Look and Plan Ahead
Mike Frantz, High Impact Practitioners LLC
Imagine that you are a small business owner who is looking ahead a few years to retirement. You are getting a little tired, the world is changing around you, your costs are rising, and your sales are not what they used to be. What would you do to prepare for the end of running your business?
Now imagine if that business were a college. Are you preparing for the end yet?
It seems to us, for businesses and colleges, there are three options with many decision trees surrounding each:
You can prepare it for sale to the highest bidder, or
You can walk it to your finish line, lock the door behind you, and walk away, or
You can give it to someone/something.
Prepare for Sale
You want to get the maximum return on your investment in the business, right?
You want your current, loyal customers to continue to be served successfully, right?
You want to be proud that your legacy lives on even though it will be without you, right?
So, what does the wise person do?
Pay off your debts—you will be more attractive to a buyer if you are debt-free or nearly so. You’ll also net more profit from the sale.
Make the business attractive—That means that you can show positive revenue returns for years in a row. It also means ensuring the physical plant is in ship shape. No one wants to buy a business (or a house) that will need a new roof in a year or whose furnace is held together with chewing gum and duct tape. You would likely cut costs and explore new lines of revenue. You would make sure that deferred maintenance would be minimal.
Create diverse revenue streams—Not all your sales eggs should be in the same nest. You will want to reach customers from different age groups, different cultures, and different financial means. When one sales line becomes unprofitable, you cease selling and open another line that can be profitable. In doing so, you don’t wait until the unprofitable lines bankrupt you; instead, you act swiftly and proactively.
Walk Away
Whether you cannot find a buyer or there is simply no buyer to be found, the day comes when you just can’t do it anymore. What must you do in the preceding months or years?
You quit replenishing your product when it sells out because you don’t want to end up with worthless product when you close.
You don’t invest anything in the upkeep of the facility. When something breaks, you patch it just enough to get you to the next day.
Your client base dwindles because you have less and less to offer them. That’s the vicious cycle—fewer offerings that are appealing to fewer customers and that means less revenue.
You walk into retirement with your head held low because the end was not the proud moment you had always imagined it to be.
Pass It On
Pass your business on to the next generation. Hand over the keys, shake hands, and walk into retirement with whatever gains you were able to make over the years. What must you do leading up to this?
Much like closing, you probably didn’t invest in product, facility maintenance, or customer development. Why invest when you won’t reap the rewards. Let the new owners spend their money.
At least the business lives on, warts and successes intact. You can be proud that what you built remains for others to enjoy. Never mind that all your former headaches live on – at least they are not yours anymore.
You made it harder for new owners to make a profit because of all the investment now required, but that is not your problem.
Trust us, we know times are tough in higher education and decisions have consequences. You want your special college to live on at all costs for the sake of alumni, future and current students, and the community you have served so well for so long.
Choosing the right option is critical.
For example, if you want the college to live on you can’t take all the steps of walking away and then suddenly decide to sell instead. If you want to sell (or be acquired or merge), you must be attractive to buyers. If you want to pass it on because you believe the college must survive, you must find a way not to hamstring the new leadership with insurmountable financial difficulties.
These are the discussions that must happen at Cabinet meetings and with Boards of Trustees. They must be highly strategic and purposeful. This means having productive, honest discussions about what is or isn’t possible.
It seems to us that there are do’s and don’ts during these uncertain times. We come at this from the standpoint of wanting the college to survive. What steps should you take?
Do
Do all you can to pay down current debt.
Invest in those facilities that can serve your customers the best. Keep them pristine and highly functional. Close and demolish buildings you cannot maintain.
Invest in programs that have good odds of profitability.
Expand your customer base. Don’t rely on a single demographic (e.g., traditional high school aged students). Whether it is adult undergraduates, graduate programs, certifications/badges for all ages, part-timers, or some other group, find ways to expand the reach of your college.
Balance your budget every year. In doing so, pay those who work for you well even if it means fewer of them. Cut costs that don’t impact the quality of your programs.
Don’t
Take on more debt.
Ignore deferred maintenance.
Keep offering programs for which there is no return on investment.
Continue to do things the way you have always done them.
Skip offering annual raises and provide salaries below market levels.
We have been in your desk chairs. We have struggled with these realities. We don’t have all the answers, but we have many of them. Talk with us. We understand. We are problem solvers.
Learn how HIP can help your institution.
