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Step Up Your Game, Increase Your Profit and Knock it Out of the Ball Park

As an experienced veteran in the vocational for-profit higher education marketplace, I have worked with over 250 Vocational universities, colleges and schools in a marketing capacity as well as owning my own schools so I see both sides of the coin. I would like to share my experiences on how to step up your game, grow your gross revenue, increase EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) margins, and plan an exit strategy to cash in on your efforts.

Let us start with the problem. Most owners whom I have met in my career have been individuals who had an entrepreneurial spirit and the desire to change the lives of their students and their communities. They were most often embraced at the beginning of their careers by an old-timer in the business who taught them the tricks of the trade of for-profit education during their tenure working as a subordinate. They learned from seasoned veterans who had boots on the ground, hands on experience and knowledge about the ins and outs of every department in their vocational institutions.

These aspiring entrepreneurs reached a point in their career where they decided to strike out on their own and either buy their mentors school, as they were retiring, or start one of their own. Rarely did any these budding new owners have a understanding of what it meant to own and operate an institution of higher learning. Until that point in their careers, they never had “skin in the game” and did not know what it meant to put their house up and take a second mortgage so that they could pay their employees’ salaries and sustain their school during tough times. In the context of owning and operating a business, having skin in the game means putting one’s own money on the line, which can be a significant motivator to ensure the success and profitability of the business. This is a very important lesson to learn and it changes the way that people do business once they have this understanding.

The beginning is always rough on the newly minted and these new owners were tried in the crucible of government regulation, Title IV funding, National or Regional (if they were fortunate) accreditor oversight, cash flow issues, employing marketing skills to achieve student growth, student retention, default rates, 90/10, composite scores and a host of other issues. As the years went on these owners developed their own teams, brought in new students, and they saw their schools grow. This was accomplished by blood, sweat and tears where the school became the central focus of these entrepreneurial owners lives. For new owners either you are all in or you are out and there is no middle ground that will lead to success.

In many cases as the knowledge-base increased so did the revenue and the EBITDA. For those who were unable to surf the daily issues of vocational education they closed their schools and faded into the distant horizon. In almost all cases the owners depended on Title IV programs to stay alive and rarely considered other options for generating revenue. As the years passed the owners became legends in their own mind, resisted adding new people to their teams who would challenge them and kept the old cadre of employees who were their yes-men. The result was that revenue and EBITDA flat lined; no new programs were added and owners basked in their wealth believing that the $500,000 to $4 million they earned annually was a windfall brought about by their wisdom and there was no way that they could increase revenue without moving outside of their area of comfort to look at new programs and employees to step up their game.

Please understand that there is nothing wrong with a gross income of $500,000 to $4 million annually as only about 1.4% of US households have an income of $500,000 or more, and only about 0.002% of households have an income of $4 million or more. The owners were revered by their vendors, employees, students and community. Owners became ego driven, adverse to new ideas, risk adverse and lazy, cutting back their work week from 80 to 40 hour weeks so that they could play golf or spend more time with their families. The growth of a business never occurs when an owner becomes myopic in their outlook and refuses to accept that there is a more effective approach to run a business.

The most important factor in growing any business is to keep an open but focused mind, have an exceptional team and associate with other owners and consultants who have successfully broken through the frozen EBITDA and revenue barriers and have grown their schools through branching, new program introduction, vocational ESL programs, U.S. Department of Education career pathways programs, reignited marketing for student acquisition, increase articulation agreements, technological innovation to improve student outcomes, hard-core admissions evaluations and creating a culture that is conducive to increasingly positive outcomes of students. These will be discussed in greater detail in future posts.

Let us start at ground zero. The goal of a for-profit vocational school is to provide students with the training and education they need to get a good job in order to be successful in their chosen careers, while also generating revenue for the school’s owners and his stakeholders. To achieve this goal, schools typically charge tuition and fees, and may also offer financial aid options such as student loans or scholarships. Let’s be clear about this, just about every school from Harvard to Henry’s welding school receive Title IV funds since most students entering a higher education environment especially vocational school students come from lower socioeconomic backgrounds and do not have the wherewithal to pay the full fair themselves. Students receive financial aid from the federal government which they need to start repaying when they graduate and are gainfully employed. Most owners try to keep the price that they charge to students close to the amount that student receives from financial aid believing that a student who does not have the resources will not attend their school if the out-of-pocket ticket price is too high, so the owner settles for tuition cost which is competitive and inclusive.

This is a big mistake brought about by a fundamental misunderstanding of the marketplace and what their students are willing to pay if the outcomes warrant they do so. If owners were more selective in the students that they accepted into their schools and to the programs that returned a much higher salary level for students upon graduation then the EBITDA,  revenue and margins of return for the school would grow exponentially. Let’s be clear on this, most for profit vocational schools will accept a student regardless of a student’s motivation, maturity, level of literacy and math skills as long as they meet the admissions criterion. This strategy courts a never-ending downward spiral to disaster and needs to be reevaluated by each and every school.

The strategy is motivated by the desire to succeed which can be translated into one word…Avarice, an excessive desire for wealth, possessions, or power beyond what is needed to live a comfortable life with a student centricity culture thrown out the door. Many for-profit school owners are driven by the pursuit of material wealth and often place their own interests above those of their students and staff. Don’t get me wrong there are also many school owners who care deeply about their students and employees. In some cases, some individual owners may engage in unethical or illegal activities to satisfy their desire for wealth or power, leading to harm to others or society as a whole. Closed schools such as ITT Technical Institute, Corinthian Colleges; Charlotte School of Law and Westwood College are names that will live in infamy for defrauding some students for their profit and are a testament to greed.

To be very clear, students are customers, clear and simple, and need to be treated that way if a school is to succeed. Students need to be nurtured, upgraded, mentored, remediated, supportive, followed up on, encouraged, made interactive with faculty, staff and ownership, and most of all LOVED. Being student-centric means that a school or educational institution places the needs and interests of its students at the center of its decision-making and operations. This approach prioritizes the individual needs of each student and tailors the learning experience to meet those needs. A student-centric approach to vocational education recognizes that each student is unique, with their own strengths, weaknesses, interests, and learning styles. It involves providing personalized support and guidance to students to help them achieve their academic and personal goals.

All students must be treated with the utmost respect regardless of their level of attainment at the time they enter the school. Educators at any vocational school must go down to the level of the student to communicate with them and then bring that student in increments up to the level of the teacher. That is the sign of a good school and a good teacher. There are no bad students, but there are bad teachers and schools.

In a student-centric environment, the curriculum, teaching methods, and support services are designed to be responsive to the needs of the students. To make discriminative wealth in the school business requires that the customer be treated with utmost respect and dignity. This means that the school is constantly seeking feedback from students and making adjustments to ensure that the learning experience is engaging, relevant, and effective. Overall, a student-centric approach to education is focused on creating a supportive and inclusive environment where each student feels valued, supported, and empowered to achieve their full potential.

A for-profit vocational school is similar to other service businesses in that it relies on providing high-quality services to attract and retain customers, in this case, students. The quality of service provided by a for-profit vocational school can have a significant impact on its reputation, as well as on its ability to attract new students and retain existing ones. Parenthetically, a good reputation can add $10 million to the sale price of a vocational school. Therefore, it is important that the school creates a positive and supportive learning environment that fosters student success. This can be achieved through a range of actions, such as providing personalized support and guidance, being responsive to student feedback, offering a range of support services, and creating a positive and inclusive learning environment. Ultimately, students are more likely to feel satisfied with their experience at a for-profit vocational school if they feel that the school cares about them and is committed to their success. This can lead to increased retention rates, positive word-of-mouth recommendations, and an overall better reputation for the school.

Schools need to treat students as customers and to be selective in the students they accept into their schools and programs. Saying no and being selective of students that are accepted is essential to growth and profitability. When a school reaches an inflexion point where their reputation, programs offered, job placement at high salaries, and employer involvement in externships are solidified they can raise tuition by 100% to 150% and still have a waiting list of students who want to attend the school. This increases the gross revenue of a school dramatically with EBITDA margins increasing by 100+%. Profit in vocational higher education is all about student centricity and I will continue this post as it is the 1st of a 6-part series in the Step Up Your Game, Increase Your Profit and Knock It Out of The Ball Park series of posts.

In summary, to be successful in the for-profit vocational school business, owners need to understand the challenges and opportunities, be open to new ideas and approaches, and prioritize student-centricity to create a positive and supportive learning environment that fosters student success which increases Revenue, EBITDA, and R.O.I. (Return On Investment).

Author: Stanford Silverman
Date: March 23, 2023

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