Business Model of Education Explained
June 9, 2023 | By Hitesh Bhasin | Filed Under: Business
The business model of education revolves around different processes of facilitating learning or procuring skills , knowledge, beliefs, habits, or values. Education is indeed one of the basic needs of man. There is hardly any chance of earning a living without proper education.
A person is known by how educated he/she is. There are various stages of education. Starting from kids’ playschools, there are colleges and universities around the world. Every region has its education system, which has the essence of that region.
These days, there is more focus on technical education and in-depth knowledge of the subjects you are learning.
Hence, education systems across most of the countries have evolved over the past few years. It has led to the emergence of educational institutes not just as a service but also as a business.
This post will take you deep into the Education Business Models and guide you about the key traits of successful education-related business models. So, let us get started-
Table of Contents
Education is often held accountable for the success of students. The education systems aim at imparting good quality education to one and all.
Students are those who are seeking answers. They look at the educational systems with hope and believe that they will find those answers. That is why the business model of education should be drafted to cater to these needs of students.
Moral Value System associated with the Business Model of Education
Every business runs of profit. But, the motive behind the business of education is to impart pure and unbiased knowledge.
The customers of this system are the students or learners. Their satisfaction is the soul of this business model. There is no business that is intrinsically good or bad. The profits earned from these businesses determine their nature.
In an educational system, the profits are in two primary forms. One is the financial profit gained by the institution, and the other is the educational insights gained by the students.
If both of these profits are achieved in equal measure, both the parties are in a win-win situation. It helps the education business reach a neutral end.
Need for a Good Business Model of Education
In the initial school years, the students take education for teaching fundamental moral values. The education they receive is aimed at making them better as human beings.
High school education is aimed at professional expertise. Students learn the skills which can help them earn a living and be the breadwinners for their families. The technological and professional trends keep on changing. Concerning technology, there are constant changes and upgrades. These changes demand changes in the business model, as well.
The current business model should be efficient . The education imparted through this model should help the students sustain themselves in the professional world. The students gain technical competence as well as the ability to mitigate the risks of vulnerability.
Best Ways of Money-making via Trendy Educational Business Models
As mentioned above, every business wants to maximize its profits. They want the revenues they earn increase manifolds. So, here are some ways that can be used by an educational institution to make money.
1. Live Classes
There can be nothing as good as actual teaching. A teacher dedicating his/her precious time for her students and empowering them in almost every aspect of life is one of the greatest gifts for the pupils.
That is why live classes are hugely popular and form the surest way of earning money. Some institutions give face-to-face learning experiences to the students. Here the teacher can understand the grasping power of the student and amend the lectures accordingly.
Also, in these times of the Covid19 pandemic, the live classes can be conducted on video calling platforms like Zoom and Google Meet.
2. Online Courses
Many people confuse between the live classes on video calling platforms and online courses. They misinterpret them to be the same. However, there is a small difference between them. The online courses are packages of audios, videos, and textual chapters that can be used by the student according to his/her convenience.
These courses are mostly self-paced. But, some of them do come with a deadline. The students need to complete the course within a specific amount of time. Then, they can get a certificate of completion.
3. Starting Institutions
Many education providers wish to start an institution like a school or a college. It encompasses a more extensive client base.
In today’s times, the institutions are also of the form of coaching classes or tuitions. They need less infrastructure and yet get all the due accountability and respect. The institutions get recognition from the government, and they also receive grants and funds for imparting knowledge to the students.
4. Consulting Services
Education is not just classroom teaching. It comprises many aspects of teaching, including consulting services.
Consulting is the process of counseling people and giving them appropriate solutions. We all need guidance at some of the other points in life. So, consulting is always in demand. There are various forms of consultation services provided by multiple educators. Some of them are given below-
- Curriculum Design
- Research Work
- Communication Skills
- Learning Experience Design
5. Professional Services
Apart from consulting services, there are professional services which are offered by some educational institutions.
These services come after the inception of consultation services. We can define the professional services as the services which fulfill the needs of the client. Some of the most popular professional services are given below.
- Curriculum Development
Challenges While Planning a Business Model of Education
The business model for education should be adequately planned, considering many aspects that are important in education. However, there are some challenges which one faces while designing these models.
In private education sectors, there is a system for rewarding productivity . It enhances the efficiency and creativity of the people working in that association.
However, if people start working for rewards more than working towards excellence, it poses a threat to the business model. The vicious cycle of expectations begins there and meets no end.
Technical Flaws as Threats to the Business Model of Education
Along with the flaws in the moral and value system of the business model, there could be flaws in the technical aspects as well.
One of the most impactful technical flaws is the inefficiency of the teachers. Sometimes, the teachers themselves do not know the subjects they are teaching thoroughly. Also, the infrastructure of the classrooms in the case of institutions plays a vital role. The maintenance of these structures is an integral part of the business model.
Innovations in the Education
We all know and believe that change is the only constant thing in the world. Hence, innovation picks up the lion’s share in making a sustainable business model. Here are a few innovations that you can bring about:
1. Make the Doors Wider
The con of many educational institutions is that they keep the doors narrower. They don’t expand enough to provide newer opportunities to their students.
It can be eradicated by making the sea opportunities available for the students as well as the teachers. The new domains of education can be made available by making slight changes in the business models.
It will give the students more exposure to the newer world. It will encompass the learners from different streams and engulf them in the education system.
2. Earning and Learning
Many people in the world cannot afford quality education. The costs of education have seen a tremendous rise in the past few years. Also, some people like to learn using their own hard-earned money.
Here, the concept of earning while learning comes into the picture. The business model of any education system should allow the students to take up internships and part-time jobs.
It will empower the students to learn on their own. This policy will get more students into the system of education. There will be lesser drop-outs, and lesser people will fall out of the educational system.
3. Employer as Payer
Many times students do not know what exactly to go for, whether to take up a job or stick to traditional higher education. Here, they can undertake a job or an internship whose profile they like and find suitable.
If they have the relevant skills, they will be approached by the employer.
The employer will take care that they complete the education they require. He/she will pay the fees for the educational course or program. It will facilitate career-specific training and promise better employment .
How to Make a More Sustainable Business Model of Education?
The essential form of stability that any educational institution needs is financial stability. If they get proper funding, they can improve their ways of teaching.
If they do not get enough money, they will not want to explore other avenues and streams of education. In the education system, it is essential to stay relevant and keep on changing the business model according to the need of the market .
They should take proper and reasonable fees from the students and then invest these funds in the correct manner, which will get the maximum financial benefits.
How to Translate a Small Scale School to a Larger Educational Institution?
There are many small scale schools and educators in the world.
Sometimes, what they lack to translate themselves into larger educational institutions is a proper business model and vision for the next few years. They should study the market well and recruit only those professionals who can add value to their already existing system.
Starting an education institution is not a cakewalk. You need proper resources and a well-drafted plan. For that, you have some experts on board who can guide you through that.
In addition to that, the tips mentioned above will help you design the best business model for your educational institution.
Are you also thinking of starting an education-related business? Then feel free to share with us about your expertise and niche so that we can suggest the right business model of education for your target audiences.
Liked this post? Check out the complete series on Business Models
About Hitesh Bhasin
Hitesh Bhasin is the CEO of Marketing91 and has over a decade of experience in the marketing field. He is an accomplished author of thousands of insightful articles, including in-depth analyses of brands and companies. Holding an MBA in Marketing, Hitesh manages several offline ventures, where he applies all the concepts of Marketing that he writes about.
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Changing the Business Model of Business Schools
- Business schools are challenged to produce more timely and practical research, ensure career readiness for a variety of professional roles, and generate broad economic impact.
- Through significant shifts in learning and teaching, research and innovation, and enterprise and knowledge exchange, business schools can better align their models to today’s stakeholder needs.
- A transformational, rather than transactional, approach to a business model focuses on collaborative and adaptive methods to teaching and knowledge creation.
Is our business school on the right track? Have we figured out the best business model for our business school? Are we creating real business and societal impact with our teaching, research, and knowledge exchange? At the Teesside University International Business School (TUIBS) in the U.K., these questions have permeated recent discussions among leadership at all levels of the school.
For a number of years now, members of the business sector, academia, and broader society have questioned the relevance and effectiveness of business schools. The need to ensure academic rigor and the need to provide timely and practical business solutions are often at odds in these critiques, as the structures that help ensure academic excellence are notoriously slow when compared to the pace of business.
Add to this tension the post-pandemic environment and the dynamically evolving age of artificial intelligence, with the advent of disruptive tools like ChatGPT , and the relevance question is only heightened. Business schools further need to challenge the status quo of leadership agendas that are often disconnected from the stakeholders who are meant to benefit from organizations’ purposes.
At TUIBS, we have tried to address the rising demands from business and society by transforming our business model, specifically in terms of learning and teaching, research and innovation, and enterprise and knowledge exchange.
The following table illustrates the contrast between our school’s transactional (our traditional) and transformational (our reinvented) approach to a business model, through the lens of these three key areas.
Learning and Teaching: Metrics and Challenges
At a fundamental level, the role of business schools starts in the sphere of learning and teaching. Business schools shape the worldview of the next generation of leaders while polishing and refining the thinking of business executives.
More than ever, business schools also have a critical role to play in addressing sustainability challenges of businesses and wider society. One way to do this is by incorporating sustainability principles into the curriculum through courses, business scenarios, and projects.
Business schools also have a critical role to play in addressing sustainability challenges of businesses and wider society.
Business schools also need to consider sustainability through the lens of student mobility: Is international study sustainable from a resource perspective in its traditional format? This is just one of a range of dichotomies that schools need to tackle in their learning and teaching activities, including investing in campus development versus digital spaces, enabling student productivity while embracing experimentation and failure, and choosing to embrace AI or avoid it entirely through redesign.
We have envisaged our learning and teaching business model in terms of focus, methods, content, and metrics, as follows:
Business schools need to quickly respond to the external forces that are shaping learning and teaching models, and many will need to make difficult decisions to adapt their practices.
A couple of key challenges we are working on in learning and teaching include:
- Taking advantage of AI to radically transform the delivery and assessment structure of business school offerings . For example, ChatGPT could be integrated into the student portal to provide personalized recommendations based on a student's academic performance and interests.
- Staying current and relevant in the fast-changing business landscape by preparing learners for multiple career paths and transitions . For example, we aim to build learners’ career readiness with a broad range of skills and knowledge that can be applied to heterogenous industries. This calls for a sharp focus on growth mindset and an appreciation for open innovation—where learners take inspiration from solutions available in other industries to solve challenges in their own.
Research and Innovation: Metrics and Challenges
In the race for scientific excellence, faculty are often encouraged and incentivized to publish more academic papers; however, as a consequence of these pursuits, efforts to solve real-world problems have been deprioritized.
Business schools should rethink the tangible business value that their scholarly work provides. At TUIBS, we have attempted to sharpen our research and innovation business model in terms of focus, methods, content, and metrics, as follows:
With rapid technological development affecting both education and the economy, the research and innovation agenda of business schools has often struggled to keep pace. At TUIBS, we are refocusing our activities on major trends like net-zero innovation, responsible leadership, and digital transformation.
Specific key challenges we are addressing in this space include:
- Using data-driven and evidence-based research that leverages predictive analytics to test hypotheses and decision-making . For instance, in marketing, predictive analytics is helping us make informed decisions about which promotions to offer to which customers.
- Producing problem-driven research that engages with stakeholders to generate actionable insights and solutions . For example, the problem of food waste in a specific community needs the engagement of stakeholders such as local government officials, food banks, and grocery stores to identify the cause and extent of food waste.
Enterprise and Knowledge Exchange: Metrics and Challenges
Demand for informed input to shape management education and business practice is increasing tremendously. To ensure that students are able to put their learning into practice, TUIBS provides opportunities for real-world learning through authentic and effective collaboration with enterprises.
A smooth and meaningful interaction of academics with non-academics leads to a win-win situation for both enterprises and enterprising business schools.
Our model of providing students with opportunities to work with international partners through summer schools and student exchanges has given our students great cross-cultural exposure while also increasing their employability prospects.
This is where a smooth and meaningful interaction of academics (including lecturers, researchers, and administrators) with non-academics (including managers, practitioners, coaches, and consultants) leads to a win-win situation for both enterprises and enterprising business schools . Accordingly, the focus, methods, content, and metrics for our enterprise and Knowle exchange business model are as follows:
The many uncertainties across the higher education sector mean that, for business schools like ours to prosper, we need to be almost separate entities with our own approaches that reduce or eliminate the administrative tasks that often create lag time.
Some key challenges that we are working on in terms of changing our enterprise and knowledge exchange business model include:
- Focusing on research commercialization and intellectual property by licensing technology and extending know-how to startups, spin-off companies, and established firms . For example, we are seeking out partnerships with established firms in the solar industry, which could then license the technology from the university or invest in the spin-off company.
- Disseminating knowledge that leads to policy recommendations and engages with media and practitioners . For instance, a study on the effects of minimum wage laws on employment rates can help us shape public discourse and give us an understanding of complex societal issues.
The Need for Profound Change
In the United Kingdom, as well as around the world, the number of business schools is growing. Business schools today represent the fastest-growing segment of the higher education industry. This, too, at a time when there is a confluence of adverse factors at play , including climate change, the rising cost of living, social unrest, political crises, and economic instability. The world needs business schools, but business schools need to ensure their value to stakeholders by transforming their business models.
By collaborating with industry partners and other disciplines on research projects; embracing technological innovations in teaching and assessment; and offering hands-on learning and consulting opportunities that benefit students, businesses, and communities, business schools can secure their relevance for the long term.
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Business Models Education Entrepreneurs are Exploring
For some strange reasons education is not considered entrepreneurial by nature, but in fact it is a humongous industry scaling between other sectors of business.
Given a little less importance than deserved, just like education the business model in education on which it is being operated plays a significant role in the success stories of an education enterprise.
As said by Mr. Ravi Shankar Prasad, IT Minister “ Healthcare, Education and agriculture are three priority areas in terms of technology, where the government can provide long term benefits to people of India .”
For edupreneurs who are constantly working to mark a place in the industry, the business model turns out to be the backbone irrespective whether you are approaching for your next round of funds or some potential clientele.
In an institutional scale a business model describes the way an organization defines itself. It is not only an earning model: describing the earnings versus the costs, determining the net income of the organization. The business model also contains collaborations, essential activities and processes and core competencies. By defining the organization in this way shows clearly what the organization sees as its raison d’être, its competitive position in regard to other institutions and organizations.
A canvas of business model in education is painted by various colors such as key activities, value proposition, customers’ relationships, customers, revenue, channels, key resources, cost, key partners and more. Indeed, “ There is no substitute for a great product .” But without the right business model in education “the great product” may end up losing its worth.
Following are some business models that you would like to explore depending upon the nature of your product being offered.
Check’em out below:
This education business plan requires the company to offer a “Freemium” model for teachers, students and parents is the best way to maximize sales. Under this scheme, you have to provide your customer with amazing few free features of your product and premium version of your product is paid with even better features that make them shed a little weight from their pocket. The content must be of upmost quality with better material being provided for money.
This is the more traditional business model in education. The selling to schools is done through district leaders. The sales strategy is generally referred as “top-down,” meaning a district makes a purchase for all the schools under its administration. The main advantage of an institutional business model is that districts are positioned to sign large contracts. This is the best approach for edtech companies that need to integrate into school- or district-wide data systems, or whose users are going to be school administrators.
A less common, but quite interesting business model in education is one where neither schools nor parents pay. Instead corporate or foundation sponsors pay for product placement, usually as part of a corporate social responsibility (CSR) initiative. The advantage of this model is that the sponsor will care mostly about usage, which is likely to be quite high if you’re offering a quality, free product to schools.
The consumer approach is an emerging business model that allows schools to use a product for free, and then charges families if they want to continue usage at home. This model is suited to companies with products that kids can use on their own. Schools, in this case, essentially become lead generation for consumer adoption.
With this model, it is important to create a “product loop” between school and home, where teachers use the product with kids in school and then also recommend to parents that students continue using the product at home. The advantage of this model is that schools love free (quality) products, which can drive user adoption, and parents tend to listen to teachers’ recommendations for what tools to use at home. The adoption is highly seen in the edtech tools for the toddlers or the kindergarten level.
Growth with Aim to Monetize
This is one of the most common model being used by the edtech startup. Free services are being offered to sustain the user base with aim to monetize in the future. One big drawback of this model is meeting the high expectations they set for the VCs when it comes to monetization of the same. n edtech K-12, this very selective league includes a small number of companies
Boots on the Ground
This model is highly expensive and slow but does bring some real results. Companies like MasteryConnect and BrightBytes have been able to mark a place with working on the same model.
The strategy is to pitch district administrators with a top-down sales approach that involves large ranks of salespeople with their “boots on the ground.” Sales cycles in K-12 are infamously bureaucratic, which makes it frustrating for startups that need to move fast and show continuous progress and significant growth on a monthly or quarterly basis. Even if a product does manage to catch the eye of the right person in the district administration, approval processes in these organizations are cumbersome.
Startups with this approach can succeed, but sales and marketing expenses will drive up the price of the product.
“ Money is like gasoline during a road trip. You don’t want to run out of gas on your trip, but you’re not doing a tour of gas stations .” – Tim O’Reilly
“ Vision is great, but don’t forget the numbers, especially in the edtech space .” – Sunitha Viswanathan, Unitus Seed Fund
Though both the quotes are in paradox but so is life. The road isn’t the same on all lengths.
[Whitepaper] The B2B and B2C Battle in EdTech Globally
What Education Entrepreneurs Miss When Selling to Schools
Because education entrepreneurs have no rule book get creative, imaginative and get out with something different… a business model of your own.
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- August 21, 2023
eLearning is one of the fastest-growing businesses in the world, especially after the outbreak of COVID-19. If you plan to start your eLearning business, you must be fully aware of the types of eLearning business models you can choose and establish a business on.
COVID-19 created a huge opportunity for the ed-tech industry as 1.37 billion learners were impacted by national school closure in March 2020. Albert Einstein once said, “In the midst of every crisis lies great opportunity .” Similarly, this crisis presented an opportunity in the form of e-learning businesses. With the massive demand for e-learning and online education across the globe, it is high time for you to start an eLearning business , and to be successful; you need to adopt an eLearning business model.
What is an eLearning Business Model?
An eLearning business model is a framework that would guide your business to generate monetary returns. It provides a roadmap to your business plans and helps you envision the long-term value of your business. Different types of eLearning business models are being used by businesses but we have gathered the most successful and proven business models for you.
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There are 3 most common and successful eLearning business models that you can follow. For your ease, we have attached an infographic below displaying the 3 eLearning models.
1. Night School Model
The term night school model came up from the concept of skill-based classes. It is a classical business model where a learner pays a one-time fee to access the course content. Courses under this business model follow a fixed framework that includes learning modules, assessments, quizzes, or examinations to test the learner. So, for example, if you are interested in learning Tableau , then you can follow the below steps:
- Search the course on an eLearning platform such as Udemy or Coursera
- Enroll by paying a nominal fee
- Access the course content
- Pass the quiz and complete the course
The night school model is most suitable for learners seeking a specific skill or learning a particular subject or a language. Most eLearning businesses adopt this model as it is a suitable alternative to physical classroom learning. This eLearning business model can be helpful for new businesses who are looking to generate cash flow by the subscriptions and sale of courses. Moreover, It is also a suitable model for businesses with high-priced courses.
However, this model has some downsides as well. The learner would only pay the course fees once and might not reinvest in your eLearning business again. In addition, if you want to focus on multiple topics, you will have to make separate courses for each of them since learners seek specific courses; hence, it is time-consuming.
There are some pros and cons of the night school model that are displayed in the table below:
2. Academy Model
The academy model is subscription-based, where the eLearning platform operates as a virtual school. An academy eLearning business model encourages students to learn and develop multiple skills and provides an extensive library of courses, videos, and other learning materials. The academy model also provides numerous features for the learners, such as live question-and-answer sessions, support groups, and one-to-one sessions with the instructors.
This model creates a long-term relationship between the platform and the learners. It is suitable for creators, fitness enthusiasts, sports fanatics, and professionals in their respective fields. The academy model covers broad topics and then covers each area in detail, attracting learners looking to learn multiple skills.
For example, you want to learn about graphic designing in an eLearning platform . The academy model would provide information about different tools and software such as Photoshop, Indesign, Illustrator, and other Adobe software.
One of the plus points of this model is the constant inflow of subscription fees from the subscribed learners. Moreover, you can earn more in the future with the increase in the number of subscribers without additional effort to create more content. The pros and cons of this model are listed in the table below:
3. Combined Model
A combined model is the integration of the “Night School Model” and “Academy Model.” This model offers both subscription-based offers as well as stand-alone courses with one-time fees. This model is suitable for those students who are willing to pay extra for additional course material or courses that can help them improve their academics and skills.
How to choose the most suitable eLearning Business Model?
You have clearly understood all three eLearning business models; now, you can find the best fit between your business and the eLearning business models. Based on your core competencies, you can assess all three options and then opt for the most suitable one.
Edly is providing free eLearning business consultancy and platform demo that you can try out before making a final decision.
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School Business Plan Template
Written by Dave Lavinsky
School Business Plan
Over the past 20+ years, we have helped over 500 entrepreneurs and business owners create business plans to start and grow their schools.
If you’re unfamiliar with creating a school business plan, you may think creating one will be a time-consuming and frustrating process. For most entrepreneurs it is, but for you, it won’t be since we’re here to help. We have the experience, resources, and knowledge to help you create a great business plan.
In this article, you will learn some background information on why business planning is important. Then, you will learn how to write a school business plan step-by-step so you can create your plan today.
Download our Ultimate Business Plan Template here >
What Is a Business Plan?
A business plan provides a snapshot of your school as it stands today, and lays out your growth plan for the next five years. It explains your business goals and your strategies for reaching them. It also includes market research to support your plans.
Why You Need a Business Plan
If you’re looking to start a school or grow your existing school, you need a business plan. A business plan will help you raise funding, if needed, and plan out the growth of your school to improve your chances of success. Your school business plan is a living document that should be updated annually as your company grows and changes.
Sources of Funding for Schools
With regards to funding, the main sources of funding for schools are donations and gifts, tuition, personal savings, credit cards, bank loans, and angel investors. When it comes to bank loans, banks will want to review your business plan and gain confidence that you will be able to repay your loan and interest. To acquire this confidence, the loan officer will not only want to ensure that your financials are reasonable, but they will also want to see a professional plan. Such a plan will give them the confidence that you can successfully and professionally operate a business. Personal savings and bank loans are the most common funding paths for schools.
Finish Your Business Plan Today!
How to write a business plan for a school.
If you want to start a school or expand your current one, you need a business plan. The guide below details the necessary information for how to write each essential component of your school business plan.
Your executive summary provides an introduction to your business plan, but it is normally the last section you write because it provides a summary of each key section of your plan.
The goal of your executive summary is to quickly engage the reader. Explain to them the kind of school you are running and the status. For example, are you a startup, do you have a school that you would like to grow, or are you operating a chain of schools?
Next, provide an overview of each of the subsequent sections of your plan.
- Give a brief overview of the school industry.
- Discuss the type of school you are operating.
- Detail your direct competitors. Give an overview of your target customers.
- Provide a snapshot of your marketing strategy. Identify the key members of your team.
- Offer an overview of your financial plan.
In your company overview, you will detail the type of school you are operating.
For example, you might specialize in one of the following types of schools:
- Private K-12 school : this type of school typically charges tuition, and may be affiliated with a religious organization, or specialize in a particular learning method.
- Charter school: this type of school offers primary or secondary education for a tuition, and may receive some public funding, and/or donations. These schools require their students to take state-mandated exams.
- Special subject school: this type of school specializes in teaching a specific subject, such as driving, first-aid, self-defense, fine arts, language, or general tutoring.
- Preschool: this type of school typically serves children who are aged 3 and 4. These schools prepare young children to enter formal education, and are funded by some combination of tuition, donations, and government grants.
In addition to explaining the type of school you will operate, the company overview needs to provide background on the business.
Include answers to questions such as:
- When and why did you start the business?
- What milestones have you achieved to date? Milestones could include the number of students served, the number of students accepted into elite formal education institutions, etc.
- Your legal business Are you incorporated as an S-Corp? An LLC? A sole proprietorship? Explain your legal structure here.
In your industry or market analysis, you need to provide an overview of the school industry.
While this may seem unnecessary, it serves multiple purposes.
First, researching the school industry educates you. It helps you understand the market in which you are operating.
Secondly, market research can improve your marketing strategy, particularly if your analysis identifies market trends.
The third reason is to prove to readers that you are an expert in your industry. By conducting the research and presenting it in your plan, you achieve just that.
The following questions should be answered in the industry analysis section of your school business plan:
- How big is the school industry (in dollars)?
- Is the market declining or increasing?
- Who are the key competitors in the market?
- Who are the key suppliers in the market?
- What trends are affecting the industry?
- What is the industry’s growth forecast over the next 5 – 10 years?
- What is the relevant market size? That is, how big is the potential target market for your school? You can extrapolate such a figure by assessing the size of the market in the entire country and then applying that figure to your local population.
The customer analysis section of your school business plan must detail the customers you serve and/or expect to serve.
The following are examples of customer segments: families with elementary-aged children, families with high-school-aged children, families with preschool children.
As you can imagine, the customer segment(s) you choose will have a great impact on the type of school you operate. Clearly, families with high schoolers would respond to different marketing promotions than families with preschoolers, for example.
Try to break out your target customers in terms of their demographic and psychographic profiles. With regards to demographics, including a discussion of the ages, genders, locations, and income levels of the potential customers you seek to serve.
Psychographic profiles explain the wants and needs of your target customers. The more you can recognize and define these needs, the better you will do in attracting and retaining your customers.
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Your competitive analysis should identify the indirect and direct competitors your business faces and then focus on the latter.
Direct competitors are other schools.
Indirect competitors are other options that customers have to purchase from that aren’t directly competing with your product or service. This includes public schools, virtual schools, and families who do homeschooling. You need to mention such competition as well.
For each such competitor, provide an overview of their business and document their strengths and weaknesses. Unless you once worked at your competitors’ businesses, it will be impossible to know everything about them. But you should be able to find out key things about them such as
- What types of students do they serve?
- What type of school are they?
- What is their pricing (premium, low, etc.)?
- What are they good at?
- What are their weaknesses?
With regards to the last two questions, think about your answers from the customers’ perspective. And don’t be afraid to ask your competitors’ customers what they like most and least about them.
The final part of your competitive analysis section is to document your areas of competitive advantage. For example:
- Will you provide specialized instruction, either in subject or in method?
- Will you offer courses or services that your competition doesn’t?
- Will you provide better customer service?
- Will you offer better pricing?
Think about ways you will outperform your competition and document them in this section of your plan.
Traditionally, a marketing plan includes the four P’s: Product, Price, Place, and Promotion. For a school business plan, your marketing strategy should include the following:
Product : In the product section, you should reiterate the type of school that you documented in your company overview. Then, detail the specific products or services you will be offering. For example, will you provide religious-focused K-8 education, college preparatory courses, or single-subject instruction like driving or fine arts?
Price : Document the prices you will offer and how they compare to your competitors. Essentially in the product and price sub-sections of your plan, you are presenting the courses and/or extracurricular activities you offer and their prices.
Place : Place refers to the site of your school. Document where your company is situated and mention how the site will impact your success. For example, is your school located in a growing neighborhood, in the city center, or will you operate purely online? Discuss how your site might be the ideal location for your customers.
Promotions : The final part of your school marketing plan is where you will document how you will drive potential customers to your location(s). The following are some promotional methods you might consider:
- Advertise in local papers, radio stations and/or magazines
- Reach out to websites
- Distribute flyers
- Engage in email marketing
- Advertise on social media platforms
- Improve the SEO (search engine optimization) on your website for targeted keywords
While the earlier sections of your business plan explained your goals, your operations plan describes how you will meet them. Your operations plan should have two distinct sections as follows.
Everyday short-term processes include all of the tasks involved in running your school, including answering calls, planning and delivering instruction, applying for grants, fundraising, performing administrative tasks, overseeing instructors, handling discipline, scheduling and monitoring extracurricular activities, etc.
Long-term goals are the milestones you hope to achieve. These could include the dates when you expect to enroll your Xth student, or when you hope to reach $X in revenue. It could also be when you expect to expand your school to a new city.
To demonstrate your school’s potential to succeed, a strong management team is essential. Highlight your key players’ backgrounds, emphasizing those skills and experiences that prove their ability to grow a company.
Ideally, you and/or your team members have direct experience in managing schools. If so, highlight this experience and expertise. But also highlight any experience that you think will help your business succeed.
If your team is lacking, consider assembling an advisory board. An advisory board would include 2 to 8 individuals who would act as mentors to your business. They would help answer questions and provide strategic guidance. If needed, look for advisory board members with experience in running a school or experience with public school administration or who has served on a public school board.
Your financial plan should include your 5-year financial statement broken out both monthly or quarterly for the first year and then annually. Your financial statements include your income statement, balance sheet, and cash flow statements.
An income statement is more commonly called a Profit and Loss statement or P&L. It shows your revenue and then subtracts your costs to show whether you turned a profit or not.
In developing your income statement, you need to devise assumptions. For example, will you enroll 100 or 1,000 students per semester, and/or offer extracurricular activities? And will sales grow by 2% or 10% per year? As you can imagine, your choice of assumptions will greatly impact the financial forecasts for your business. As much as possible, conduct research to try to root your assumptions in reality.
Balance sheets show your assets and liabilities. While balance sheets can include much information, try to simplify them to the key items you need to know about. For instance, if you spend $50,000 on building out your school, this will not give you immediate profits. Rather it is an asset that will hopefully help you generate profits for years to come. Likewise, if a lender writes you a check for $50,000, you don’t need to pay it back immediately. Rather, that is a liability you will pay back over time.
Cash Flow Statement
Your cash flow statement will help determine how much money you need to start or grow your business, and ensure you never run out of money. What most entrepreneurs and business owners don’t realize is that you can turn a profit but run out of money and go bankrupt.
When creating your Income Statement and Balance Sheets be sure to include several of the key costs needed in starting or growing a school:
- Cost of equipment and supplies
- Payroll or salaries paid to staff
- Business insurance
- Other start-up expenses (if you’re a new business) like legal expenses, permits, computer software, and equipment
Attach your full financial projections in the appendix of your plan along with any supporting documents that make your plan more compelling. For example, you might include your school location lease or a list of elective courses or extracurricular activities you will offer.
Writing a business plan for your school is a worthwhile endeavor. If you follow the template above, by the time you are done, you will truly be an expert. You will understand the school industry, your competition, and your customers. You will develop a marketing strategy and will understand what it takes to launch and grow a successful school.
School Business Plan FAQs
What is the easiest way to complete my school business plan.
Growthink's Ultimate Business Plan Template allows you to quickly and easily write your school business plan.
How Do You Start a School?
Starting a school is easy with these 14 steps:
- Choose the Name for Your School
- Create Your School Business Plan
- Choose the Legal Structure for Your School
- Secure Startup Funding for Your School (If Needed)
- Secure a Location for Your Business
- Register Your School with the IRS
- Open a Business Bank Account
- Get a Business Credit Card
- Get the Required Business Licenses and Permits
- Get Business Insurance for Your School
- Buy or Lease the Right School Equipment
- Develop Your School Business Marketing Materials
- Purchase and Setup the Software Needed to Run Your School
- Open for Business
Learn more about how to start your own school .
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School Business Plan Template
School business plan.
You’ve come to the right place to create your School business plan.
We have helped over 5,000 entrepreneurs and business owners create business plans and many have used them to start or grow their Schools.
Below is a template to help you create each section of your School business plan.
Southside Academy, located in St. Paul, Minnesota, is a private school that has been providing quality education to the community’s school children since 2017. Southside Academy teaches elementary, middle school, and high school students in a wide range of subjects including mathematics, science, and history. We aim to provide a welcoming and inviting environment where every student can reach their highest potential.
We promote academic, artistic, and athletic excellence in a close-knit learning environment, with a challenging curriculum that cultivates intellectual curiosity. Furthermore, we offer a low teacher-to-child ratio, where teachers can build close connections with their students as they help them excel. We develop confident, continual learners by establishing behavioral supports and the social culture needed for students to achieve social, emotional, and academic success.
Southside Academy offers a premium private education at an affordable tuition fee. We provide a challenging education where students can explore their true potential and a safe space where they can freely discover and express themselves. Our students range from 1st grade to 12th grade and we teach a wide variety of subjects including:
- Basic Mathematics
- Physical Education
Southside Academy primarily serves families within a 5-mile radius of the school’s location. The area is home to thousands of middle and upper-class families looking for high-quality education for their children. Before the school was built, the area was underserved and many children had to travel far to attend quality private schools.
Southside Academy’s founder is Mike Brown who has been working as a teacher for more than 20 years. Mike has taught at several public schools in the region but saw a great demand for private education. He noticed that the current location of the school was underserved and set out to create a school to serve this population. Mike Brown has successfully led Southside Academy as its principal since the school’s inception and will continue to do so for the foreseeable future.
Mike Brown is supported by a team that has experience teaching students, managing finances, and running businesses. Specifically, our team has solid experience in being effective teachers, connecting to different types of students, and achieving key goals.
Southside Academy is able to achieve success by offering the following competitive advantages:
- Location: Southside Academy’s location is near the center of town, giving members of our community easy access for parents and their children.
- Passionate and Skillful Teachers: Southside Academy hires teachers with strong academic backgrounds who are skillful in handling all types of children.
- Low teacher-to-student ratio: We provide a low teacher-to-student ratio so that every student gets personal attention from teachers to reach their highest potential.
- Affordable, quality education: Most of the schools in the area offer their services at a very expensive price. Our fees will be moderately low so that good education is accessible to all families.
Southside Academy is currently seeking additional donations of $600,000 in order to fulfill our mission. The breakdown of the funding may be seen below:
- Salaries: $200,000
- School Materials (books, toys, desks, chairs, etc): $180,000
- Administrative Expenses: $120,000 to pay for lease costs, ongoing operational expenses, and marketing.
- Working capital: $100,000
The following graph below outlines the pro forma financial projections for Southside Academy.
Who is southside academy, southside academy’s history.
Southside Academy started as an idea from a group of school teachers, including Mike Brown. The teachers were university pals who are passionate about teaching and children. They have seen the gaps in education in St. Paul, Minnesota, and wanted to create a school that elevates the academic environment for the children of this area.
Their plans to build a school started in 2015, but it was only until April 2016 that they finally completed all the paperwork and met the legal requirements. Since then, Southside Academy has achieved the following milestones:
- Found a location and built the school
- Developed the school’s name, logo, and website
- Determined curriculum
- Hired teachers and other key employees
Southside Academy’s Services
Education is an essential foundation for a thriving society. It’s more important than ever before that every child has access to affordable, high-quality education. While public schools are an essential option for many low-income families, the education provided by private schools often results in higher test scores and more students moving on to top-tier universities.
The private school industry has experienced steady growth in the past five years. The key industry drivers are economic growth, the rise in numbers of K-12 students, an increase in the number of families with both parents working, and government initiatives to support education.
According to Polaris Market Research, this growth is expected to continue with a forecasted compound annual growth rate of 6.6% from now until 2030. This shows that Southside Academy has great potential to keep growing and expanding. We will have ample opportunities to grow our curriculum and offer services to students that help them reach their highest potential.
Demographic profile of target market.
Southside Academy serves the families and children of St. Paul, Minnesota. The area is mostly populated by young couples and new families that have disposable income and can pay a premium for their children’s education.
The precise demographics of the town in which our location resides are as follows:
We primarily target the following three customer segments:
- Young children
- Young couples
Direct and indirect competitors.
Southside Academy faces competition from other schools with similar profiles. A description of each competitor company is below.
Waters Independent School
Founded in 1968, Waters Independent School is a non-profit and tax-exempt independent school system. The school is governed by an independent Board of Trustees and offers preschool through eighth-grade programs. WIS is accredited by the state’s Council of Independent Schools (FCIS).
Waters Independent School has small class sizes with low student-to-teacher ratios. Further, WIS’ Programs include a strong academic foundation coupled with programs in the arts, physical education, media/technology, foreign language, and extracurricular areas.
Hill Preparatory School
Founded in 1923, Hill Preparatory School is a private, non-sectarian, coeducational, college preparatory day school. It offers PK-12 programs in a safe, student-centered environment. HPS supports its students through the challenges of the school year with one-on-one attention from dedicated faculty, robust services like The Learning Center and the College Center, and the most advanced educational technology. The campus spans 28 acres and has a new 60,000+ square foot facility.
Future Leaders Preparatory School
Founded in 1968, Future Leaders Prep is a private school for PreK3-8th grade. FLPS offers preschool, elementary school, and middle school programs and offers the International Baccalaureate program of study for all students. Teachers are endorsed in gifted education through a master’s level grant with [local University]’s College of Education Gifted Program. In addition to the school, Future Leaders offers community programs such as music, dance, art, and theater lessons through the Community School of the Arts, youth sports in the Community School for Sports, and the 7-week summer camp.
There are many schools in St. Paul, Minnesota but none of them provides the same quality of education that Southside Academy provides, specifically the following:
Brand & value proposition.
The Southside Academy brand will focus on the school’s unique value proposition:
- Providing premium education at an affordable price
- Providing a supportive and challenging place for children to learn
- Giving parents the assurance that their children will reach their full potential
The promotions strategy for Southside Academy is as follows:
Southside Academy will invest heavily in a social media advertising campaign. The school will utilize social media accounts and invest in ads on all social media platforms. It will use targeted marketing to appeal to the target demographics.
The school will place print advertisements in key local publications, including newspapers, area magazines, and business newsletters. Additionally, Southside Academy will print brochures and place them in specific locations frequented by target individuals.
Southside Academy will invest heavily in developing a professional website that displays all of the features and benefits of Southside Academy. It will also invest heavily in SEO so that the school’s website will appear at the top of search engine results.
Southside Academy will blanket neighborhoods with direct mail pieces. These pieces will provide general information on Southside Academy and incentives to enroll.
Southside Academy prices its tuition at a moderate price so our students and their families feel they are getting great value when choosing our school.
The following will be the operations plan for Southside Academy.
- Mike Brown is the school Principal. He manages the teachers, directs the direction of education, and serves as the head of the school.
- Mike is joined by Amanda Johnson who acts as the Administrative Assistant for the school. She helps Mike with the operations of the school as well as the marketing and administrative functions.
- Mike has hired an extensive team of highly qualified educators. Together, they teach dozens of subjects, including biology, chemistry, social studies, and mathematics. Every teacher that works for Southside Academy is passionate about education and pushing their students to reach their highest potential.
Southside Academy expects to achieve the following milestones in the following six months:
- 3/202X Kickoff of promotional campaign to attract new students
- 4/202X Start donation campaign
- 5/202X Hire new teachers for the upcoming year
- 6/202X Achieve donation/funding goal
- 7/202X Finalize list of incoming students for next year
- 8/202X Start next school year
Key revenue & costs.
Southside Academy’s revenues come from student tuition fees and donations from both individuals and corporations.
The major costs for the company will be staffing, marketing expenses, location maintenance, equipment, and materials.
Funding Requirements and Use of Funds
Southside Academy is currently seeking additional fundraising and capital of $600,000 in order to fulfill our mission. The breakdown of the funding may be seen below:
The following outlines the key assumptions required in order to achieve the revenue and cost numbers in the financials and to pay off the startup business loan.
- Year 1: 200
- Year 2: 300
- Year 3: 400
- Year 4: 500
- Year 5: 600
- Tuition rate per year: $10,000
Income statement, balance sheet, cash flow statement, school business plan faqs, what is a school business plan.
A school business plan is a plan to start and/or grow your school business. Among other things, it outlines your business concept, identifies your target customers, presents your marketing plan and details your financial projections.
You can easily complete your School business plan using our School Business Plan Template here .
What are the Main Types of School Businesses?
There are a number of different kinds of school businesses , some examples include: Private K-12 school, Charter school, or Preschool.
How Do You Get Funding for Your School Business Plan?
School businesses are often funded through small business loans. Personal savings, credit card financing and angel investors are also popular forms of funding.
What are the Steps To Start a School Business?
Starting a school business can be an exciting endeavor. Having a clear roadmap of the steps to start a business will help you stay focused on your goals and get started faster.
1. Develop A School Business Plan - The first step in starting a business is to create a detailed school business plan that outlines all aspects of the venture. This should include potential market size and target customers, the services or products you will offer, pricing strategies and a detailed financial forecast.
2. Choose Your Legal Structure - It's important to select an appropriate legal entity for your school business. This could be a limited liability company (LLC), corporation, partnership, or sole proprietorship. Each type has its own benefits and drawbacks so it’s important to do research and choose wisely so that your school business is in compliance with local laws.
3, Register Your School Business - Once you have chosen a legal structure, the next step is to register your school business with the government or state where you’re operating from. This includes obtaining licenses and permits as required by federal, state, and local laws.
4. Identify Financing Options - It’s likely that you’ll need some capital to start your school business, so take some time to identify what financing options are available such as bank loans, investor funding, grants, or crowdfunding platforms.
5. Choose a Location - Whether you plan on operating out of a physical location or not, you should always have an idea of where you’ll be based should it become necessary in the future as well as what kind of space would be suitable for your operations.
6. Hire Employees - There are several ways to find qualified employees including job boards like LinkedIn or Indeed as well as hiring agencies if needed – depending on what type of employees you need it might also be more effective to reach out directly through networking events.
7. Acquire Necessary School Equipment & Supplies - In order to start your school business, you'll need to purchase all of the necessary equipment and supplies to run a successful operation.
8. Market & Promote Your Business - Once you have all the necessary pieces in place, it’s time to start promoting and marketing your school business. This includes creating a website, utilizing social media platforms like Facebook or Twitter, and having an effective Search Engine Optimization (SEO) strategy. You should also consider traditional marketing techniques such as radio or print advertising.
Learn more about how to start a successful school business:
- How to Start a School
Other Helpful Business Plan Templates
Nonprofit Business Plan Template
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A new business model for the business school
The new scaling rules
Business schools have delivered a premium product in the form of globally accredited expertise by teaching large cohorts. However, scalability is changing with the ‘new normal’ that David Lefevre describes so well in his article for the EFMD Global blog.
This article examines two aspects of teaching and learning, the lecture and the seminar, to assess the impact of scalability on each. It is supported by a YouTube channel – Getting started this Autumn – some of which is referenced below.
The new lecture
From time immemorial, the lecture was scalable until you ran out of seats. It was so popular that double teaching was often chosen instead of worrying why the model had just hit the buffers.
Other pressures were building on the lecture, however, as it gravitated towards mere content delivery. Ted Talks profiled much better communicators, while all kinds of content were bursting onto the web: funny, clever, engaging, informative, whatever. The lecture was dying and the crisis has only helped it along.
Sure, one speaker can still reach millions on-line, but most students prefer their content in better forms. The big opportunity, however, is what is already out there, by curating content instead of creating it. That way, we still fulfil our pedagogical responsibilities but must abandon our dreams of swaying the masses with the weight of our words.
These ideas are explored in What will teaching & learning look like? and Hard learning , but it is not just about searching for great material, fun as that may be. It’s about curating a collection that targets outcomes (see Outcomes & content ).
This can be fun for students, too, once they are drawn in with training in what to look for. They will find better stuff faster than you, and it sets them up for lifelong learning.
Scalability? Less creation; more curation.
The new seminar
The scalability challenge with face-to-face is that more than 4 or 5 students on-line is hard, and even socially-distanced rooms admit fewer than before. So how affordable is it to deliver seminars to hundreds of students in small groups?
I’ve started to explore this in An industry-style focus on teaching costs is vital to survive the pandemic (Times Higher Education, September 2020) by building a simple business model to show that weekly small groups are affordable for large cohorts once the rest of the module has been redesigned to make face-to-face encounters key to the learning. There is practical help on the model in Lessons from the budget and on streamlining in Making face to face encounters pay .
Affordability will demand serious decluttering of the lecturer’s life and removing duplication and all haphazard or off-the-cuff meetings. The good news is that you can do this while promoting the importance of the time you will spend with your students.
Scalability? Radically new module designs; streamlining out distractions.
The new pedagogy
These ideas cannot be bolted onto the measures taken to survive the last academic year nor adapted to suit them: they require significant re-thinking. However, they can be structured to ease implementation and to get up and running relative quickly.
Scalability? Think hard; implement in viable steps; get senior support for the (creatively modest) changes needed to your regulatory processes.
Terry Young is Director of Datchet Consulting and Emeritus Professor at Brunel University. He specialises in challenges across the borders of industry, health and academia. His earlier career was first in commercial R&D and then as a university professor.
Trend No. 3: The business model faces a full-scale transformation
The traditional business model of higher education is broken as institutions can no longer rely on rising tuition among traditional students as the primary driver of revenue..
Managing Director | Higher Education
Cole is a managing director within the Higher Education sector at Deloitte Services LP. He has more than 30 years global experience engaging with education and non-profit research organizations, with a focus on the enabling capabilities of technology within the unique culture and context of education and research. In his current role, Cole engages with the higher education community on issues ranging from cost and revenue challenges, administrative modernization, technology transformation, Future of Work, hybrid and online modalities, enterprise risk and resiliency, and the student experience. Cole has participated in research and co-authored several monographs on leadership development and transformation in higher education, including Pathways to the university presidency, Future(s) of public higher education, and The hybrid campus – three major shifts for the post-COVID university. Prior to Deloitte, Cole served as Global Vice President for Education and Research at Oracle Corporation, serving clients across the major functional areas of the academic enterprise, including student lifecycle, HR, and finance. He has also held a variety of education-focused roles with Sun Microsystems, Inc. and Apple, Inc. In addition to the core business functions of the institution, he has experience in areas of the “front office” of higher education including research administration, student engagement, recruitment and retention, and student success. Cole serves on the corporate advisory committee for EDUCAUSE and on the board of trustees of Western Governors University and the Corporation of the Western Governors.
- [email protected]
- +1 703 626 4755
- Megan Cluver
Principal | Deloitte Consulting LLP
Megan is a Principal with Deloitte’s Higher Education team within the Government and Public Services practice. Megan has more than 10 years of experience assisting universities and academic medical centers with institutional strategy, organizational design, and operations. Her work has included transformational projects to increase service effectiveness and reduce administrative overhead across all facets of the university, as well as targeted service delivery redesign projects. Foundational to the success of Megan’s work has been strong client partnerships and a change management focus.
- [email protected]
- +1 802 281 2979
- Jeffrey J. Selingo
Jeffrey Selingo has written about higher education for more than two decades and is a New York Times bestselling author of three books. His latest book, Who Gets In and Why: A Year Inside College Admissions, was named among the 100 Notable Books of 2020 by the New York Times. A regular contributor to The Atlantic, Selingo is a special advisor for innovation and professor of practice at Arizona State University. He also cohosts the podcast, FutureU.
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Colleges and universities were built around the needs and desires of faculty. Academic majors mimicked departments and disciplines; faculty designed the curriculum on their terms and timelines; course catalogs and schedules were dictated by the needs of professors; at many institutions, research was seen as more important than the student experience; and the success of students was often left up to them. That model, which left behind large swaths of adolescents and young adults who never went to college or ended up leaving short of a degree, worked for half a century as demand for higher education continued to grow among the core audience. And while demand will remain for traditional higher education among top-ranked, brand-name institutions, many colleges and universities need a business model that is better aligned to the economic and social realities of the prospective learners that these institutions could serve.
Current models have two fundamental flaws that need to be immediately addressed for institutions to survive and thrive.
First, the cost-value equation is misaligned (figure 1). When institutions set their annual tuition prices, they often look at what they charged last year, the rate of inflation, and what their competitors are charging. Colleges and universities rarely look at what it costs them to offer their education, especially at the academic-program level and the net revenue they’re making on those programs that drive enrollment (or what they’re likely losing on low-demand programs). Without this comprehensive understanding of cost and net revenue, institutions could fail to grasp where strategic cuts can be made without damaging the academic core nor do they know where demand is shifting and how that intersects with what they’re good at or where they need to build institutional muscle by reallocating resources.
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- Explore the 2023 Higher Education Trends
- Explore the Higher education collection
- Learn about Deloitte's services
- Go straight to smart. Download the Deloitte Insights app
Second, the business model has largely been driven to this point by middle-class and affluent, well-prepared high school graduates (of all racial and ethnic backgrounds) whose parents attended college. The kind of students who propelled expansion over the last 20 years will not disappear, but they won’t spur growth either. As Trend no. 1 summarized, finding adult students who have accumulated postsecondary credits but are short of a credential is much more difficult than recruiting high school students into college. What’s more, many adult learners are juggling the demands of work, caregiving responsibilities for children and aging parents, as well as a frayed social safety net that often means a car repair or a sick child derails their progress toward a degree. A recent survey by Gallup and Lumina found that 56% of one-time students who stopped out before the pandemic would be open to reenrolling, but they also cited work and family obligations as huge hurdles to returning to college. 1 Many colleges lack the administrative and student structures to reenroll and retain adult learners, putting even more pressure on their business model.
Yet the opportunities for colleges and universities that shift their business model to a more student-centric one, serving the needs of a wider diversity of learners at different stages of their lives and careers, are immense. Politicians and policymakers are looking for solutions to the demographic cliff facing the workforce and the need to upskill and reskill generations of workers in an economy where the half-life of skills is shrinking. This intersection of needs—higher education needs students; the economy needs skilled workers—means that colleges and universities, if they execute on the right set of strategies, could play a critical role in developing the workforce of the future. For many colleges, this shift will require a significant rethinking of mission and structure as many institutions weren’t designed for workforce development and many faculty don’t believe it’s their job to get students a job. But if a set of institutions prove successful on this front, they could in the process improve the public perception of higher education, potentially leading to more political and financial support for growing this evolving business model in the future.
Call to action
Outside of the top tier of institutions, there is a critical need to develop innovative means of delivery that will require institutions to take measured risks and design new operating models and programs. Such models will call on institutions to challenge the “sacred cows” of higher education: reconsidering the ongoing viability of investments in areas such as athletics and research, assessing the use case for alternative models such as credit for prior learning, and considering even the assumption of 120 credits as the basis for a degree. There’s a compelling opportunity for institutions to develop more competitive certifications/short credential programs and lifelong learning opportunities aligned with market needs. Institutions who succeed here will need to bring faculty to the table to redefine “workforce development” to include both the immediate term technical skills employers are seeking as well as the longer term “human skills”—foundational to a liberal arts degree—that employees need to be successful in a rapidly changing skill environment.
Read the previous trend .
Read the next trend .
Let’s make this work.
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Lumina Foundation and Gallup, The State of Higher Education 2022 Report , April 20, 2022.
The authors would like to thank the following colleagues for their sizeable contributions to the report: Tiffany Dovey Fishman , Pete Fritz , Cynthia Vitters , and Jake Braunsdorf . They would also like to thank the participants in Deloitte’s inaugural Forum on the New Era of Higher Education, whose perspectives and insights helped shape the contents of the report.
Cover image by: Sonya Vasilieff and Sofia Sergi
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Applying the Business Model to Education: Current Failures, Future Possibilities
In recent years, there has been a growing trend to view educational institutions as businesses, assessing them in terms of business models and measures. Just as individuals seek guidance from a life coach and financial advisor to navigate their personal and financial goals, universities and schools are increasingly turning to specialized consultants and experts to optimize their operations and achieve their educational objectives. Consistent with such models, institutions are required to justify their existence based not on criteria such as quality of faculty or resources, but on whether they:
- satisfy a current demand,
- anticipate a future one,
- keep their clients happy,
- continuously increase product offerings (courses/programs) and sales (enrollment), and
- positively balance their books.
This trend arose partially from the need to move away from the subjective and over-emotional manner in which education has been traditionally approached (vague references to intellectual maturity and greater good) and was encouraged by the increasing reliance of educational institutions on state or private Online Broker “investors,” who demand increasingly measurable, objective, short-term “return on investment.” Also, in my experience, taking the guidance of a seasoned broker is indeed a prudent choice. For those seeking to make an informed decision, I would urge you to get expert advice now . The expertise that I encountered significantly influenced my journey, making it a rewarding and enriching experience.
Conceptual and Practical Problems with the Business Model in Education
In the business model of education, the institution is viewed as the “service provider” and the students are viewed as the “clients.” The only tangible and measurable components of the transactions between the two in the current version of the model are the fees the students pay to attend an institution and the degree (“product”) students receive at the end of their residency at the institution.
However, unlike any other business transaction in the US, payment of the fees does not guarantee that the “clients” will:
- always be right (by definition, the opposite is most often the case),
- receive the end product (the “provider” actually delivers the “product” based on criteria other than fee payment),
- be able to return the end product for a refund, exchange, or credit if it does not fulfill the expectations raised by the institution (there is no system in place to hold providers accountable for their products), or
- get a refund if they eventually change their minds and decide not to attend the institution.
To stay consistent with their current business model version, institutions would have to either:
- provide degrees upon payment (I do get several emails per day advertising just that), eliminating in the process the degrees’ value and therefore the institutions’ reason for existence or
- issue refunds to students that do not earn the degrees, permitting noncommittal students to take up resources and bankrupt their business.
One could envision a two-stage model in which the provider-client roles switch half way through the paying-fees-receiving-degree process.
Stage 1: Institutions as Service Providers, Students as Clients
In this stage, students pay a fee. In return they get access to resources that facilitate and structure learning, such as:
- qualified, accomplished, passionate instructors,
- comprehensive, manageable, and timely curricula, and
- physical and virtual facilities that promote retrieval and dissemination of high quality information related to the educational area they paid for.
These resources are clearly spelled out in the institution’s mission/advertising/contract with their “clients” (through admissions policies, for example). After the service has been provided (e.g. at the end of each quarter), clients have the right to evaluate the service they received and examine whether it fulfilled the admissions contract. If it has not, they should be able to request remedies such as:
- improvement in instruction/curricular resources and
- re-offering of a course for a reduced or waved fee.
If these requests are not satisfied, students should be entitled to a refund. This is where the first stage of the transaction ends.
Stage 2: Students as Service Providers, Institutions as Clients
In this stage, institutions “pay” students with a grade and/or degree. Degrees are the currencies of educational institutions. Their value has been earned through the universities’ work and, like all currencies, degrees carry a proof/promise of value and can be “handed over” in return for employment (among other things).
Once students have completed stage one and have accepted the educational service they received as fulfilling the admissions contract, the institution demands that students demonstrate that they deserve the grade/degree. Students do this in the form of:
- submitted projects, etc.
In stage one, it was up to the students to assess whether the institution provided them with what was promised in the admissions contract. In stage two, it is up to the institution to determine whether or not the students can provide the “service” necessary to earn the degree, which constitutes a certification that the recipient has demonstrated thorough knowledge of the topic the degree is for.
Staying within the business context, the reasons institutions would enter stage two and require proof that the students deserve the “payment” (degree) cannot be of the vague, education-for-the-greater-good kind. In other words, it cannot be about ensuring that the students have grown intellectually, are better and more knowledgeable and experienced individuals, and can better serve society. Rather, the reasons for requiring proof before handing out degrees will be about ensuring that the promise this degree makes to the world is true (the promise that the recipient has demonstrated thorough knowledge of a topic and has acquired certain certified skills). The motivation is that ‘true’ degrees result in:
- happy employers of the degree recipients,
- trust in the institution,
- demand for recipients of the institution’s degrees, and, consequently
- increase in the institution’s business, the ultimate measure of any business’s success.
Such an approach to education-as-business and to the meaning of a degree would be more consistent with the scope of a true business model. The question that remains is, “Is this what we want education to be?”
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4 thoughts on “ Applying the Business Model to Education: Current Failures, Future Possibilities ”
- Pingback: Applying the Business Model to Education: Part II | Instructional Design and Development Blog
Too often when people look at business models and education they assume the student is the client. Not so. The community is the client.
Let’s look at public K-12. The entire community buys the product through taxes and has an expectation of the product. The product is the student graduating with a pre-determined set of skills: reading, writing, arithmetic, but also more elusive skills such as citizenship and responsibility. Think of students like a car that we expect to run, stop and do a pre-determined set of things like defrost the rear window.
When public school began that set of expectations was clear–the three Rs–and because schools were local and paid with local property taxes these service providers were pretty responsive to the needs of its clients (the community). Our world is more complex and global, and communities expect our schools to prepare students for every possibility. Public schools also need to be responsive to, and show respect for, the diversity our modern world demands. So, religions, race, gender and other roles, previously simple, are now making complex demands as well. Thus, the demands of the client/community is in flux and a bit muddled. No service provider can meet such vague and changing demands.
Enter NCLB. In defining outcome with clear standards the public schools are expected to teach towards that target. Each year schools are tested, and those results are released to the community at large. As payment has shifted from local taxes to state and federal, those larger entities now assume more of a client/community role and thus demand satisfaction, or withhold payment.
What does this mean for schools? In short, service providers (aka schools) are required to meet the needs of the client/community. The students are merely product. This means that the needs and wants of the students are immaterial other than what makes them meet the expectations of the community. Learning does not need to be fun, and teachers do not need to be liked other than how that succeeds in creating a better product (students will skills).
One problem with looking at students as cars, though, is that some people automatically turn to being “old school” and harsh. But that does not work for all. Let’s remember that NCLB stands for No Child Left Behind. Graduation rates in the past were horrible compared to today, but our economy allowed for students to drop out and still become productive members of the community. Students also graduated with skills far below the standards because they showed up. Now, our client/community expects all students to not only graduate, but to have the skills expected at each grade level. How to get there?
This is where free and reduced lunch, counseling, sports teams and fun come in. What motivates students? What provides the support and motivation required for students to learn? As each student/product is different, schools need to be flexible, but they also need to get the job done for each student. If they do not–if some children are being left behind–then they need to reexamine what they do and change accordingly.
The community as client is not new, but in examining what motivates students and supports them schools have mistaken students as clients, and not products. Our society used to look at students as the children they are, and do what was best for them as a matter of course. At some point schools began to ask them what they thought, and then catered to them. There is an always-moving but clear line between getting feedback and responding versus thinking they (and their parents) know best. Schools are, at best, partners in providing what the client/community deems worth paying for.
Much of the current frustration in education comes from these confused roles. Not all students respond to the traditional curriculum, yet students are clearly not self reflective nor honest enough to determine their own needs. Schools no longer teach, but facilitate, and the debate of what to do with those not meeting standard is complex and frustrating because what works for that shrinking under served product is hard to determine. Their failure also calls into question to experience of the service providers and the client/community that succeeded with past methods. And, unlike a car, we cannot reject it and sell it for scrap. We also cannot reject delivery of students for being defective, but have to work with what comes in the door; at best we can work with our suppliers through early education and nutrition.
Differentiation and Response to Intervention are two basic strategies that service providers are now using. They are a start. Along with programs like Head Start and free and reduced lunch schools are providing services clients demand. But, notice that every solution to schools has nothing to do with the student at that moment, but instead with what skills they walk in the door with (including attitude, tenacity and other elusive skills) and what teachers do with where they are. In looking at students as the product (the car) business models such as The Toyota Way, Lean Manufacturing and organization skills like Getting Things Done suddenly speak to the educational crisis in our country.
I suggest these models are our next step.
This article seems to be focused on the college level. In that case, the client is even more elusive, but I would argue it is the future student. What goals do they have? In ten years, what do they expect from their investment. A job that pays a certain amount? A career? Or simply to be well rounded? Assume the client is future-student, and present student becomes the product while the school remains the service provider. To this end, a survey of alumni might provide guidance.
- Pingback: Business model canvas applied to education - Model canvas
Dear Prof. Vassilakis.
Your essay is the most thoughtful and constructive critical analysis of the “business model” of ed–ucation I have thus far found online. I have a sense that it is offered by a committed and thoughtful classroom educator.
(Just to introduce myself:” I hold a PhD. (philosophy) and a M.A. (philosophy of ed.). I have multiple peer review publications and conference presentations in both areas and have taught at the ABE/GED, high school, community college, and university levels, including for-profit institutions).
As I understand your more thoughtful and realistic proposal, it is offered as an approximation of the best outcome that is be reasonably “consistent with the scope of a true business model;” and that it is an open question for you whether such benefits are all we should expect from our educational institutions. But is it an open question whether any educational model can be acceptable that is conceived in terms of a commercial exchange and motivated, at least one side, by profit?
I oppose the business model because it would place the principal means of our intellectual and cultural development in the hands of people who do not understand or value them and who do not seem to be capable of reflecting on their own limitations. When used disingenuously by Wall Street, appeals to these values are, as you say, appeals to “sentimental idealism.” But the fact is that acceptance of business model would be a cultural catastrophe and massively profitable windfall for corporations. At best it would serve the perceived needs of children, older adolescents, and a general public whose beliefs and values have been shaped by these same commercial interests.
(1) You are obviously right in insisting that learning outcomes must be assessment ; but, it is equally obvious that the assessment must not be controlled by the for-profit-institutions themselves. It must be done by an independent agency through standardized tests of proven validity and reliability (including “hands on” assessment), with guidance from relevant professional organizations and oversight by Federal and State authorities, It should issue no grades, diplomas, or certificates of qualification — only an explanation of what was assessed, the evidence for the test’s validity and reliability (including correlations with related academic and employment goals), and guidance about how the results should be interpreted and applied, Of course, tests alone cannot measure everything that is educationally important, but they are the only means available to us of blocking inevitable — and highly profitable — institutional abuse. (Were such a validating resource available, there would also less need for formal educational institutions. One would be free to learn whatever one wishes, either independently through one’s own efforts or from someone able and willing to serve as a teacher; and there would be a credible, publically available, and realistically applicable measure of what was learned.)
(2) Unfortunately, the profits of post-secondary for-profit institution depend upon a pool of 700,000 fully qualified academic professionals working – if at all – as part-time “adjuncts” in traditional institutions where they are hired part-time by the semester, paid a small fraction of full-time faculty salary per course, receive no benefits, have no role in departmental or institutional governance, and are terminated at will without cause or appeal. These essentially jobless educators would provide additional for-profit institutions with a ready source of low-cost faculty. If the business model succeeds, the status of post-secondary faculty as “hired hands” will have been established, and higher education will no longer be our principle sources of intellectual and cultural leadership.
(3) Your “two step” plan would make honest bargaining and real learning at least possible; but, given grade inflation and the profit incentive, it is more likely to result in student demands for lower standards and administrative pressure on faculty to comply in order to maintain the high enrollment required for high profits, The same considerations would motivate strong corporate resistance to any rigorous, objective assessment. (The SAT is already being altered to permit lower admission standards and to reflect more popular, i.e., commercial, values.)
(4) Employer dissatisfaction with other businesses’ profitable but unsatisfactory “products” would in-pose some “quality control,” but this would take time; and if it has a serious effect on profits, the “pro-duct suppliers” will do what businesses do – cut their losses and invest their capital elsewhere.
(5) “Is this what we want education to be?” As the issue currently stands, it matters very little what “we” want. State funded educational institutions have already adopted the business model in principle and private non-profits are not far behind. All that is needed is for further cut-backs in government funding, together with continuing increases in tuition, administrative, and other, non-instructional costs, to create a financial crises. It will then be urged that the only solution is to be transfer control of curricula, standards, educational methods, revenues, and physical assets to the managerial “efficiency” of Wall Street.
(6) Growth is only valued in business if it leads to greater profits. This is not a trivial point. Growth in the number of individuals served may be assumed to be good, depending on the service actually provided; but growth for the sake of unlimited increase in wealth and power cannot. It is the latter which has led to the present problem. The business model scenarios we are being sold are produced by ad agencies; the real reasons for selling them to us are written on the “bottom line.”
As far as I can see, the only solution is for educators, K. through graduate school, to organize to block any further progress of the business model and to reverse the damage already done. (Who else will or can do it?) This can also be a first step toward permanent, responsible control by educators of their profession.
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