In Part 1 of this series, Adopting a Revenue-Positive Mindset, covered the basics of Net Tuition Revenue (NTR) as a concept. Now, in Part 2, we will discuss the practical application of NTR as an important part of your strategic enrollment management playbook. 

For most schools, tuition dollars are the primary source of revenue for their operating budgets. That said, the strategic application of discounting dollars (of all types) is crucial to financial sustainability. This means that every enrollment decision is also a revenue decision, regardless of whether a student is full pay, full need, or anywhere in between. Applying these basic concepts of NTR starts with setting realistic goals and tracking the right data.

Set Goals With Net Tuition Revenue
The very first item on the NTR to-do list is to understand precisely how much of your operating budget in a given year is expected to come from tuition dollars. This portion averages around 74% for most schools, though I have seen schools go as high as 100% and as low as 5%. The higher the percentage, the more critical NTR’s role becomes in your enrollment management toolkit. Ultimately, you’ll want to convert the percentage to a dollar amount, your “goal NTR.” In other words, it is the target for how much revenue you need to generate from enrollment. 

Once you know your goal NTR, you’ll want to determine your goal enrollment for the coming year. From there, divide the revenue by the total number of students to give you the beginnings of an NTR benchmark. To simplify the math, let’s say your revenue goal is $1M and your enrollment goal is 100 students. Your NTR benchmark is then $10k per student, meaning that if you enrolled 100 students and every student paid exactly the same amount, it would be $10k. So, as you seek to enroll your 100 students, the goal is to manage your discounting for your NTR benchmark such that every student is contributing at least $10k on average. In practice, that means if I enroll one student at full need, that can be balanced by two full-pay enrollments (if I set tuition at $15k).

Track Essential Data
Once your goals and benchmarks have been established for the school, it’s essential to dig down one more layer and track those metrics on a grade-by-grade basis. Many schools will have different tuition rates for various grade levels and, by extension, different discounting needs. Following our $10k-per-student NTR benchmark example, if my kindergarten tuition is $15k but my 6th grade tuition is $20k, there’s a very different calculus for how much discounting is possible.

You will want to look at each grade like a mini-school and determine what slice of that goal-NTR pie ($1M in our example) each grade level needs to contribute. To do this, multiply the desired enrollment for each grade level by the full tuition for that grade to get your gross revenue possible. Then, to get your goal NTR for the grade, take your desired NTR per student ($10k) and multiply that by your desired grade level enrollment. For example, if your goal is ten kindergarteners at $15k full tuition, your gross revenue is $150k, and your goal NTR is $100k. This means that you cannot discount more than $50k for that grade, or else you will be carrying too high of a discount rate, and that grade level won’t be contributing its share to the whole school revenue. In contrast, my 6th-grade tuition at $20k and a goal enrollment of 10 would result in $200k gross revenue and a maximum total discount of $100k — 100% more than the kindergarten, but with the difference in tuition, it’s only around 33% more effective.

As you look to enroll and award your students, understanding how each award and enrollment decision brings you closer to or further away from the benchmarks will help ensure that you balance the correct discounting-to-revenue ratio.

Apply Data Insights
As you track your actions against the benchmarks, it’s important to recognize that there will be nuances in any given year and even within the year, so maintaining flexibility is essential. Start each year by establishing your current discount rates for your returning students, knowing that most families will likely require similar discounting and awarding from one year to the next. Then, with what’s left over, examine the realities for each grade or division. If you know that it is more difficult for your market to enroll a new 7th grader than a new 6th grader, you may want to adjust your goal discounting between those two grades to achieve a balance and fulfill your enrollment and revenue goals.

Final Thoughts
Whether a school has a discounting program that is entirely need-based or a mixture of need, merit, and other types, every decision impacts the bottom line. Tracking these metrics and utilizing their insights for real-time data-driven decisions can become a very complex task. 

This could be made easier by using a detailed system of spreadsheets (which many of us already have), but at Clarity, we’ve built these tools directly into our platform.  InTuition in Clarity allows users to benefit from all of this data without needing to export or create complex spreadsheets. When combined with the expertise of a dedicated Client Success Manager, InTuition has proven to be a force multiplier for small offices as well as instantly elevating the effectiveness of larger teams. 

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