As schools continue to add programming and enhance facilities, balancing growing expenses with additional revenues will become increasingly important. But tuition increases, which have outpaced income growth and prevented an increasing number of families from attending independent schools, are not a sustainable strategy for the uncertain future.
Acknowledging this reality, some schools have started to experiment with alternative sources of income. This might not be the antidote to the larger issues schools are facing, however, these nontuition sources of income can help compensate for rising costs while improving a school’s student and community experience.
In 2018, NAIS surveyed independent schools to learn about their experience with nontuition sources of income. The resulting Survey on Nontuition Sources of Income includes information from more than 350 business officers about the prevalence, cost, and benefits of nontuition sources. Respondents reported maintaining a wide variety of alternative sources of income. The most common sources were summer programs (84%), facility rentals (67%), and extended-day programs (65%). As a follow up to the survey, NAIS spoke more in-depth with several schools operating such programs to learn more about their experiences. Through these conversations, stories emerged that can serve as inspiration and learnings for schools seeking to implement new revenue streams.
Sonoma Country Day School’s Facility Rentals
Although Sonoma Country Day School (CA) began renting its facilities in the early 2000s, school leaders took a more deliberate approach in 2010. The board of trustees was looking for a way to slow the rate of tuition increases and started to think about revenue in a different way. SCDS also had a strong desire to be a resource in the community.The opportunity to use the campus during the summer seemed most desirable. The school had already actively cultivated relationships with the Golden State Warriors basketball camp and a youth symphony. It also had run its own camps in the past, but these consisted almost entirely of SCDS students and staff and were costly to run. When Steve & Kate’s Camp, a large and innovative camp operator looking to expand into the area, struck a deal with SCDS in 2010, it solidified the school’s presence as an area camp provider. In later years, SCDS would add partnerships with a tech summer program and a local Native American tribe offering programs to tribal members, rounding out a robust annual summer season on campus.
School leaders also realized an opportunity in its on-campus theater. SCDS developed relationships with local performing groups, including the Sonoma County Philharmonic and an annual jazz festival, who use the theater at night and on weekends. Another opportunity came when a nearby FedEx office sought more parking for its employees. It took nearly four years due to the complicated nature of the property and access, but the school built on-campus parking where it had underused space. The rent now helps fund maintenance of the school.
None of these relationships developed overnight. With an eye on the long term, SCDS patiently began cultivating groups in the area through friends, school families, or local businesses. Early on, the school marketed its facility as a venue, reaching out to for-profit renters, but as the facility rental program began to develop, SCDS began to think more strategically. With fulfilling a public purpose as part of its mission, it began to appeal to local nonprofits rather than for-profit companies. Today, SCDS does not need to market rentals; the campus is filled through word-of-mouth referrals and repeat renters.
Staffing changes were needed to adjust to such a large-scale facility rental program. In the beginning, an administrator ran the school’s summer programs. As her job responsibilities expanded, she began to oversee facility rentals in addition to after-school programs and summer programs. This role involves contract and relationship management, as well as oversight of school programs.
At first, SCDS relied on generic use agreements for external groups, but as the offers continued to come in, the school consulted with an attorney. In addition, SCDS needed to ensure that it was complying with relevant tax laws. The school worked closely with the local tax office when designing the contract with Steve & Kate’s Camp, for example; because the group is a for-profit business, the relationship affects the tax paid on the campus during operation of the camp.
About 3–5% of the school’s $7 million annual operating budget is generated by these alternate revenue streams today. In addition, all of the activity brings unaffiliated people to campus, providing a significant increase in name recognition and a window to engage with prospective parents and supporters.
Friends School of Minnesota’s Plant Sale
On the Wednesday before Mother’s Day weekend, middle schoolers at Friends School of Minnesota (MN) will descend upon the state fairgrounds and help set up the school’s annual plant sale. The sale, which began 30 years ago as a small event on the school grounds through the work of a school parent, has grown into a massive community event. About 20,000 people attended the event last year, generating $1.2 million in gross receipts.The event has always been held the weekend of Mother’s Day, which starts the short Minnesota gardening season and is a popular time to buy flowers. In 2005, after 15 years of event growth and a few weather-related issues, school leaders decided it was time to move the sale to a different location, which is just a few minutes from the campus in St. Paul. The new location provided relief from the rain and cold as well as a larger space.
In the early days, the school bought plants directly from local nurseries, with payment due after the sale, but as the event grew, the school began buying plants internationally, in part for logistical reasons. An agreement between the United States and Canada provides a simplified process for certain plant imports, making it easy for Friends School to purchase from greenhouses there. More recently, Friends School began importing unusual, noninvasive plants from countries like Japan that could not be obtained at local gardening stores. This process is more intensive, requiring work with an import broker and obtaining an import permit from the Department of Agriculture. The school hired a company to assist with the logistics of transportation and set up an international wire transfer to pay the grower in Japan.
Running an event of this size requires a dedicated planning committee—10 to 20 parent and community volunteers meet throughout the year. The committee works to organize logistics, including the purchase and delivery of the plants. They also market the event, creating a catalog of plants, and organize 1,400 volunteers, including parents, students, and other community members.
The school’s community connections coordinator, a part-time administrator, formally manages the plant sale, among other community-facing responsibilities. The coordinator organizes committee meetings and communication, and the school’s business office manages the finances of the event.
Last year’s sale provided Friends School with about $430,000 in net income: about 11% of its $4 million operating revenue. The plant sale also provides the school with many nonfinancial benefits. The entire middle school helps work the event and looks forward to it as a culminating event for the year. The sale also provides great visibility for the school––the event is often one of the first contact points with prospective parents. Some parents come to the plant sale and decide that Friends School is a community they want to be a part of.
Getting Started
For schools hoping to implement on new sources of income, experts recommend focusing on issues surrounding current services, rather than focusing on improving services incrementally. Thus, schools should focus first on “adjacencies” such as products, services, geographies, or customer segments that are closely related to their core business and mission. This approach can help generate new revenue with little risk. And to decrease the risk of failure, organizations are advised not to stray too far from the core business. The first step, experts recommend, is ascertaining the true demand for the proposed program. Conduct some market research and introduce a pilot or trial program to test it out.For more case studies, including Charlotte Latin School’s Daycare and Brownell Talbot School’s Gala, download the full report at nais.org.
For additional resources on the legal implications of nontuition income programs, please visit our Legal Resources page.