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Profit Centers: Has Your School Tapped These Revenue Sources?

Profit centers are growing in use in independent schools. They have been major sources of revenue for years for colleges and universities, yet independent schools tend to think that they are too small to take advantage of many of them.

The most common ones include: bus service, food service, summer programs, facilities rentals, school stores, affinity advertising, and partnerships with corporations.

Food Service

Many schools do not offer a required sit down food service. Yet for others, this mode of dining is civil, traditional and profitable. A required food service program provides better quality food, better accountability of the food service and a higher level of service overall because the overhead is high enough for the school to demand bargaining power with the vendor.

At vendor operations where lunch service is optional, students pay only for what they buy per day, or buy from small vendors and vending machines. The school earns very little by comparison. Lunch carries no “cultural” identity other than “grab your food.” Schools miss another important socialization opportunity for students.

Bus Service

Bus service is abhorrent to some schools which contract with bus companies at high prices, or are fearful of owning buses due to insurance rates, the nature of operating and repairing buses and hiring and monitoring a reliable staff.

However, the potential benefits of operating a bus service can far outweigh these perceived negatives. Many schools overlook the intangible benefits that a bus service can provide. It ensures consistent on-time arrivals. It can project a school’s marketing and recruitment efforts far from the school’s door because seeing the school’s name on the side of a bus all over a city can enhance awareness of school name and image.

Busing is also an important tool for ensuring racial, ethnic and geographic diversity. Busing can “reach out” and deliver non traditional families to the school.

Bus service can generate substantial income over expense even if the school has TV monitors in the buses with daily Discovery channel programming. The secret lies in having a good bus service director, buying good used buses rather than new buses, and ensuring high hiring standards for drivers to keep insurance rates down.

School Stores

School stores sell uniforms, athletic clothing, brand name logo clothing, school supplies, and school logo materials from children’s pajamas to coffee mugs. Stores appeal not only to students but to parents, and especially to grandparents. If a school sponsors a grandparents’ day, it is not uncommon for the entire inventory of the school store to be sold out in a day.

Schools with enrollments of 300-500 routinely can net $50,000 to $100,000 a year. Larger schools have been known to net well over one million dollars a year. Profit margins are typically 33%, and products are priced competitively with items sold at local clothing stores.

Facilities Rentals

Rental of facilities include everything from the gym, to the athletic fields and include the conference rooms, library, classrooms, pool, hockey rink, tennis courts, etc. The rentals may be timed to be used when the school is not in session, or when demands on the space are not as high. Schools can develop long term relationships with skating clubs, hockey clubs, neighborhood sports organizations, etc. If a rental relationship is well maintained and expectations for insurance, usage and maintenance are made clear, such rentals can also be major community relations opportunities.

Advertising

Affinity advertising provides an interesting option. Most schools have had some experience with allowing certain vendors to advertise through traditional means such as cola machines on campus. However, many schools have found opportunities to sell tasteful ads on standard signs featuring the names of the companies but no slogans or promotions. Such signs may be posted on the fences of the baseball diamond, the football field, inside the gymnasium and hockey rinks etc. The signs should all be in the same color background and lettering to ensure a tasteful representation for the school.

The school can sell the signs on the basis of a calculation of how many visitors will see them annually through attendance at functions and events. Several schools net well over $250,000 a year from such signs. The corporate sponsor pays for the sign and an annual rental of space fee. One school carries 10 of these on the football field, 8 on the baseball fields, 6 in one gymnasium and 6 in another. Sign rental brings in $10,000 a year after costs.

Corporate Partnerships

Corporate partnerships offer a variety of opportunities. An example is a university alumni club renting summer dormitory and dining room facilities for gathering regional alumni in nice locations. They may also include corporate sponsored partnerships in science ventures, and economics courses and programs. The potential is as varied and broad as the creative outreach of the development, alumni, business or athletic departments to corporate prospects.

Summer Programs

Many schools have highly successful summer programs that yield additional annual revenue, often in the six-figure range. Depending upon the school’s physical plant, it can offer a variety of sports programs and lessons for a range of ages, as well as enrichment in technology, foreign language and science. Schools with an entry level PK program can offer a summer “camp” that orients these youngest students to their new school. Extended care hours may also be appealing depending on the area demographics.

A high-quality, well-run summer program can be an excellent marketing tool for attracting new students. It is also a supplemental source of income for faculty.

The program must be competitively priced, but the school must ensure that the pricing includes an adequate margin over the cost of liability insurance for activities that may not be offered during the course of the normal school year; faculty and staff salaries; additional operating costs such as utilities; and wear and tear on the facility.

Summary

When they are well-managed, profit centers can reduce overall pressures on other sources of revenue such as giving of all kinds and tuition and fee income. Food service and busing are income sources resistant to economic downturns, and demand for them is price inelastic. If a school’s facilities are attractive to and needed by another organization or group, this rental income can be a stable source of revenue in tight economic times and create good will within the community. High quality summer programs are also always in demand among working families, in particular.

A school should not overlook the intangible benefits of many of these profit centers in enhancing the school’s marketing efforts and image and broadening its outreach to other constituents. Over time, they can result in increased enrollment and new and larger contributions from individuals and organizations which might otherwise not have been reached.

It is well worth the time and effort involved in researching how other schools successfully manage profit centers through NAIS or other sources of statistical information and through associations of business managers or bursars. Your school may be missing an important opportunity to realize significant gains to your bottom line as well as intangible rewards that translate into long-term financial gains.

John Littleford
Senior Partner