Even if you choose to make your school a non-profit entity, it will still need a business plan to make sure it stays focused and has enough money to keep the lights on. Don’t worry, it’s not as intimidating as it sounds. A business plan is just a way to put on paper what you’re about, who you want to serve, and how you’re planning to cover costs.
Why is a business plan necessary?
The first benefit of a business plan is for you. Most of us have a lot of ideas in our head about what we want to build. Often, these ideas are so obvious to us that we don’t even realize our own assumptions until we sit down and articulate them on paper. Once they’re written, they’re easier to critically evaluate. You might be surprised at what you find.
The second benefit of a business plan is for others. Parents are often concerned about moving their children around to many different schools (and rightly so), and they’ll want to make sure that you can keep the school afloat long-term. If you want to hire another teacher or another staff member, they’ll also want to know that you have a plan to make sure you’ll be able to continue paying their salary. Knowing that you’ve thought about the long-term will go a long way to easing their concerns and having a short document you can hand them is even better.
A basic business plan
If you Google “how to make a business plan,” you’ll find a lot of information and opinions on what needs to be in a business plan. It can be a little overwhelming, and you don’t want to give up on your dream of building a great school just because the concept of a “business plan” sounds dry and formal, and quite frankly pretty intimidating! Let’s break it down to what actually needs to be in a plan for it to be helpful to you.
Who are you?
Good news! You’ve already completed the first step by creating your mission statement and identifying which students you want to work with. Describe the principles behind your school. What makes yours different from others? Which students and families are you planning to serve? Does the school focus on a particular skill set? Importantly, are there enough families in your area who would be interested in a school like yours to fill your school? Who would be on staff at your school, and what would the relationships be between those people? Briefly describe the educational process itself. How is it different from others? How is it better, or who is it better for? How are you planning on bringing in new families?
There is one other question: How are you planning to price your services to make sure you have enough income to cover operating expenses? A useful, structured way to consider this is by making a financial projection.
Financial projections can be useful tools
Just like a business plan, a financial projection doesn’t have to be complicated. At the simplest level, you’re just adding up money coming in (revenue) and making sure it’s always larger than the money going out (expenses).
Most of your revenue will likely come from tuition fees. If you plan to require a deposit to hold a student’s spot before the beginning of the year, that would also be counted in your revenue. One final source might be fundraising, although it’s difficult to know how much funds you’d be able to raise before you try.
Expenses, on the other hand, are much more numerous. Here are some ideas to get your brainstorming started.
One-time cost:
Computers
Desks
Books
Recurring cost:
Salaries of teachers / staff
Rent of space
Utilities, including insurance
Insurance
Software
Paper, pencils, etc.
Items for project-based learning
You’ll never be able to account for everything, but it’s worthwhile to have an estimate that’s in the right ballpark. As you add them up, make sure to account for the recurring expenses each time they occur. Then add up the school’s revenue and compare it to the expenses.
Bad news? It’s okay, that’s what making these financial projections are for. Expenses can be diminished by offering lower salaries, finding cheaper locations, and getting creative about how you obtain the materials you need for projects (e.g. ask the students to bring an old oversized T-shirt instead of buying smocks for art class). However, some of those strategies come with drawbacks. For example, it might be more difficult to find a good teacher at a lower salary point.
Important decisions: tuition, deposit, and registration fee
Another way you can change the equation is by increasing the amount of revenue you gather. Increasing the cost of tuition is a powerful solution, and can easily make the financial projections look a lot better. However, it’s important to remember that not everyone can afford a steep tuition rate, and as you increase the cost, your pool of possible families will shrink. Depending on the principles behind why you’re starting the school or the types of students you’re interested in working with, you may be committed to a lower tuition rate. In that case, diminishing expenses would be the best way to break even.
Don’t forget to keep an eye on the amount of money in the bank, too. Even though a school’s annual budget might work out, there are initial start up expenses before the first tuition bill kicks in, and it’s hard to spend money you don’t have! Asking for an initial deposit that would ultimately count toward a student’s first tuition payment can be helpful because it can allow you to take care of start up expenses before you have revenue from tuition in the bank. If you’re planning on purchasing a Chromebook or other computer for each student, you might also want to ask for a registration fee for each student to cover that cost.
Tools are meant to help, not cripple
Ultimately, both business plans and financial projections are meant to help you craft a great school and keep it running successfully. The business plan goes hand-in-hand with the vision and mission statement that you’ve been creating. It’s good to have these sketched out at the beginning, and don’t be afraid to revise them as you go. What you learn about the market from your successes and failures should help you fine-tune your approach. Finally, remember these are just tools. They’re meant to help you, not to derail you from making the school you want. Keep a healthy balance between planning ahead and hitting the ground running.