Tuesday, June 23, 2009

Facilities and business plans

An article in the Times yesterday ("For Colleges Needing Cash, Summer’s No Longer a Quiet Season" http://www.nytimes.com/2009/06/22/education/22campus.html?_r=1&ref=education) takes a look at how colleges are using their campuses during the summer to generate revenue. While this is no doubt an intensifying trend, it is by no means new to the current downturn. For years nonprofits have been trying to address uneven distribution of facility use over the course of the year (colleges and schools), the week (also museums and theaters), and the day (also hospitals).

Further, focusing on facility use alone, the Times neglects to note some related opportunities. For example, a college or independent school can use summer programs not only for direct revenue, but also to
• build its market: by developing programs that appeal to prospective applicants, the school or college can increase its pool of appropriate and informed applicants, and improve its yield from acceptances.
• capitalize on its brand: institutional and faculty reputation can be an appealing draw for special programs for students and families unable or unlikely to enroll in degree programs.
• develop a virtuous cycle of brand promotion, revenue creation, increased applications and selectivity, and improvements in quality of facilities and offerings.

To pursue these benefits with optimal chance for success and minimal risk, an institution needs to develop a serious business plan. As the wisdom has it, "nonprofit" is a tax status, not a business model. All of the standard business planning elements of market analysis, business strategy, financial goals, resource requirements and organizational structure must be addressed.

Unlike strategic planning, which focuses on building consensus around mission, and program planning, which is based in the professional expertise of staff, business planning involves skills that often are undervalued in the nonprofit world.

A few years ago it seemed that every client wanted to include a revenue-producing conference center—or rental athletic space—into projects, on the Field of Dreams assumption.Business planning usually cast serious doubt on the financial promise of these ideas, but that did not always convince the leaders that they might not produce the revenue needed to support other facilities.

Supplemental revenue programs offer many potential benefits to a nonprofit, but only if they are evaluated objectively and rigorously.

1 comment:

  1. A good reminder of the importance of objective thinking regardless of the type of organization.