1. Reverse Musical Chairs: A Study in Competitive Market and Demographic Analysis or Maintaining Stable Enrollment in a Down Market ERB Conference October 2014 Laurel Baker Tew Viewpoint School, Calabasas, CA lbtew@viewpoint.org 818-591-6580 Chad Tew Tew & Associates chad@chadtew.com 818-653-6200 1

2. Laurel Baker Tew Viewpoint School - Chief Enrollment Officer & Director of Admission & Financial Aid Viewpoint School - Chief Enrollment Officer & Director of Admission & Financial Aid Trustee of SSATB Trustee of SSATB University of Southern California – From Admission Roadrunner to Director of Admission University of Southern California – From Admission Roadrunner to Director of Admission The Wesley School – Co-founder & Trustee The Wesley School – Co-founder & Trustee Education Education BA & MA, University of Southern California BA & MA, University of Southern California Alumna and Former Trustee of Viewpoint School Alumna and Former Trustee of Viewpoint School Viewpoint School - Chief Enrollment Officer & Director of Admission & Financial Aid Viewpoint School - Chief Enrollment Officer & Director of Admission & Financial Aid Trustee of SSATB Trustee of SSATB University of Southern California – From Admission Roadrunner to Director of Admission University of Southern California – From Admission Roadrunner to Director of Admission The Wesley School – Co-founder & Trustee The Wesley School – Co-founder & Trustee Education Education BA & MA, University of Southern California BA & MA, University of Southern California Alumna and Former Trustee of Viewpoint School Alumna and Former Trustee of Viewpoint School 2

3. Chad Tew CFO: California Health & Longevity Institute CFO: California Health & Longevity Institute Principle: Tew & Associates Principle: Tew & Associates Viewpoint School - CFO/ treasurer 2000-2013 Viewpoint School - CFO/ treasurer 2000-2013 The Wesley School – Co-founding Trustee The Wesley School – Co-founding Trustee Enrollment Management Sys. - Sr. Consultant at MIT, Georgetown Enrollment Management Sys. - Sr. Consultant at MIT, Georgetown Admission & Marketing positions – Chapman U. & Westminster College Admission & Marketing positions – Chapman U. & Westminster College Teaching – Marketing, Business Plan Development, Economics Teaching – Marketing, Business Plan Development, Economics Education Education MBA, University of Southern California MBA, University of Southern California BA, University of Utah BA, University of Utah CFO: California Health & Longevity Institute CFO: California Health & Longevity Institute Principle: Tew & Associates Principle: Tew & Associates Viewpoint School - CFO/ treasurer 2000-2013 Viewpoint School - CFO/ treasurer 2000-2013 The Wesley School – Co-founding Trustee The Wesley School – Co-founding Trustee Enrollment Management Sys. - Sr. Consultant at MIT, Georgetown Enrollment Management Sys. - Sr. Consultant at MIT, Georgetown Admission & Marketing positions – Chapman U. & Westminster College Admission & Marketing positions – Chapman U. & Westminster College Teaching – Marketing, Business Plan Development, Economics Teaching – Marketing, Business Plan Development, Economics Education Education MBA, University of Southern California MBA, University of Southern California BA, University of Utah BA, University of Utah chadtew.com 3

4. Tew & Associates Founded July 2013 Consultants in Education & Business chadtew.com 4

5. Enrollment Leadership Goals Promote enrollment & budget stability in a dynamic market Promote enrollment & budget stability in a dynamic market Develop a competitive marketing model Develop a competitive marketing model Market-informed outreach plan Market-informed outreach plan Market-based enrollment strategy Market-based enrollment strategy Competitive tuition setting Competitive tuition setting Financial aid / variable pricing Financial aid / variable pricing Promote enrollment & budget stability in a dynamic market Promote enrollment & budget stability in a dynamic market Develop a competitive marketing model Develop a competitive marketing model Market-informed outreach plan Market-informed outreach plan Market-based enrollment strategy Market-based enrollment strategy Competitive tuition setting Competitive tuition setting Financial aid / variable pricing Financial aid / variable pricing chadtew.com 5

6. Success Strategies for Enrollment Shift Focus to Enrollment, not just Admission Shift Focus to Enrollment, not just Admission New students plus retention New students plus retention The # that matters to CFO, Head, & Trustees The # that matters to CFO, Head, & Trustees Learn the language of numbers Learn the language of numbers The information age is about data The information age is about data Communicate in the language of the Business Office & Trustees Communicate in the language of the Business Office & Trustees 6

7. Success Strategies for Enrollment Leadership Tie & Communicate your efforts to strategic goals Tie & Communicate your efforts to strategic goals Multi-year budgeting, building plans, fundraising Multi-year budgeting, building plans, fundraising Think like a for-profit, mission-driven organization Think like a for-profit, mission-driven organization Become the expert in fighting Disrupters! Become the expert in fighting Disrupters! 7

8. Disrupted Business Models Graphic thanks to Motley Fool 8

9. The traditional school business model is next chadtew.com 9

10. What’s disrupting the school model? Demographic shifts, mobile population Demographic shifts, mobile population Charter Schools: Offering community, local control, and academic depth & breadth without tuition Charter Schools: Offering community, local control, and academic depth & breadth without tuition Technology: New low-cost and no-cost alternatives, along with increasingly robust online tools, networks, and resources Technology: New low-cost and no-cost alternatives, along with increasingly robust online tools, networks, and resources Psychographic shift – Many more parents with the confidence to try non-traditional options: “Private’s too expensive… Public’s not an option … I can do it better myself anyway.” Psychographic shift – Many more parents with the confidence to try non-traditional options: “Private’s too expensive… Public’s not an option … I can do it better myself anyway.” 10

11. NAIS PRESIDENT JOHN CHUBB : Private schools --9% of the school-age population—not growing. Charter schools-- 4% and growing. “The fastest growing market for home and charter schooling is now highly educated parents in affluent areas choosing to save money—usually for college—and do it themselves.” Chart Source: SSATB 1999Today Charter Schools 340,000 enrolled 1.9 million enrolled Home Schooling Less than 500,000 enrolled 2.1 million enrolled Online/ Virtual Schools Less than 500,000 enrolled 2 million enrolled

12. Generation X Psychographic: (Born between 1965-1979) Far more deeply involved in all aspects of their children’s education than the generation before them: academically, socially, emotionally. Non-traditional education models (Disruptive Innovators) highly appealing. Image courtesy of chicagonow.com 12

13. When having it all means not having children (Time Magazine 8/12/2013) chadtew.com 13

14. Baby Bust Stewart Friedman, Wharton: Survey of the Class of 1992: 78% said they planned to have children. Survey of the Class of 2012: 42% said they planned to have children. 14

15. New Household Formation Disturbingly Low 15

16. Who’s out? More than 10% of private schools will close their doors or be forced to merge with another school in the next five years! Based on current demographic trends Ceteris Paribus – All other things being held constant chadtew.com 16

17. Reverse Musical Chairs Every year the enrollment music stops, some private school students are removed, but the number of empty desk chairs remains the same chadtew.com

18. Children can’t come to school if they weren’t born chadtew.com 18

19. Average Number of Children per Woman in the U.S. chadtew.com 19

20. chadtew.com 20

21. H.S. Grads on decline in many states chadtew.com Source: “Knocking 2012” by Western Interstate Commission on Higher Ed. / ACT and College Board 21

22. Who’s not Knocking at the College Door Projected change in total Public and Nonpublic High School Graduates between 2008-09 and 2019-20 Projected change in total Public and Nonpublic High School Graduates between 2008-09 and 2019-20 United States total down 2% United States total down 2% Biggest Regional losers are Midwest (8%) and Northeast (7%) both with heavy concentrations of independent schools Biggest Regional losers are Midwest (8%) and Northeast (7%) both with heavy concentrations of independent schools Source: “Knocking 2012” by Western Interstate Commission on Higher Ed. / ACT and College Board chadtew.com 22

23. Sinkholes -9% Alaska, Massachusetts, and Pennsylvania -9% Alaska, Massachusetts, and Pennsylvania -10% Montana and Wisconsin -10% Montana and Wisconsin -16 % Rhode Island -16 % Rhode Island -18-19% Maine, Michigan, New Hampshire, and Vermont -18-19% Maine, Michigan, New Hampshire, and Vermont -23% Washington D.C. -23% Washington D.C. Source: “Knocking 2012” by Western Interstate Commission on Higher Ed. / ACT and College Board chadtew.com 23

24. The school-age population has decreased in 3/4s of US Counties 24

25. Growth in Hispanic child population balances white decline 25

26. Families with children are changing & CA is in the lead 26

27. Production of H.S. Grads in CA chadtew.com 27

28. Where does this leave private schools? Survival of the Fittest? Survival of the Fittest? Looking farther afield for students Looking farther afield for students Competitive Pricing Competitive Pricing Adaptive Mission Adaptive Mission Is my School Sustainable? Is my School Sustainable? chadtew.com 28

29. Viewpoint School Case Study K-12 day school on 40-acre campus K-12 day school on 40-acre campus 1,215 students 1,215 students Calabasas, CA (pop. 23,000): an affluent city in Los Angeles County, zoned zero-growth Calabasas, CA (pop. 23,000): an affluent city in Los Angeles County, zoned zero-growth Local school district: Las Virgenes Unified Local school district: Las Virgenes Unified Current tuition $29-34k Current tuition $29-34k $40M annual operating budget $40M annual operating budget Founded in 1961 as elementary Founded in 1961 as elementary $66M worth of new construction since 2003 $66M worth of new construction since 2003 29

30. Viewpoint School Case Study 30

31. THE CHALLENGE: HOW TO MAINTAIN STEADY ENROLLMENT IN A CHANGING EDUCATIONAL MAREKET 31

32. Collaboration between CFO, Enrollment Dir., Head, & Trustees Began with joint work on 5-year budget projections Began with joint work on 5-year budget projections Informed by experience in college enrollment planning Informed by experience in college enrollment planning Projections started with detailed history review Projections started with detailed history review Drew on existing research on local population trends Drew on existing research on local population trends Led to commissioning of primary demographic research on target markets Led to commissioning of primary demographic research on target markets 32

33. Tuition Sustainability Task Force Tuition Sustainability Task Force Ad hoc trustee group based on mostly Finance and Strategic Planning Committees, CFO, Admission, & Head Ad hoc trustee group based on mostly Finance and Strategic Planning Committees, CFO, Admission, & Head Not born from crisis Not born from crisis Enrollment remained strong during Great Recession Enrollment remained strong during Great Recession More churn in families More churn in families Asked - are historical tuition and expense increases sustainable? Asked - are historical tuition and expense increases sustainable? What are other threats to financial sustainability? What are other threats to financial sustainability? chadtew.com 33

34. Historic and Projected Tuition Growth chadtew.com

35. High School Tuition Growth chadtew.com

36. Projected Tuition at 7.1% Increase chadtew.com

37. Factors Impacting Tuition key for CFOs and Trustees Competition Competition Financial aid, including mission-driven aid Financial aid, including mission-driven aid Tiered tuition: Primary/Lower v. Middle/Upper Tiered tuition: Primary/Lower v. Middle/Upper Building reserves to combat future challenges (e.g., high inflation) Building reserves to combat future challenges (e.g., high inflation) Strategic Factors Strategic Factors chadtew.com

38. Review internal factors: mission, program variety and quality, cost structure, unique market, etc. Evaluate competing schools & prices Review general market trends Gather more demographic data (birth rate, income distribution, “graying,” etc. Task Force Action Steps 38

39. Evaluate competing schools & factors at each entry grade Gather and analyze competition price data Capture total cost less financial aid discount Competitive Analysis Goals chadtew.com 39

40. Increase & concentration of wealth Slow decline in local public schools Increase in private school enrollment Increase in charitable giving Access to cheap municipal bond funds for construction Several new/expanded schools General Market Trends from mid-1990s to 2007 chadtew.com 40

41. Reduced wealth, high unemployment, increasing concentration of wealth Continued decline in local public schools Flat private school enrollment Spiking demand for Financial Aid Flat charitable giving Dried-up access to bond funds and loans Only one new school/limited expansion School closures and mergers Market Trends in Great Recession 2008 - 2012 chadtew.com 41

42. Flat to slow growth in California population Uneven gains in wealth and employment Continued concentration of wealth Continued higher demand for financial aid More diverse population Projected Future Market Changes chadtew.com 42

43. Accelerating decline in local public schools Flat or declining private school enrollment Rapid growth of charter schools and spiking interest in home schooling Technology becoming big driver expanding educational options and possible hybrid models Possible Future Market Changes chadtew.com 43

44. Defining Competition Competition = other schools that families consider when applying to your school Cross-over v. Peer schools Peer = schools with which we share attributes (e.g., independent, private, NAIS) Cross over = schools with which we cross applications (geography; public; religious) Difference has significant impact at various entry grades chadtew.com

45. Enrollment Pipeline chadtew.com 45

46. BRAND NEW CHARTERS IN LOCAL MARKET L.A. Unified School District Conversions to Charter: Calabash ElementaryWoodland Hills Calvert ElementaryWoodland Hills Serrania ElementaryWoodland Hills Woodlake ElementaryWoodland Hills WH ElementaryWoodland Hills Hamlin ElementaryWest Hills Haynes ElementaryWest Hills Pomelo Way ElemWest Hills Welby Way ElemWest Hills Topanga ElemTopanga Emelita ElementaryTarzana Nestle ElementaryTarzana Wilbur ElementaryTarzana Encino ElementaryEncino Hesby Oaks Elem/MSEncino Sherman Oaks ElemSherman Oaks Dixie Cyn ElementarySherman Oaks Carpenter ElementaryStudio City Marquez ElementaryPacific Palisades ---------------------------------------------------------- Hale Middle School Woodland Hills ---------------------------------------------------------- El Camino Real High SchWoodland Hills Taft High SchoolWoodland Hills Palisades High SchoolPacific Palisades Las Virgenes District new charters: 46

47. BRAND NEW FREE HOME SCHOOL OPTIONS IN OUR LOCAL MARKET “Led by highly educated moms, Topanga families take charge of their kids’ education in unique ways. Offering SM Mountains conservancy courses; travel to London; lessons in French; jazz studies; sign language; Shakespeare; chess.” 47

48. NEW TUITION-CHARGING HYBRIDS IN OUR LOCAL MARKETS 48

49. Demographics Studies Demographics Studies 49 chadtew.com Hiring a demographer NAIS Data Center SSS by NAIS data mining Wealthengine; Zillow

50. Defining Viewpoint’s Target Market Defined as households with (1) children (51% of households) and (2) income over $200,000/year (7% of households) 3% of total households meet the criteria

51. How Much Income Does it Take to Send One Child to Viewpoint? (SSS by NAIS Affordability Index Calculator: For a family of four with one child at Viewpoint) Viewpoint’s Current Tuition 2013-14 Minimum Gross Household Income Needed to Afford Full Tuition* K$27,800$225,000 MS$30,650$235,000 US$32,750$245,000 Viewpoint’s Projected Tuition 18-19 ** Projected Minimum Gross Household Income Needed to Afford Full Tuition* K$35,144$260,000 MS$38,747$275,000 US$41,402$295,000 * Income model based on a family of four with one child at VPT. Each additional child enrolled requires an additional income of approximately $120K. ** Projection is based on a presumed 4.8% annual tuition increase. 2013-14 2018-19 Projected ** 51

52. 52 Concentration of High-Earning Households chadtew.com

53. Modified Target ($175,000 with kids) chadtew.com 53

54. Core K Markets: Households with Both Children and Appropriate Level of Income (Source: NAIS Data Center) 54

55. Graying of Kindergarten Market (source: hired demographer) 55

56. Broader Data Examined unemployment data, especially for college-educated and top income quintile. Examined unemployment data, especially for college-educated and top income quintile. Examined local median home prices over past 10-15 years, as people had been using home equity to pay tuition. Examined local median home prices over past 10-15 years, as people had been using home equity to pay tuition. Looked at home sales volume to understand turnover rate. Looked at home sales volume to understand turnover rate. chadtew.com 56

57. Population Data So. Cal. population grew only grew 3.3% in past decade and number of families with children actually declined by 7.1% in Los Angeles County So. Cal. population grew only grew 3.3% in past decade and number of families with children actually declined by 7.1% in Los Angeles County A study comparing 2000 and 2010 census data found the number of children under 18 decreased 10% in Los Angles County and that the number of children between 5-9 years old decreased by 21% A study comparing 2000 and 2010 census data found the number of children under 18 decreased 10% in Los Angles County and that the number of children between 5-9 years old decreased by 21% Income for top-earning families has grown steadily, with the number of families making at least $200K/year increasing to 7.8% in 2010, but rate of growth was slowing. Income for top-earning families has grown steadily, with the number of families making at least $200K/year increasing to 7.8% in 2010, but rate of growth was slowing. chadtew.com

58. Conclusions re Demographic Data Household incomes not projected to grow as quickly as in last decade Household incomes not projected to grow as quickly as in last decade Number of families with children expected to decline in core market area Number of families with children expected to decline in core market area Growth of families with the wealth to afford full tuition was growing more slowly (but growing) Growth of families with the wealth to afford full tuition was growing more slowly (but growing) School already has excellent market penetration School already has excellent market penetration

59. Task Force Conclusions Promote enrollment & budget stability in a dynamic market Update/build a competitive marketing plan Update/build a competitive marketing plan Use data, insights, and demographic research to create a market-informed outreach plan and a market-based enrollment strategy Use data, insights, and demographic research to create a market-informed outreach plan and a market-based enrollment strategy Be strategic in tuition setting Be strategic in tuition setting Use competitive data to consider both the list price and the net tuition after financial aid for each cross- over school and at each entry grade Use competitive data to consider both the list price and the net tuition after financial aid for each cross- over school and at each entry grade Improve sophistication in financial aid budgeting including multi-year projections Improve sophistication in financial aid budgeting including multi-year projections 59

60. Additional goals Long-term key is growing other revenue sources Long-term key is growing other revenue sources Summer programs Summer programs Renting-out campus facilities Renting-out campus facilities Programs for community and/or adults Programs for community and/or adults Moving the school to be less dependent on tuition with the assistance from increased endowment income Moving the school to be less dependent on tuition with the assistance from increased endowment income 60

61. No More Kumbaya? Old paradigm: We are all brother and sister educators working side by side in our respective schools to provide stellar independent education Old paradigm: We are all brother and sister educators working side by side in our respective schools to provide stellar independent education That only works when there are more kids than seats. As the empty seats multiply does the NAIS / CAIS world turn into the Lord of the Flies – a cut- throat game of domination, kill or be killed, survival of the fittest? That only works when there are more kids than seats. As the empty seats multiply does the NAIS / CAIS world turn into the Lord of the Flies – a cut- throat game of domination, kill or be killed, survival of the fittest? chadtew.com 61

62. How colleges are dealing with it Chronicle of Higher Ed 10/18/13CIC: Council of Independent Colleges AASCU: Amer. Assoc. of State Colleges & Univer. 62

63. Alternative School Future Independent schools as a whole build market share and take a bigger slice of the pie from the public school world. Independent schools as a whole build market share and take a bigger slice of the pie from the public school world. Will full-pay families continue to underwrite increasing financial aid? Will full-pay families continue to underwrite increasing financial aid? Find alternative sources to fund increased financial aid. Find alternative sources to fund increased financial aid. Become tighter, more business-like operations that can support the same high level of program for a lower cost. Become tighter, more business-like operations that can support the same high level of program for a lower cost. chadtew.com 63

64. How will your school meet the challenge? How would shifts like the one in the case study affect How would shifts like the one in the case study affect Your target families Your target families Your parents’ customers Your parents’ customers How does this affect your budget and enrollment forecasts? How does this affect your budget and enrollment forecasts? Who at your school examines long-range strategic impact of demographic shifts? Do you have a seat at the table? What outside help do you need? It’s hard to be a prophet in your own land. chadtew.com 64

65. Adage To survive an attack by a bear while hiking, you don’t need to outrun the bear, you just need to outrun your slowest hiking companion! To survive an attack by a bear while hiking, you don’t need to outrun the bear, you just need to outrun your slowest hiking companion! chadtew.com 65