Low cost private schools: any appetite?

Some of you may have come across the magazine that exists for those interested in investing in education. From time to time its journalists ring me up to ask about issues relating to the private sector in education As a business operator, albeit with TeachVac (www.teachvac.co.uk) using disruptive modern technology, I understand their need to assess opportunities and I happily share my thinking with them.

Recently, the magazine hosted a conference in London. Mostly, the topics discussed were in the higher education realm, an area of less direct interest to me at present than schools. However, there was a session about low cost private sectors schools and possible opportunities in England. Now that’s a topic of more direct interest to me, although they may not know that fact. Many years ago I undertook a piece of research for a client about the possible opportunities in the private school market for a low cost model at a time when school fees were rising sharply. My conclusion was that such a school might well struggle as it offered neither exclusivity nor the small classes that were both the trademarks of many private schools.

Has my judgement changed? Well, I haven’t done any in-depth analysis, so this is very much my first thoughts, but my hunch is that if anything the market is less propitious for new entrants than twenty years ago. With an expansion of selective state schools on the horizon, there may be opportunities in the primary sector, but less so in the secondary. Why pay for what you can achieve for nothing? Paying for tuition is also a cheaper option than paying for a school with some parts you won’t need.

Much could depend upon where the bar for entry to selective schools is set if the Conservative were to go down that path where they to be re-elected. Too selective and they will have little overall impact on existing comprehensive schools in most areas. Too low and we really have a return to the two-tier system of yesteryear. In that case, there might be an appetite in urban areas for fee-paying schools for those pupils that just missed out on a selective school, especially in a period of growth in pupil numbers. However, the existing fee-paying schools should be able to cope with that demand, especially if there were the transfer of some traditional entrants from these schools to the selective schools as parents feel they no longer have to shell out on school fees. You only have to look at what happens in areas with sixth form colleges with a high reputation and the distribution of fee-paying schools.

So, I think that I would be wary of thinking the future holds significant opportunities for the low-cost private school market. There might be some specific groups of parents still wanting to exit the state system but, while there is the chance of a free school paid for by the State, surely that would seem like a cheaper option for them.

Where I have always thought there might be a market is in the vocational skills area for the 14-18 age-group, especially if an institution is closely linked to the local job or apprenticeship markets. Even better, if you can persuade employers to subsidise the cost of the school in return for a fast track into the challenging sections of the labour market. The armed forces have historically understood this section of the market with their apprentice training colleges of yesteryear.

A school offering direct entry into the hospitality or travel industries, where the local further education college isn’t doing a good job, is one possibility. This section of the market also comes with less need for expensive building requirements associated with teaching the full range of curriculum subjects. So, find a niche that can be taught in traditional office type accommodation near a park or other outside space and in an urban area with good transport links and it might be worth creating a business plan; especially if the wages for lecturers can be low, but still better than when working as an experienced professional in the sector and you might have something worth taking further. But, there may well be some other opportunities in the education world for many investors.

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Making money from schools

Why would anyone want to take the risk of running a ‘for profit’ school when there are so many easier way to make money out of state education? At one time, companies and foundations from the USA and Sweden were going to revolutionise schooling in England, while making a profit at the same time. Seems it didn’t happen quite that way. The academies that both the Erudition Schools Trust and the Learning Schools Trust opened have all been re-brokered away from the groups that originally founded them and now both of the groups are seemingly no more.

Another education experiment originally from the age of new Labour capitalism has bitten the dust. But, that doesn’t mean you cannot make money from schools. Books, furniture, resources, services such as accountancy, human relations, payroll and legal services, as well as construction and the maintenance of school buildings and facilities can all be offered at a profit. Then, as regular readers know, there is the recruitment industry that thrives on helping schools find staff.

Many years ago, in 1999 to be precise, the then Education Select Committee started an inquiry into ‘The role of private companies in the management and supply of state education services’. I don’t think it was ever completed.  I noted in my written submission that J S Mill had taken the view  in his essay  entitled On Liberty that the role of the state was to ensure the education of its citizens and not necessarily to operate the schools. The question was, and still is, how can The State achieve its end of educating its citizens without paying more of taxpayers’ money than is necessary?

The National Audit Office and the Public Accounts Committee are there to see that where possible public funds are used judiciously. I would say wisely, but I am not sure that is always the case. Mill, was convinced that the State should not necessarily run the service of education. But are politicians and these days, educationalists, any better at obtaining value for money if the service is run by others: sometimes not.

In 1999, I pointed out that the CEO of an education company with a turnover of £48 million earned £122,000 whereas a Chief Education Officer, remember them, of an authority with an education budget of more than £150 million didn’t even earn a six figure salary.  Presumably, the difference was the price to be paid for risk. You can find the same differentials today between CEOs of MATs and chief officers in local authorities, but with, in my opinion, less justification.

Some of us do try to challenge the orthodoxy, by taking the disruptive approach allowed by new technology. TeachVac www.teachvac.co.uk is one such attempt. Like Twitter, Facebook and many other on-line service sit is free to users and makes its money in other ways. In the case of TeachVac, analysing the growing amount of data and using it to provide additional paid services.

With growing concerns about school funding it is time to develop mechanisms for driving down private sector charges to schools. The government’s recent initiative in IT procurement is a good example of what can be achieved.