New Business Models forNew Business Models forIndependent SchoolsIndependent Schools

Marc Frankel, Ph.D. – Senior Consultant, Triangle Associates (MO)Marc Frankel, Ph.D. – Senior Consultant, Triangle Associates (MO)Cynthia Berkshire – Trustee, Wildwood School (CA)Cynthia Berkshire – Trustee, Wildwood School (CA)

Charles Clark, Ed.D. - Headmaster Emeritus, St. Edward’s School (FL)Charles Clark, Ed.D. - Headmaster Emeritus, St. Edward’s School (FL)Kevin J. Ruth, Ph.D. – President, Endowment Strategies, Inc. (DE)Kevin J. Ruth, Ph.D. – President, Endowment Strategies, Inc. (DE)

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Contact Information

Marc Frankel……………………………………marc@ta-stl.com

Cynthia Berkshire…………………………..berkcr@aol.com

Charles Clark…………………………………..clarkcf47@gmail.com

Kevin Ruth…………………………kruth@endowmentstrategies.com

Independent School Business ModelIndependent School Business Model

Mission andValues

Activities, services, programs

Valued Outcomes

Pressures on Our Business ModelPressures on Our Business Model(1)(1)

Reliance on ever-increasing tuition to Reliance on ever-increasing tuition to support programmatic additions, support programmatic additions, competitive salaries, and small class sizescompetitive salaries, and small class sizes

Competition from low- and no-cost Competition from low- and no-cost providersproviders

Less successful fundraising and lower Less successful fundraising and lower investment returnsinvestment returns

Tuition increases softening demand in a Tuition increases softening demand in a stagnant economystagnant economy

Pressures on Our Business ModelPressures on Our Business Model(2)(2)

Reduction in funding to schoolsReduction in funding to schools Religious “inner soul” search and revivalReligious “inner soul” search and revival ““Media on steroids” hyping abundance of Media on steroids” hyping abundance of

problems facing usproblems facing us

The Next Five YearsThe Next Five Years

Nominal investment returnsNominal investment returns Challenging endowment givingChallenging endowment giving Interest rates artificially low; Interest rates artificially low;

predicted to risepredicted to rise Stricter selection policies enacted to Stricter selection policies enacted to

regulate capital and tax-exempt regulate capital and tax-exempt bond financingbond financing

Is It Time to Change the Model?Is It Time to Change the Model?

Consider How You “Do School”Consider How You “Do School”

New delivery strategiesNew delivery strategies New technologiesNew technologies New teaching strategiesNew teaching strategies New focus on differentiated ratios for New focus on differentiated ratios for

costing out school operationscosting out school operations

An Unchanging FormulaAn Unchanging Formula

XXtt + Y + Ys s + Classroom = School+ Classroom = School

How Do We Exit Baumol’s “Cost Disease” Model?How Do We Exit Baumol’s “Cost Disease” Model?

Analogy: Hotel IndustryAnalogy: Hotel Industry

From Here to ThereFrom Here to There

Schools need to change something Schools need to change something fundamentalfundamental within the business model… within the business model…

How we operate itHow we operate it

Our Business is ChangingOur Business is Changing

Higher Ed Growth in EnrollmentHigher Ed Growth in Enrollment

Growth in Enrollment by SchoolGrowth in Enrollment by School

What Does It Mean?What Does It Mean?

Concept of location (physical locale)Concept of location (physical locale) Concept of time (school day, etc.)Concept of time (school day, etc.) Concept of school communityConcept of school community Where efficiencies can be gainedWhere efficiencies can be gained What to start / what to endWhat to start / what to end Sources of programmatic innovationSources of programmatic innovation Various pricing modelsVarious pricing models Differentiated product delivery streamsDifferentiated product delivery streams Teacher productivityTeacher productivity

Three Questions for LeadersThree Questions for Leaders

How do we keep the independent How do we keep the independent school “model” in the face of school “model” in the face of differentiated competitors?differentiated competitors?

How might we refine (or re-define) How might we refine (or re-define) our value proposition?our value proposition?

How do we decide what is a mission-How do we decide what is a mission-congruent way of changing how we congruent way of changing how we do school?do school?