Can’t Charge Enough
Is private education a luxury good? Many, maybe most, people working in the field resist labeling what they do as such, but this seems less logical as the price climbs out of reach of the middle class without financial aid. Reading this piece on fine dining by acclaimed restauranteur Vivian Howard writing in the NY Times in the wake of the much-reported Noma restaurant closure, we couldn't help but see parallels to our sector as represented by a few quotes.
On leadership:
"A restaurant is a hefty investment that looks terrible on paper — but when we have a spitfire talent at the helm, we convince ourselves that it just might work."
No matter the state of local demographics, general economic conditions, and the financial resources available from endowment, so many board members are convinced that with the right head of school their institution will be the one that succeeds.
On pricing:
"We could raise prices, but any price adjustment that would wholly fill the cracks in our foundation would be so high that it would drive customers away."
As a result, in private education, we effectively shift part of the "cost" onto our employees, who "pay" for it with sub-optimal wages, and onto donors who help underwrite operations with soft dollars.
On alternative revenue sources:
"For us, any culturally appropriate concept would have done as long as it involved less service, labor, square footage — really less of everything than its demanding, insatiable money pit of a big sister. All we needed was volume. The goal was to make enough profit from burgers and pizza to ensure the future of the mother ship."
Private education is the antithesis to volume; we intentionally elevate "small batch" to be our value proposition. This renders us unable to realize the benefits of scale.
Food and education are both necessities, but the bottom line is that any product or service that comes at a premium price when there is a free or lower-cost alternative is a luxury. Vivian Howard plans to return with a different, less labor-intensive restaurant concept. If we can't charge enough to cover our expenses plus a small surplus, then maybe it is time to change our production model, too.