Planning to open a new school?

20 July 2015

The range of information that schools need seems to be greater than ever. More and more schools have to work hard to ensure that they are attracting the numbers of students and prospective students required to keep the school sustainable. For many, this is thought of as a marketing problem, and it is certainly essential that schools are at the top of their games at the moment.

For new schools, however, whether independent, academies or new Free Schools, it is essential that high-quality business and financial planning is undertaken – work that projects the reality of the school over the next decade or so in order that the school’s management team can be sure that their business (and it really is a business) is viable.

Financial planning is notoriously difficult and it is, therefore, important to be prudent when building a model of the school – prudent, in particular, with the assumptions that go into the plan. What will the initial occupancy of the school be, for example? This will, of course, depend on a great many variables including the marketing spend, the lead time given to the marketing and admissions team, the catchment area and the competition.

Planning new schools is complex and requires a keen eye on the worst-case scenarios

It is vital, however, that your school’s financial model at least has an option that assumes the worst – and that it is robust enough to provide some ‘what if?’ analysis. What will the school look like in ten years if the initial occupancy is 50% of capacity, that the annual improvement in occupancy is 5% and that the maximum occupancy achieved over time is 85%? In these circumstances, is the school in surplus or deficit? How many years will it take to recover the build costs of the school?

The model also needs to cope with a range of fees (if fees are to be charged) or with local or central government contributions, with a range of maximum class sizes, with a range of pupil/teacher ratios and with a range of overhead costs. It is important that an adequate time frame is chosen. The market may not be ready for the school just yet – should the school be built now, or should it wait so that it is built just in time for the market rather than some years in advance of it?

Only with this sort of in-depth analysis feeding into a robust business plan and high-quality catchment demographic analysis and marketing data can a sensible decision be made about opening a school. In that way the school can be sure that it is setting up in the right place, that there is a market for their services, that they will attract and retain sufficient pupils and that they can afford to run their school for future generations.

mtmconsulting is well placed to advise on financial analysis of schools and to couple this with high-quality research and marketing. Please call James on 01502 722787 or email james@emrsolutions.co.uk.

mtmconsulting is a brand of Education Market Research Solutions Ltd.

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