2. A focus on non-traditional students. Emphasis on serving adult learners goes hand-in-hand with workforce development training and is nearly universal among Velocify school clients, with 99 percent offering programs for non-traditional students. The non-traditional student population is substantial, and market drivers have led a diverse array of institutions to target programs to the needs of that population.
The number of non-traditional students jumped when the economy soured during the Great Recession. Laid-off workers returned to school in droves to pursue training for a new career.
At the same time, the population of high school graduates is decreasing, underscoring the risk of a traditional school model that is tied to the vagaries of population trends. Smaller public colleges like Chicago State University continue to make cuts and small liberal arts colleges are struggling to survive. Last fall, Moody’s estimated that the number of four-year, nonprofit public and private colleges going out of business could triple, from 5 to 15 a year over the next few years.
In response, traditional not-for-profit schools that were historically not focused on adult students started adding online degree and certificate programs to serve these new student populations. Eager to quickly establish an online presence, some schools made the transition to online by partnering with school-as-a-service firms (also known as online program management or OPM) that provide schools the necessary technology, capital, and marketing infrastructure to build and operate an online program from scratch.
And the demand shows no sign of letting up. In fact, Eduventures predicts double-digit growth in the number of public-private partnerships—such as with OPM firms or international student pathway companies—as colleges seek to monetize their assets and generate much-needed revenue. OPM companies that put up capital to build and grow a school’s online program have opened up the market for institutions that might not have been able to start online programs on their own.
This brings us to the next attribute.
3. Adaptability. A number of today’s OPM firms have roots serving the proprietary sector and have survived by pivoting their business models to the substantial OPM market opportunity.
One look at the pedigree of OPM firms shows a strong thread of private sector education know-how. Keypath Education (formerly Plattform Advertising) was primarily a marketing services firm focused on the proprietary sector, now offering an OPM model. OPM Deltak was built as a sister company to large proprietary institution Rasmussen College before being acquired by John Wiley & Sons. And propriety school elder statesman Michael Clifford, a co-founder of multiple proprietary schools, is a principal in Significant Systems, an OPM which helps faith-based schools go online.
Rather than working with OPM providers, some schools are even hiring former private sector marketing and admissions leaders to help them compete, especially online. For example, Northern Arizona University recently recruited Lincoln Educational Services chief marketing officer Piper Jameson, and the University of Southern California hired the former president of Kaplan International College, Dr. Anthony Bailey, to run its new career-focused school.
4. A commitment to ‘smart’ growth. The last quality we’ve observed is a commitment to ‘smart’ or managed growth. That can include making the hard decision to right-size when needed. The large proprietary institutions that have continued to survive and, in some cases, grow, have generally done a good job of matching their programs and tuition levels to market demand and their cost-structure to (often) lower enrollment levels.
Private sector schools that were barely able to operate in the black in good times are certainly going to struggle as the number of potential students decreases and students become more sensitive to taking on debt.
Increasing regulatory demands coupled with smaller marketing budgets have put pressure on schools to use data and automation technology strategically to drive growth. For example, schools can use historical admissions data in their enrollment software to try to attract “strong fit” students (i.e., those that will do well in school, graduate and be good job candidates), combining program of interest and previous education and distance from campus and level of family support for returning to school.
Once schools know who their ideal students are, they can prioritize their pool of inquiries to first reach out to these model candidates before prospects that might be less successful at their school. While this has long been best practice for schools, Gainful Employment regulations, which will hold schools accountable for the amount of debt their graduates have relative to their post-graduation earnings, or risk losing access to federal financial aid, have made it a must-have.
Lessons Learned
Being nimble and able to adapt to changing market conditions and pressures is essential in a mature market that isn’t going to see steep growth. Private sector schools that continue to make the hard choices during trying times and continue to do a good job putting their students first are in a stronger position to weather future economic challenges.
GENERAL DISCLOSURE: The compensation of the research analyst(s) principally responsible for this discussion is indirectly based on (among other factors) the general investment banking revenue of FASC. FASC considers all the companies covered in its research reports to be potential clients.
Corey Greendale is a managing director specializing in research and investment in software-as-a-service (SaaS) businesses, particularly in human capital technology. His work has been cited for excellence in the Wall Street Journal’s “Best on the Street” survey, in Forbes, and in the Financial Times. Martin Lind oversees the business development, product marketing and thought leadership for Velocify’s enrollment management solution.
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