollment Shrinking

Consider today’s realities. Private K-12 enrollments shrunk by almost 13 percent from 2000 to 2010. Catholic schools nationwide have fewer than half as many students as they had 50 years ago and are closing right and left. The Archdiocese of Philadelphia, for example, announced that 44 of its 156 elementary schools will cease operation. In addition, many independent schools are having trouble filling their seats — at least, filling them with their customary clientele of tuition-paying American students. Traditional nonprofit private colleges are also challenged to fill their classroom seats and dorms, to which they’re responding by heavily discounting their tuitions and fees to garner more students. Private education is headed for dramatic shrinkage except for in a handful of places and circumstances, to be replaced by a very different set of institutional, governance, financing, and education-delivery mechanisms.2

Public School ROI Superior to Private

This blog post was archived on April 17, 2017 and is only available for Enterprise clients