Stephen Green, Chief Partnerships Officer and Tim Sheehan, Director Partnership Development
It’s no longer enough to say that higher education is evolving. The rapid pace of technological advancements, changing student demographics, and shifting economic realities are reshaping the ecosystem at lightning speed. For universities, this evolution presents a challenge: how to balance delivering high-quality education with optimizing resources and reducing costs.
While many may think DIY is the answer, it often requires significant expertise, time, and resources that universities simply do not have. This can lead to burnout among staff juggling multiple responsibilities on top of their full-time jobs.
The Myth of High Enrollments
In the past, universities could rely on high enrollment numbers to bring in revenue. However with competition from brick-and-mortar schools, online programs, and alternative certificate options, this approach is no longer sustainable. Simply put, increasing enrollments isn’t the solution it once was.
Instead of chasing after large numbers of students, universities should focus on maintaining strong profitability with the enrollments they do have. This means understanding the financial equation at play and making small, sustainable increases in their core programs.
Optimizing Resources and Reducing Costs
Partnerships in higher education help optimize resources and reduce costs. Launching and expanding an online program can involve upwards of 800 tasks and unique learner touchpoints. From recruitment and enrollment to student support and technology integration, the sheer volume of tasks can overwhelm even the most well-resourced institutions.
We’ve observed this firsthand with our university partners: few can seamlessly add these specialized duties to their existing workload. By forming partnerships, universities can extend their capacity, enabling them to concentrate on education while specialized partners manage ancillary functions.
Shifting the Math Mindset
To stay competitive, universities need a mindset shift. Instead of focusing only on enrollment numbers, aim for strong profitability with existing enrollments and sustainable growth in core programs. Consider the following:
- In a typical revenue share model, universities keep 40% of revenue while partners handle services like marketing and enrollment.
- Conversely, a fee-for-service (FFS) model lets universities retain up to 70% of revenue by paying only for needed services, enhancing cost efficiency and profitability.
To illustrate, consider a simplified model:
Assume a university operates with a 60% revenue share and generates $10 million from an online program. In this scenario, the university retains $4 million, with $6 million allocated to the partner. If operational expenses consume 20-25% of the retained revenue, the university spends $1-1.25 million on these expenses, leaving a margin of $2.75-3 million.
Imagine a university operating under a Fee-for-Service (FFS) model, retaining 70% of its revenue, which amounts to $7 million. Despite operational expenses remaining at $1-1.25 million, the university’s profit margin would increase to $5.75-6 million.
This simple calculation underscores the significant financial benefits achievable through strategic partnerships. Maintaining consistent enrollment, the margin rises to $5.75-$6 million. Even with a slight drop in enrollment, the university would still enjoy a stronger financial position compared to a revenue share model.
The Role of Technology in Partnerships
Effective technology use is crucial. It can enhance marketing, streamline administration, and improve student outcomes. For example, data analytics can offer insights into student behavior, helping tailor programs to their needs. Online platforms can make education more engaging, boosting satisfaction and retention.
The Role of Collaboration
Collaboration is key to creating a sustainable path to profitability. At Noodle, we understand the importance of working closely with university partners to address their needs and concerns. By sharing responsibility and accountability for the success of their programs, we build trust and foster a productive relationship.
Additionally, technology plays a crucial role in collaboration. Advanced data analytics and online learning platforms can help universities make informed decisions about program offerings and deliver engaging educational experiences for students.
Conclusion
Increasing enrollments used to be the golden ticket for financial stability in higher education partnerships. But as times have changed, so have the rules of profitability. It’s more important than ever for universities to understand the numbers behind their operations and focus on maintaining profitability with their current enrollments. Through collaboration, responsible financial planning, and innovative use of technology, universities can create a sustainable path toward success for both themselves and their students.
For more insights on the benefits of partnerships in higher education, browse these articles from our thought leaders:
- The Online Education Dilemma: In-House Vs. External Partnerships
- Navigating Your OPM Transition: A Comprehensive Checklist For Success
- Moving Beyond Traditional OPMs
- The Agile Academy: Embracing Dynamic Learning in Higher Education
- Unpacking Agility: 3 Questions for Noodle’s John Katzman
- Universities and Extended Credentials
Want to learn more about how a partnership can help your program thrive?
Let’s talk.
