Nonprofit Resources
When Your Institution is Facing an Uncertain Future: Revenue Enhancement Considerations
Many smaller higher education institutions face constant uncertainty due to enrollment changes, increased costs, and heightened competition. Leaders sometimes find that despite their best efforts to ensure the longevity of their institution, all paths forward seem to be blocked.
As a CPA firm exclusively serving higher education and other nonprofit organizations, we have worked with colleges, universities, and seminaries in all stages of organizational growth. In our three-part article series, we’ll explore the three main routes we have seen institutions with fewer than 1,000 students take when experiencing gradually negative trends in key indicators.
The first route is revenue enhancement – pursuing options for increasing revenue and optimizing your institution’s finances. Here are some strategies to discuss with your leadership team.
Four Revenue Enhancement Strategies to Consider
1. Increase tuition. Start by forecasting revenue for the next five years to determine what reasonable and sufficient tuition increases you can make. Next, communicate the change clearly and consistently to help current and prospective students manage the increase. For example, by applying for more internal and external scholarships, their out-of-pocket costs might not increase as much as they expect. Also, be sure to track the first-time freshman discount rate as well as the total undergraduate discount rate. This will help you avoid increasing tuition to an amount you later need to undercut with unfunded aid.
2. Attract more students. Smaller colleges often struggle with name recognition, since much larger institutions have substantial marketing and communications budgets and broader alumni networks. Here are some ideas for attracting more students to your institution:
- Keep alumni plugged in. Set up alumni scholarships, host homecoming events, and communicate about new programs. Encourage alumni to talk with family and friends and share their life-changing experiences at your institution with current and prospective students.
- Promote clubs and sports. Offer affordable season ticket plans for athletic events to encourage community members to engage with your institution. Provide ways for your campus clubs to be present in the community through service or by supporting local businesses.
- Embrace your niche. Smaller higher education institutions have distinct personalities and are unique because of their locations, programs, on-campus activities, and foundational beliefs. Rather than trying to cater to everyone, lean into what makes your institution, students, and faculty distinctive. You don’t need to be all things to all people – do what you do best, and people will be attracted to that authenticity.
- Provide dual-enrollment programs. Many institutions have found success in offering dual-enrollment programs with local high schools. In addition to providing a revenue stream, students in these programs often convert to full-time undergraduates after graduating from high school.
3. Cut costs (and maybe some majors). Evaluate your current systems and personnel, determine gaps or needs, and consider outsourcing certain tasks or responsibilities so your on-campus team can focus on what they do best. Review your accounting processes and systems to see if you’re missing out on time-saving automations. Consider performing a marginal revenue analysis to identify and potentially eliminate unprofitable majors and programs.
4. Add revenue streams. Consider making event spaces available to the community to rent for weddings or other special occasions. Some institutions also use retail and vendor spaces on campus, with the institution keeping a portion of the profits, receiving monthly rental payments, or both. Branded apparel and other merchandise can also be a beneficial revenue source, even if you don’t have athletic teams. Consider hosting summer camps, which can have the added benefit of convincing some campers to come back for college!
While change is inevitable, the right revenue enhancement strategies could help your institution manage uncertainty. By focusing on increasing tuition, attracting more students, cutting unnecessary costs while demonstrating value, and adding revenue streams, institutions can optimize their finances for greater long-term stability.
If you’d like help identifying how your institution can enhance its revenue, or have any questions, please contact us.
Authors: David J. Gunter, Partner and Rachel McMichael, Partner