Once again, we invited ALTO members to delegate their rising stars, their future leaders to our professional development session in London. The group’s presenter was Andrew Needham of Embedding Performance who previously presented to our leaders’ group, receiving excellent feedback and especially appreciated for his brilliant presentation style.
Andrew’s aim was to provide an insight into a company’s finances in order to make managers understand the financial implications of their decisions.
Measuring financial performance
The session kicked off looking at the 3 core financial statements used to manage a language school or college business being the Income and Expenditure account (or P&L), cashflow statement and balance sheet.
We looked at the important distinction between profitability and cashflow working through examples and sharing thoughts on how important concepts apply in our business and how best to manage cashflow i.e. collecting fees and invoices from students or agencies promptly, managing capital investment and taking advantage of any credit terms available from suppliers or partner organisations.
We explored the concept of return on investment (ROI) and the need to recognise the cost of debt and equity capital invested in our businesses and the importance of earning an appropriate level of return on how that capital is deployed in school assets like property, classrooms, fixtures and fittings, IT systems, etc.
This discussion was used to identify critical operational and financial metrics essential to manage for language school-based businesses e.g. student weeks, staff costs as % of tuition fee revenue, % of students recruited through agents, agency commission rates, etc.
Finally, people, working in small teams, applied their new knowledge to the financial results of a fictional language college business that was growing in terms of students and revenue but not translating that top-line growth into profitability or cash. The challenge was to identify the main issues or concerns before moving on to develop possible solutions.
Driving improved financial performance
After a short networking break the groups moved on to consider specific tactics or strategies that language school businesses can use to improve financial performance. We discussed examples from the airline industry that, like the language school industry, is highly competitive and has a high proportion of fairly fixed costs. We discussed how they drive bottom line profitability by more efficient use of their assets, generating ancillary revenues and achieving a more flexible lower cost base.
This rich discussion was developed by the groups who presented back some specific ideas open to language schools that could improve profitability and capture value for the business owners. Ideas discussed included optimising staffing structures, growing class sizes, collaborating with strategic partners like accommodation providers and travel companies, and using various added value services for students to generate ancillary revenues.
Participants left the session armed with tools and promised themselves to stay in communication with the finance department to make sure they are aligned with their company’s overall goals. Andrew received 100% excellent or very good score on the feedback form, which I believe was the first i ALTO’s history! Thank you Andrew for preparing a tailor made programme for our Leaders in Training!
If you missed this session but would like to join the next one….