Should you buy that school
Should You Buy That School?

Should You Buy That School?

The appetite for investment in schools worldwide seems unabated. But should you buy that school?

There are five key elements that should be used to gauge the viability of a school purchase. Financial  Position, Education Management,  Market Growth Potential, Facilities and Valuation. Should you buy that school? We will share our key criteria and measures over the following series of 5 blog posts to help you narrow down the field.

Financial Position

The strength of a school’s balance sheet can be evaluated by three investment-quality measurements. Working capital or short term liquidity, asset performance and capitalisation structure. Schools can be evaluated the same way. In particular, if a school has substantial positive working capital, then it should have the potential to invest and grow. When a school has low working capital it likely indicates a risk of distress.

There is a wide range of data and information that can be reviewed to determine the operational and financial health of a school. Should you buy that school? We recommend investigation into the the following key areas:

Operating Budget

Is the current or most recent operating budget on track? Were there any deviations from the existing budget and spending plan? Where will the school end up financially at the end of the current year? Will the board need to create a new budget, or is the current budget sound?

Operating Cash Flow

Should you buy that school

What is the anticipated cash flow for the school over the next 12-18 months? What will be the general direction and trajectory of the current cash position? Will the school require additional investments of cash, and for how long?

Admissions

What does the admissions pipeline look like? What are the trends and what does data tell you about enrolment acceptances as well as the yield/return from each enrolment? Is the income stream from enrolments sustainable? Are there any positive or negative levers caused by current or new marketing initiatives? What are the sales conversion rates? What is the marketing cost per enrolment and what do trends tell you over time?

Debt

Should you buy that school

How much debt exists and how much should the school take on? In what ways does debt help the school, and in what ways does it create constraints? What is the capacity of the school to repay debt? How might the school tolerate a sharp decline in income or required increase in expenditure.

Facilities and Physical Assets

Does the school set aside funds annually for depreciation and maintenance of the school facility? Are the funds enough and does the plan consider minor and major capital replacement? Does the school have a strategic plan that considers the changing nature of technology, teaching methodology, trends and new initiatives? Does the plan match the quality and nature of the facilities and assets?

Attrition, Student Turnover and Projections

How much attrition is there at different grade levels throughout the school? What do these trends tell you and how is this data used to determine decisions for extra, or reduced, classes each year. Is the enrolment projection valid and based on sound data, research and analysis? Is it defendable by data rather than subjective opinion.

Financial Support, Scholarships and Aid

What percentage of revenue is affected by non-fee paying or reduced-fee paying students? What is the net cost of each student? Does this match the school mission and is it balanced in terms of the budget planning process?

Tuition

Should you buy that school

How does the tuition fee structure compare to other schools and does it increase at a fair market rate annually? Does the tuition model match the demographics and socioeconomic characteristics of the enrolment catchment? What is the net cost of each student as well as break even point? Are there any factors that may change or influence this demographic including the capacity for parents to pay more, or a need to pay less?

Faculty

What are the salary package inclusions plus other expenses allocated to staff compensation, support and welfare. How does the salary package and inclusions compare to other schools?
What is the age range and profile of staff? What retirements are projected in the short to medium term? What are the staff retention and turn over rates. What causes good/bad staff retention year by year.

Staffing

What are the trends of teacher ratios and FTE (full time equivalent) in comparison to similar schools? What is balance between staff holding different roles including instruction, management and specialist support? What is the take up and expenditure on annual training?

Decision Making Processes (Financial)

Decisions about  salaries, expenses, tuition, enrollment, and facility plans are generally put in place  by a board however it is important to know how these mechanisms work. Is all information considered? Are the stakeholders relevant including both academic and business side. Politics? Yes, there will be politics in any organisation but are decisions made based on data, are they strategic and are they made beyond personality and ego. What is the history of key decision making in the past? If wrong decisions were made, what happened next?

Should You Buy That School?

There are five key elements that should be used to gauge the viability of a school purchase. We will share our key criteria and measures over the following series of blog posts to help you narrow down the field.

You might also consider setting up a new school

Contact GSE now for advice in setting up a school, managing a school, training and development, school acquisitions. All major regions of the world!

Should You Buy That School
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Who is Global Services in Education (GSE)

Global Services in Education is a full service education management company led by education experts. They are proven education and business leaders who know how to set up and manage international schools in unique cultural contexts. GSE lead education projects from the initial idea to set up and full management. Kindergarten, Primary, Middle and High School, Universities and Adult education.

School Acquisition: GSE represents investors looking to acquire schools or evaluate potential of school group expansion.

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