Improve Revenue Without Increasing Tuition Rates

June 23rd, 2016 | Posted in Articles

Kathy Cropped
We are barely into summer and we are pushing fall thoughts and decisions! As you begin preparations for the new school year, it is often a huge decision whether to increase tuition rates, and the level at which you can increase. Below is an article we published originally on October 1, 2014, that often gets requested with much positive feedback. Hope this helps!

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October 1st, 2014 | Posted in Articles
Before discussing those items that can impact revenues without increasing tuition rates, it must be said that we are often our own worst enemies in holding tuition rates lower than the business can support and in delaying annual rates increases. Many owners, in an attempt to support family’s financial needs, have delayed necessary annual rate increases to the point that it will impact your financial ability to create strong programs, provide the best staff and curriculum, invest in your facility, and take care of your own financial obligations

If you have fallen behind market rates and are struggling to meet your expense obligations, or provide salary increases to deserving staff, first consider a strategy—even if it takes several years—to charge an appropriate amount to. Since there is typically a limit of the amount you can raise rates at once, other options might be to grandfather current families at a reasonable rate of increase and start new enrollments at a high rate.

As we all know, if you are struggling personally, your school will also never thrive. Don’t be timid about charging a healthy tuition rate, and remember that if your tuition is below market, it creates questions in prospective parent’s minds about the value of your school.

Now that the tuition rate discussion has been addressed, what other options are available to increase revenue? Several items that are often overlooked can strengthen and, in some cases, be even more effective ways than tuition rate increases to gain revenue.

Other Revenue Sources
In addition to tuition revenue, several other opportunities are available to gain top line funds to complement tuition.

Rent Income. Some owners find it beneficial to utilize their real estate resource during non-traditional hours by renting all or a portion of the space for alternative uses. Some options that work well are weekend religious organizations, as well as other services for children such as dance and karate. A multi-purpose or gym space works well for this option.
Fund Raising. Some groups of parents are supportive of helping raise funds for the school and some might take offense. Typically all parents support photos of their children a couple of times per year and will participate in this fund raiser. Be sure that the photographer you select shares a portion of the sales with the school. It is also helpful to raise the funds for a specific cause, such as a piece of playground equipment or classroom computers, so that the parents see the success of their efforts.
Part-Time Programs. Other revenue producing options could include adding a part-time morning class in an empty space or an afterschool program or camp that uses a classroom not in use in the late afternoon hours.
Registration/Material Fees. Registration and material fees should be charged annually to cover the expense of curriculum and materials. Often there is the ability to increase this amount with relatively little pain for parents since it’s a once a year charge makes it much easier for families to absorb.
Late Payment Fees. Late payment fees should be significant and charged consistently. Typical policy is to charge $25-35 per week for tuition that is paid after the stated due date. Only make small exceptions for this charge when a consistently paying family is having a particular issue and is communicating with you. This option is not for families that don’t respond to your communication and send Grandma in to pick up the children just to avoid seeing you. When payments are overdue the time and energy it takes management to collect is both a drain on people resources and a significant cost to the school. In addition, if families are allowed to create large balances, you are more in jeopardy of losing the family and never collecting your money.
Late Pickup Fees. Most schools charge a fee when parents pick up their children after the close of business with a typical charge of $1 per minute. Again, if a parent contacts you and has a small one-time tardiness, you might want to overlook the charge. However, when there is a habitual offender of this policy and you are paying a staff member to stay late (often with overtime), this charge is necessary to balance your finances and discourage the practice.
Discounts
Discounting tuition will often have a dramatic effect on the financial performance of a school with some schools discounting up to 20% of overall revenue. If there is the ability to limit the discount, while not sacrificing competitiveness or enrollment, the overall effect can be greater than raising tuition rates.
Vacation/Days Off. This one item has the ability to be most impactful if you are allowing parents to not pay for days their child does not attend. Since your costs continue whether the child attends or not, tuition should be due in full weekly regardless of attendance. Consider changing this policy along with a smaller tuition rate increase as it is usually easier for family’s to absorb.
Staff Discounts. Most schools use discounts for staff childcare as a significant benefit since health care and other options are often cost-prohibitive. Typical is free childcare for Directors and half price childcare for all other staff. Most recently, companies have begun eliminating the discount for infants, and limiting the number of children an individual staff can have discounted. Also, some schools are limiting the total number of children that can be discounted in a single school.
Multiple Child Discount. This discount is typically market-driven as most providers seek to be competitive with the other schools in their area. Usually schools will give a 10% discount on the child(ren) with the lowest tuition rates. It is challenging to not offer multiple child discounts, but reducing the amount could have a large financial impact.
After creating a healthy tuition environment in your school, consider one or more of these options to increase the top line and strengthen the financial health of your school. Please consider SSGA a resource on healthy financial control and let us know how we can support your efforts!

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