How to diversify your income for long-term financial security
Diversifying our income is key to being able to deliver what you want for children.
A wise person once told me that, "you can cost control yourself out of a crisis, but it doesn't give you the long-term future". Never has this been truer than in the world of schools. The financial pressures we have experienced over recent years have seemingly become ever more acute, especially in the face of rising inflation, soaring energy prices and staff salary rises. We have become adept at finessing every single budget line and squeezing efficiencies wherever we can. The language of ICFP (Integrated Curriculum Financial Planning) has become common parlance, and there's almost a dark sense of humour emanating from SBL offices across the land.
However, we need to grab hold of our top line and diversify our income streams. This mystical art of generating new revenue is an area we should all be tapping into and making the most of.
To paraphrase the poet laureate Andrew Motion, "What if we can find sustainable ways to grow income streams, so that we can create the schools we have in our dreams"?
This article sets out some ways in which schools and trusts can move past the core funding and raise valuable extra funds.
Hiring of facilities
Schools have a phenomenal array of buildings and offer a huge potential for income generation. Outside of school hours, if we're not doing anything with them, they sit there depreciating.
Schools should be a core part of communities, and I don't know one school leader that doesn't say that. Making the facilities available to the community is a real demonstration of that in practice, and it doesn't have to be overly complex.
Take, for example, a school in a town. Is it feasible for the school hall to be let out for 5 hours over the course of a weekend, for birthday parties, activity classes, night classes, clubs etc? If the hourly charge was £40, then that's £200 for the weekend. Every weekend makes it about £800/month, or, close to £10,000 per year. Of course, there are incremental costs associated, such as opening/closing, cleaning etc, but there's still a clear margin there to be made.
Further, if the school could also coincide these lettings with other lettings of other spaces, e.g. classrooms, then there are more gains to be made as the costs don't dramatically increase. Sports facilities are usually very much in demand, and if you have good football pitches or gyms, then these can be particularly lucrative.
If you scale this up to a large secondary school, or even a MAT-wide strategy, then there is significant income that can be reinvested back into the activities of your schools.
If you're in the fortunate position of having substantial cash reserves, and not doing anything with them, the chances are that you're getting a lower rate of interest than you're losing due to inflation. Therefore, hand on heart, are you really getting value for the taxpayers' pounds?
There do exist options that will give you a better rate of return than you get on the mainstream deposit or current accounts. You should talk to your bank manager to see what options are available. Other platforms exist which give you greater returns and keep your funds as cash.
Similarly, for those who have a greater appetite for investment management, (and this is not financial advice – take your own professional advice before investing!) some trusts have set up equity investment portfolios to maximise the return on their money, within their board's risk appetite. There is evidence of trusts making six-figure returns in a year on cash they chose to invest.
Strategic investment in assets
We know that the rises in energy price is crazy at the moment – and they're only set to increase. I'm seeing schools getting renewal quotes of 3, 4, or even 5 times what they were paying in their previous contract. If you are able to invest in renewable energy assets, now may be the time to do so.
Solar panels or wind turbines are both great ways to reduce your ongoing energy costs, over the short and long term - and are sustainable too.
It is likely that with either of these, you'll see a return on investment that is far greater than the cost you're currently paying for energy, or the return you're getting from cash sitting in your bank account.
Even better than that – it's a recurring saving/income, which is the holy grail of income management.
Maximising your Number On Roll
This is quite possibly the biggest impact on revenue generation that you can have.If your school has class sizes/year groups that are not full, then there is financial inefficiency, which can be significant.
Consider a 1 form entry primary school, with the following year group numbers:
This school is under capacity by 22 children.
Assuming an average grant per child of £3,500 per year, then if the school was able to add one extra child per year group, the funding would increase by £24,500. However, because pupil funding is recurring income, this accumulates significantly, so, over the next five years the additional income would increase fourfold.
That's a huge amount of income that can be reinvested directly into the school, with very little extra incremental cost, as the number of classes, and teachers, remains constant.
Schools across the country have a raft of phenomenal colleagues in them. We see them every day. Schools invest in their people, and rightly so – we are nothing if not people organisations.
If your school or trust has great quality CPD, or resources, then it could easily be something that could and should be shared with the wider professional network. Yes, there is a moral conversation to be had about professional generosity to others, but there is also scope for charges to be made for this training or resources. This can reflect the work that has gone into their generation.
Wrap around / nursery care
Wrap-around care is hugely popular with parents of primary children. There may be potential for your school or trust to establish provision which meets the needs of your children and parents, and to do so internally, or through a negotiated agreement with third parties. At the very basic level, this could be a letting of your space to a third party, through to running and staffing the provision yourself.
Our finance experts are experienced at finding these opportunities and using them to support your school or trust's continued success. Keystone can also review your finances to find efficiencies, either through application of ICFP or looking at your procurement to find better deals.
Contact us to find out more.
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