Being in the Retail Biz

Schools have a disconnect with their stakeholders when it comes to matters of money. While doing focus groups today at a school in Michigan, this truth became stunningly obvious when faculty and parents alike both identified growing endowment and increasing donations to the school as being of primary strategic importance. I would agree in theory, but what this ignores is that long-term financial resources are devilishly hard for day schools to accumulate.  Consider these math facts, based on 787 schools reporting endowment data to DASL, the NAIS database of school operating data, for the 2016-17 school year:

• Median total endowment - US$6.3 mil
• 75th Percentile - US$17.5 mil
• 90th Percentile - US$41.2 mil

At today's rates of return in Western countries, US25 mil would yield about one tuition (give or take). This means that more than 75% of day schools have endowments below that threshold. Even at the 90th percentile of schools, barely two tuitions would be covered by endowment.What this means, for better or worse, is that most schools are essentially in the retail business. And most of these haven't yet learned how to to handle this reality.