When did you last check the ‘Financial Health’ of your school?
Updated: Jun 17, 2020
Author: Sunit Gajbhiye, Chief Business Officer, Financepeer
As an owner or director of a prestigious group of schools, you have the expert CA or Finance Managers as part of your team who guide you on numbers, what makes monetary sense, and what solution you should not invest your time in right now.
I am sure you would remember the time when you analyzed the Cashflows, Revenue Projections, D&A and finally your P&L sheet. It may have been a long time now and you would have your trusted managers or CFO making these calls.
Amongst the numerous discussions I have had with School Directors across the country, I have heard responses like – Oh! I know what you are talking about, I always keep checking my financials, I have my experts and I trust them with it.
Some of them are right to the extent of bean-counting to find flaws and take corrective measures. But most of them ignore the core of revenue generation amidst the burning problems of collections, school reputation, cashflows, fluid operating cash, new revenues and increasing cost of technology solutions and infrastructure issues.
It is simple actually. The core of revenue is the Total Fees that you collect from the parents of the pupils. Seriously, is that it? What am I deriving over here?
So that you appreciate the point I am about to present, let me give an example. Consider a local, and of course fictional – lemonade stall with just one person running it for more than a century. Which means the business is based on reputation and revenue? Now, revenue can be increased by either selling more lemonade to the same customer or increasing customers. Assuming that a customer would not have more than 2 lemonades at once, the focus would definitely be on increasing customers. And finally, you would push for repeat customers since it’s a local affair?
I am sure you would have connected the dots. When it comes to a school – which is mostly a location-dependent business entity, what matters is reputation, increase in admissions (siblings are good), and reduced dropouts.
Everything that you build is around this as the core
Reputation – which increases with the quality of education
Admissions – which increase with capacity
Dropouts – which reduce with convenient solutions
There are exceptions where dropout is ok if the reputation is affected. Point A and B are obviously higher priority.
I have purposely missed one factor in all this – The Total Fees that you charge from the parents which are connected to Reputation and Admissions.
So, the point I have derived here is that the core of revenue is Total Fees which are immediately circled and connected by reputation and admissions.
Does it seem that I am stating the obvious? No.
Yes – the answer is No.
In my discussions with most directors, even after being aware of the core, in time, down the line, we forget the core of the business. The experts work for you so they may also work on the periphery of your priorities but apart from thinking of new ways to increase fees, there is no innovation. The focus should be on increasing reputation and admissions simultaneously. This is the only long-term solution for profitable sustainability. Every other so-called cost whose impact cannot be measured does not work on the ‘Core’.
In the Indian market, everything is driven by value-driven expenses. I am sure you understand this.
So what do you do next? According to me, you should look at innovative solutions which would increase your reputation and admissions at once. This amalgamated solution can be in the area of quality education, digital learning and even financial solutions for parents.
If you want your school to be financially healthy – then you should implement healthy and innovative financial solutions – that’s it!
And then…you can still sit back and let your experts do their magic.