What Data Should Schools Analyse Before Setting Fees?

Setting school fees is rarely a straightforward decision.

There is pressure to cover rising costs, protect margins and maintain financial sustainability, but increasing fees can also affect demand. Parents may compare your fees more closely with competitors, reconsider whether your school represents good value, or decide that another option is more affordable.

For governors and bursars, the challenge is therefore not simply deciding how much fees need to increase. It is understanding what the market can support and what different fee levels could mean for pupil numbers, income and the school’s longer-term position.

A robust school fee setting strategy should bring together financial information, pupil data, competitor intelligence, demographic trends and evidence about how parents respond to price.

The earlier this analysis is done, the more useful it becomes.

Start with your own financial position

The obvious starting point is the school’s financial position.

Before considering the market, governors need to understand what the school actually needs its fee income to achieve.

This should include:

• Current operating costs
• Forecast salary increases
• Staffing requirements
• Pension and employment costs
• Estates and maintenance expenditure
• Capital investment requirements
• Borrowing and financing costs
• Planned investment in facilities or services
• Current operating margin
• Cash flow requirements
• Any expected changes in income from other sources

This gives you the financial parameters within which the fee decision needs to be made. But it should not, on its own, determine the fee increase.

If costs have risen by 8%, for example, it does not automatically follow that fees should also rise by 8%. The key question is what effect that increase could have on demand and whether there are other ways of addressing the financial requirement.

That is where market data becomes important.

Look at your pupil numbers in detail

Total pupil numbers can hide a lot.

Before setting fees, look at how enrolment has changed over time and, importantly, where the changes are happening.

Consider:

• Total pupil numbers
• Numbers by year group
• New joiners
• Leavers
• Retention rates
• Applications
• Enquiries
• Conversion rates
• Waiting lists
• Available places
• Full and under-subscribed year groups
• Trends by entry point

This can reveal whether demand is genuinely strong across the school or whether some year groups are already more vulnerable.

For example, a school may have a healthy overall roll but be struggling to fill Year 7. Alternatively, the school may have strong demand at entry but weaker retention further up the school.

Those situations may call for very different approaches to fees.

It is also worth looking at the direction of travel. A school with 95% occupancy today may look financially healthy, but if applications and enquiries have been falling for three consecutive years, that needs to be considered before setting next year’s fees.

Analyse your future demand

Historical pupil numbers tell you what has happened. Demographic data can help you understand what might happen next.

This is particularly important when setting fees because the affordability of your market is only one part of the equation. There also needs to be sufficient potential demand.

Look at the number of children within your catchment and how that population is expected to change.

Questions to consider include:

• How many children are in the relevant age groups?
• Is the local population growing or declining?
• Where do your pupils currently come from?
• Are there areas with significant numbers of potential pupils that you aren’t reaching?
• Are new housing developments likely to change the local market?
• Are there demographic changes that could affect particular entry years?

A school facing demographic decline may have less scope to increase fees without affecting pupil numbers than one operating in a growing market with strong demand.

This is one reason why demographic analysis should be part of the fee-setting process rather than something considered separately.

Know what your competitors charge

Parents don’t assess your fees in isolation.

They are likely to compare your school with other independent schools, and potentially with selective state schools, grammar schools or other alternatives available in the local area.

Competitor fee analysis should therefore look beyond a simple league table of fees.

Consider:

• Published fees
• Registration and joining fees
• Additional compulsory costs
• Boarding fees where relevant
• What is included
• Fee increases over recent years
• Discounts and incentives
• Bursary provision
• Facilities and services
• School size
• Academic outcomes
• Location
• Admissions requirements
• The overall proposition offered to parents

The important question is not simply “Are we more expensive?”

It is “What are parents getting for the difference?”

A school charging more than its competitors may have a very strong proposition and high demand. Another school with similar fees may struggle if parents don’t see a clear difference between the options available to them.

Understand your own price position

Once competitor data has been gathered, look at where your school sits in the market.

Are you a premium-priced provider?

Are your fees around the market average?

Are you deliberately positioned as a more affordable alternative?

And does your actual positioning match how parents perceive you?

This last question is particularly important.

A school may believe that its facilities, academic performance or pastoral provision justify a premium, but if parents don’t see the difference, increasing the gap between your fees and competitors could create a problem.

This is where parent research can add an important dimension to financial and competitor analysis.

Look at price elasticity

One of the most useful pieces of analysis when setting fees is understanding price elasticity of demand. In other words, how sensitive demand is to changes in price.

A fee increase does not necessarily result in an equivalent increase in fee income.

For example, imagine a school with 500 pupils paying £15,000 per year.

At £15,000, annual fee income would be £7.5 million.

If fees increased by 5% to £15,750, but pupil numbers fell by 3%, the additional income would be much smaller than a simple 5% uplift would suggest.

The calculation becomes even more important when considering larger increases.

This is why fee modelling for independent schools should consider both sides of this.

Model different scenarios

A useful fee model might consider several possible increases, for example:

Scenario 1: Lower fee increase / stronger pupil retention
Scenario 2: Moderate fee increase / moderate impact on demand
Scenario 3: Higher fee increase / greater risk to pupil numbers

For each scenario, consider:

• Projected pupil numbers
• Fee income
• Bad debt or affordability pressures
• Bursary requirements
• Staffing costs
• Operating margin
• Cash flow
• Capacity utilisation
• Potential impact on future recruitment

This allows governors to have a much more informed conversation.

Instead of asking:

“Can we increase fees by 6%?”

the question becomes:

“What happens to our financial position if we increase fees by 4%, 6% or 8%, and what level of pupil loss would change the answer?”

That is a much more useful governance discussion.

Understand affordability in your catchment

A school’s market isn’t simply defined by the number of families living nearby.

You also need to consider their ability and willingness to pay.

Demographic and geodemographic data can provide useful insight into the characteristics of households within your catchment, including indicators relating to household income, lifestyle and socio-economic profile.

This can help schools understand whether their current fee level is broadly aligned with the market they are trying to serve.

It can also highlight differences within the catchment.

A school might have an affluent catchment overall but be drawing pupils from a relatively narrow group of households. Understanding where potential families are concentrated can help inform both fee strategy and admissions activity.

Look at affordability and parent sentiment

Data alone cannot tell you everything about how parents will react to a fee increase.

Schools should also understand what parents currently think about fees and value.

Are parents already concerned about affordability?

Do they believe the school provides good value?

What do they particularly value?

What would make them question whether the fees are justified?

And are there aspects of the school that parents would be willing to pay more for — or aspects they feel are less important?

Parent surveys and qualitative research can provide useful insight here.

This is particularly valuable when a school is considering a significant change in fees. Understanding how parents are likely to respond can help governors assess the potential reputational and retention risks as well as the financial ones.

Consider the impact on different parts of the school

A fee increase won’t necessarily affect every pupil and family in the same way.

Governors should consider whether certain year groups, entry points or segments of the parent population are more price-sensitive. For example, parents joining at an important transition point may behave differently from families already embedded in the school.

Similarly, families with several children at the school may respond differently to a fee increase than those with one child.

This doesn’t mean schools should necessarily introduce different fees. It means understanding where the risks may sit. That information can then inform the wider admissions, communications and bursary strategy.

Don’t forget the longer-term consequences

Fee setting should not be viewed as a one-year financial decision. A school that consistently increases fees faster than its competitors may gradually change its market position.

It could become inaccessible to some families who would previously have considered it, while also creating greater pressure on bursary budgets.

Conversely, holding fees too low for too long can create financial problems and make it difficult to invest in the quality of the school.

The right decision therefore needs to consider the school’s position over several years.

Governors should be asking:

Where do we want the school to sit in the market in three to five years?

And:

Will our fee strategy help us get there?

Fee setting should be a strategic decision

The strongest fee decisions bring financial and market information together.

Finance tells you what the school needs.

Pupil data tells you how demand is behaving.

Demographic analysis tells you what the potential market looks like.

Competitor research shows how your fees compare.

Parent research tells you how families perceive your value.

Price elasticity and scenario modelling help you understand what could happen when fees change.

Taken together, these provide a much stronger basis for deciding fees than simply applying inflation to last year’s figure.

For bursars and governors, this also makes the decision easier to explain and defend. Rather than agreeing a fee increase because it feels necessary, the board can see the assumptions behind the decision, the risks involved and the likely consequences of different options.

At MTM Consulting, we help schools bring these different strands together through fee elasticity research, market and catchment analysis, competitor analysis, demographic data and parent research. You can read a case study on our work in this area with Sedbergh Schools Group by clicking here.

The aim isn’t to tell a school what its fees should be.

It is to give governors and senior leaders a clearer understanding of the market so they can decide what fee strategy is right for their school.

Because the most sustainable fee increase isn’t necessarily the highest one.

It is the one that supports the school’s financial future while remaining realistic about what its market will bear.