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

1
 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.

2
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
12
13
14
 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.

17