Strategic Financial Planning Reengineering to Secure School Stability Part I by kratoo

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									Strategic Financial Planning
 Reengineering to Secure School Stability Part I

   Helping to Re-Shape a School’s Future by Re-Shaping its
                          Finances

                        Harry Bloom
                       Rheua Stakely



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            Definition:Financial Reengineering
         • A fundamental reconsideration of the
           financial model of school,
                   – From a long term perspective,
                   – To reflect a school’s
                             • Core value proposition in light of its market
                               and the institutions within it
                             • Desired strategic positioning for long term
                               future success.



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Learning Acceleration, LLC. All Rights Reserved. 2008
     Financial Reengineering
When?
• *Immediately, in times of crisis
• *Every other year, to avoid crisis
Who
• Schools in financial trouble
  – Little schools
  – Big schools
• Everyone else!
                                       3
Who: Big Schools with Financial
         Challenges
Total Tuition Prior to Scholarship               8,346,873
Scholarship( 15% of Net Tuition)                (1,255,297)
Net Tuition Income                               7,091,576
Less Uncollectible Tuition(1% of Net Tuition)     (70,916)
State Reimbursements                              280,000
Net Fund Raising                                 1,150,000
Donations/Grants                                  850,000
Other Income                                       54,000
Total Income                                     9,354,660
                                                                             Enrollment
Expenses                                                      630
Total Salaries                                  6,911,818     620
                                                              610
Total Salaries/ Salaries related Expenses       8,066,231     600
                                                              590
Total School Related Expenses                    289,430
                                                              580

Total Office Expenses                            233,810      570
                                                              560
Total Building Expenses                          463,500      550
                                                              540
Total Other Expenses                             187,460            2005/6    2006/7      Budget 2007/8   Projected 2007/8

Total Flexible Expenses                         1,174,200

Fixed Expenses

Total Rent                                       985,857

General Insurance                                107,100

Transportation(Net)                              199,500

Total Fixed Expenses                            1,292,457

Total OTPS Expenses                             2,466,657

Total (PS and OTPS)Expenses                     10,532,896

Net Profit/(Deficit)                            (1,178,236)



                                                                                                                             4
Small Schools With Challenges
                                             2007-2008


                                                 Budget
SUMMARY
Hard Income                                   $1,485,500
Annual Fundraising                              $550,000                                   Enrollment
Grants                                          $101,250
                                                           140
Total Revenue                                 $2,136,750
                                                           120

                                                           100
Expenses
                                                            80
 Personnel                                    $1,691,853
 Other than Personnel - Facilities              $381,252    60

 Other than Personnel - Other                   $224,234    40

Total Expenses                                $2,297,339    20

                                                             0
                                                                 Act.2005/6   Act.2006/7      Budget 2007/8   Actuall 2007/8   Projected 2008/9
Operating Surplus (Deficit) - hard income     ($811,839)
% hard income coverage of expenses               64.66%

Operating Surplus (Deficit) - all income      ($160,589)
% all income coverage of expenses                93.01%

cost per student                             $22,745.93
Surplus (deficit) per student - all income   ($1,589.99)




                                                                                                                                              5
         Foundation=Know What Your School’s Positioning Is… and
             Program and Process Performance Implications

                                                                    Product                  Must Be
                                                                    Leadership              Strong on
                                                                C           X                  1-2
                                                                                               And
         X=Our School                                                                        Ballpark
         A=School A                                                                          On the
         B=School B                                                                            3rd
         C=School C
         U=Unserved Population
                                                            U


                                                        B                        A

                                   Operational                                   Customer
                                                                                                    6
                                   Excellence                                    Intimacy
Learning Acceleration, LLC. All Rights Reserved. 2008
                    Financial Planning for the Long
                                 Term
         • Develop a financial plan that mirrors your
           school’s strategic plan
         • Engage in more creative annual budgeting
                   – The norm is incremental budgeting
                   – The problem: Incremental budgeting
                     reinforces incremental thinking
                             • Many of school’s challenges and opportunities
                               require longer time perspective
                             • What is a “given” in the short term is amenable to
                               change in the longer term

                                                                                    7
Learning Acceleration, LLC. All Rights Reserved. 2008
         A Long Term Perspective is Necessary,
                        When
                   – Significantly realigning tuition with cost to approach the cost of
                     education
                   – Renegotiating a union contractual obligation so that it better
                     promotes program improvement
                   – Renegotiating expensive long term real estate leases when
                     underlying needs shift
                   – Building a new building
                   – Reducing operating expenses when enrollment declines
                     permanently due to new school start ups or fundamental population
                     shifts…to try to maintain program integrity and quality
                   – Making virtuous cycle investments, e.g., in the Arts, Math and
                     Science, Special Needs




                                                                                          8
Learning Acceleration, LLC. All Rights Reserved. 2008
                                          Required Budgeting
         • Process-driven budgeting, e.g.,
                   – Recruitment process?
                             • Faculty?
                             • Student?
                   – Professional development process?
                   – Communication process?
         • Program-driven budgeting
                   – E.g., virtuous cycle investments in Hebrew
                     language or math/science curriculum
                     enhancements
                                                                  9
Learning Acceleration, LLC. All Rights Reserved. 2008
                               The School’s Processes


        THE WORK OF THE SCHOOL



                                                                                                  Develop
          Recruit                                                         Teach                     and                    Develop
                                           Recruit Staff
         Students                                                        Students                 Evaluate                Curriculum
                                                                                                  Teachers

                          Manage                                                                             Manage
                                                           Communicate              Raise Funds
                          Finances                                                                           Facilities
                           Tuition Setting
                           Financial Aid Process
                           Expense Mgt
                           Cash Flow Management



                                     What is desired investment posture for each process?

                                                                                                                                 10
Learning Acceleration, LLC. All Rights Reserved. 2008
                                                        Taking Control
3-5 Year Investment Posture (Compound Annual Average Growth in Spending)


                                                       Strategic                               Reduced
                                                      Investment          Maintenance         Investment
                                                   Candidate (+8-10%)   Candidate (+4-5%)   Candidate (0-3%)
Overall Faculty
Compensation


Target Departmental
Compensation (e.g., Hebrew
Language, Math and Science)


Overall Process Investment

Target Process Investment
                                                                                                          Tuition Setting
Total Budget                                                                                              Financial Aid
                                                                                                           Process
                                                                                                                    11
Learning Acceleration, LLC. All Rights Reserved. 2008
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                      In Summary
• Know your school’s value proposition
• Understand the implications of that value
  proposition for process and program spending
• Take a long term prospective to financial
  planning
• Utilize creative budgeting: Process and Program
  budgeting to shape a more positive future
• Respect the Virtuous Cycle wisdom
       Note: Please do not miss Part II Session:
       STRATEGIC FINANCIAL PLANNING:
       Dealing with Financial Moments of Truth (2:15pm;Back Bay C)
                                                                     15
                                                                   Bio
                                                              Harry Bloom
                                                               President
                                                       Learning Acceleration, LLC

                             Harry Bloom is an experienced marketing manager and management consultant
                             who has worked for some of the leading corporations and consultancies in the
                             world, including Procter & Gamble, General Electric, McKinsey & Company, and
                             the Computer Sciences Corporation. Mr. Bloom helped the Partnership for
                             Excellence in Jewish Education develop the highly successful Joint Purchasing
                             Initiative which assists hundreds of Jewish day schools in saving money through
                             collaborative purchasing activities. Additionally, he helped design, research and
                             establish the PEJE Knowledge Exchange which codifies and makes easily
                             accessible independent school best practice in Admission, Leadership and
                             Governance, and Fundraising.

                             Mr. Bloom lectures for the Partnership for Excellence in Jewish Education, the
                             Solomon Schechter Day School Association, the Association of Modern Orthodox
                             Day Schools, and Torah Umesorah and is a much-in-demand facilitator of
                             leadership retreats for teams of professional and lay leaders of Jewish non-profit
                             organizations on the topics of governance, fundraising, marketing and student
                             recruitment. Mr. Bloom is an active PEJE coach and is assisting a number of
                             Jewish organizations throughout the U.S. in programmatically strengthening their
                             governance, strategic planning, student recruitment and fundraising operations.
                             Additionally, Mr. Bloom is serving as the Director of Institutional Advancement
                             of South Area Solomon Schechter Day School where he has helped develop a
                             compelling vision, strategic and long range financial plan, directs fundraising and
                             marketing, and led a successful campaign for a new campus.

                             Mr. Bloom has a B.A. and Hebrew Teacher’s License from Yeshiva University
                             and an MBA from Columbia University’s School of Business. He is an instructor
                             at the Azrieli Graduate School of Education and Administration at Yeshiva
                             University, where he is a doctoral student.

Contact Information:
Email: harry@harrybloom.com                                                                                        16
Telephone:617-212-4910
Mail: 200 Cotton Street, Suite 18, Newton, MA 02458
                                   Rheua S. Stakely
                                      Consultant
                               225 Washington Street
                                Marblehead MA 01945
                        rheua@hotmail.com • 781-631-0255
                                           BIO
•   Rheua Stakely is a consultant from Marblehead, MA who specializes in
    independent school admission, recruitment, attrition, and financial aid. After
    working in admission and financial aid at Phillips Exeter Academy for 12
    years, she formed her own consulting company working with nonprofits, for
    profits, and management training institutes, as well as schools. Some of
    her other consulting work includes: board professional development and
    retreat facilitation, as well as short and long range planning. Over the past
    22 years she has worked with more than 350 schools and nonprofits
    including more than 90 Jewish day schools coast to coast. Rheua is a
    senior coach for PEJE.
•   In addition, Rheua has plenty of coaching and performing experience as an
    Outward Bound instructor, a tennis pro, a nationally ranked squash player,
    and an amateur musician. She also learned much about thinking quickly in
    difficult situations while climbing the Matterhorn, Mont Blanc, Kilimanjaro,
    and other mountains around the world.


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