The £7.99 FE Financial Viability Plan

Collab recently published an article on the “key drivers for colleges to think and act more like a commercial business”. It mentioned funding reduction, competition and apprenticeship reform. It was perfectly correct in all it said but, for me, missed one essential element.

It reinforced all that we already knew, but failed to point to any solutions. 

The overarching message seemed to be that FE needs to become more commercial. That is a message I’ve seen reinforced by various government initiatives since the 1980s. So nothing new there!

And clearly FE has failed in its quest, or why else the call to become more commercial.

How Does FE Become More Commercial?

FE certainly needs to become more commercial due to the drivers Collab mentioned, and many it didn’t. 

But how do we do this? Well the answer might be partly summed up in the headline above. It’s £7.99.

OK,  so £7.99 might sound like the answer to the meaning of life, the universe, financial viability and everything. The reality is that it is these are the figures that point to an entirely new FE mindset. We have to accept that funding is never going to improve, except perhaps at the periphery, for things like T levels. Competition is going to get worse and that reforms and changes are two a penny, and have come along, as if timetabled like the buses, since at least the 1980s.

And, sadly, FE has behaved in a polite and courteous way to government and kept to the rules. We’ve accepted all that government has thrown at us. That’s been to our detriment and has resulted in the numerous Notices of Financial Concern over recent years. Our attitude seems to be that we’ve always done it this way so we will continue to do so. Einstein is turning in his grave. And we aren’t being commercial.

FE will only become more commercial if we adopt a commercial mindset. Listing the drivers to do so is not likely to make us more commercial.

Commercially Inexperienced Leadership

I greatly admire many college leaders. They have a tough job and are a resilient bunch. But admiration and reality are uneasy bedfellows and we have to admit that there are not many FE leaders with an entrepreneurial track record, especially outside of FE. That’s not their fault.

FE was never designed to be a hotbed of entrepreneurial zeal capable of being held up as an exemplar of successful commercial practice. And most of our leaders have come up through the FE route, not via a commercial route. So how can we expect commercial acumen.

What we need to do is rethink the way we do things. We need to reconsider our product, our delivery methods, our market and our pricing structure. After all, the world has moved on and we know FE isn’t at the vanguard of radical thinking when it comes to being commercial.

We complain of underfunding but the realists among us know that in the present climate we aren’t going to see a hike in funding. So we have to accept that we have to spend our limited funding more effectively.

For years we’ve seen FE make cuts. And every merger I’ve ever seen has been based around the proposed savings that would be made. (How merging a sinking ship to a ship loaded to the gunwales is meant to make both more seaworthy is yet to be explained to me. I’ve yet to see a merger that can point to real savings, except where staff has been shed and capital assets sold!).

But I digress. Cuts aren’t the answer. Redundancies aren’t the answer.  Selling the family silver isn’t the answer.

We need to radically rethink the way we do think. And £7.99 is one potential answer.

But before I get on to that let’s take a lesson from Mr Micawber. Let’s cut some expenditure.

FE will not welcome my next comments. But we waste too much money in FE. We spend far too much without understanding how to specify our needs or what alternatives exist.

For example I see many colleges spending far too much on websites that cost far to much in hosting and support costs. An example would be a college where the web developers sold the college hosting at £3k a year. They used a hosting company that the college could have contracted direct at a cost of £199/year.

The £2800/annum difference was the web developers huge profit margin. You have to admire them for being commercial!

Having a robust procurement process is useless if you don’t know what you could buy and what it could cost. Knowing how many beans make five is part of the commercial approach FE needs to adopt. We can’t afford waste.

Commercial Nous, Waste and Technology

And talking of waste, and doing things the same way as we always have, let’s think about the changes that technology brings.

One of my bugbears is the way we cling to outdated technology. Especially telephones.

Most of us carry mobile phones today. Fewer people have a landline in their homes. More of us use VOIP systems like Skype or Zoom to make international calls at no cost.

But, in the main, FE remains staunchly traditional.

I noted an interesting fact in a recent article written by Jamie Smith. It seems the average college spends around £100k on the provision of mobile phones for staff with safeguarding, wardening, estates and security responsibilities. His company has brought in an app that will sit on the staff members personal mobile phone and replace the need to carry a second phone. The costs are minimal.

Of course some people will object to receiving business calls on their personal phone. And I’m sure the unions will object for some reason. And yes, a small amount of personal call allowance might get used. But that is no reason not to consider this route to £100k savings.

We are intelligent people. There must be a way to recompense staff willing to go down this route and still save the college huge sums. The alternatives are budgetary issues leading to larger classes, more redundancies and more mergers.

FE is funded to educate people. It isn’t funded to ensure web developers make huge profits reselling hosting or mobile phone operators being paid for unnecessary services.

These are just two of the many thousands of ways we can make our funding go much further.

But what about the £7.99?

Rethinking What FE Offers

Isn’t it time we had a radical rethink about our offer. The traditional chalk and talk in a classroom has to be rethought. And I’m glad to see some FE institutions making steps in this direction. But they are relatively small steps.

I don’t want to see teachers replaced. They have a place in the future. Indeed they are essential.

But we now live in a society where people buy and behave differently. Take music or films. Both have changed radically.

Music used to be sold as sheet music. Then came 78s (anyone remember those). Then came 45s, EPs, LPs, Tape, Cartridges, CDs, BlueRay etc. And although vinyl has made a limited comeback, we now have subscription services like Spotify.

Film and TV are the same. We had music halls, then silent film, then the talkies, and despite cinemas being very popular again, we now have subscription services like Netflix.

Even software comes as a subscription service these days. It’s no longer possible to buy many software packages. They are only available on subscription.

Subscription seems to be the name of the game and millions of us pay £7.99 a month for this type of service. 

So why can’t our students pay £7.99 a month for their college courses?

If you subscribe to the school of thought that says we’ve always done it this way, then you have missed the point.

£7.99 may not be the actual price. It is a metaphor for a new type of FE thinking. It’s about being commercially minded.

Uber founder, Travis Kalanick was probably told he was mad when he thought he could run a “taxi“ service without owning any cars.

Brian Chesky, Joe Gebbia and Nathan Blecharczyk think commercially. They are the founders of Airbnb. Airbnb leases and rents out hotel rooms, houses, cottages etc that they don’t own. Of course I don’t need to tell you this as you will have heard of Airbnb.

So if the founders of these businesses rethought the traditional why can’t you? Why can’t FE rethink the way we offer FE? In fact why can’t we rethink what we offer?

A course at £7.99 a month may seem impossible. But so were the above ideas.

This isn’t new outside of traditional FE. I have colleagues that already offer education and training on a subscription model. For example one of them offers training to business leaders at a subscription fee of £85/month. It’s a “take it at your own pace” package and most people stay for years. He turns over £millions and runs the business single-handed! Traditionalists think it’s impossible …. but he does it and is runs a very profitable business. He is commercial.

So is a £7.99/month A level impossible?

Is a £25/month degree impossible?

If we continue to think as we have always thought they are. But if we think like commercial entrepreneurs we can reshape FE totally. Teachers still have a place but do we need large campuses? Do we need to even own computers?

A friend of mine, for many years, ran an international coaching company with hundreds of staff. They didn’t own or rent any office space, PCs, vehicles etc. but were very successful. They were very profitable. They uberised their market before Uber came onto the scene.

Can the colleges in the Collab Group collaborate to find a £7.99 solution to the present commercial impasse? 

There are now businesses and charities out there that are going beyond £7.99 thinking. I recently mentioned one, FuseSchool, in my article about snow days. FuseSchool, as a charity, is providing education curriculum support at nil cost to schools around the world. Students are taking modules online and this supports the teacher. It doesn’t do away with teachers. This type of learning has the potential to increase pass rates and that means increased income for colleges.

And before someone points out that FuseSchool is a charity, aren’t colleges also registered charities? My point is we need to think differently if we are to be commercial. Improving pass rates seems to me both within our charitable objectives and commercial.

I’m not advocating the destruction of FE. It will destroy itself if it tries to continue without change. What I’m advocating is the same as Collab. FE needs to become more commercial.

However, without going beyond understanding the drivers of change we have no chance of long-term survival.

Above I’ve listed just a few of the changes that are needed if we are to become commercial. I could write a book on the hundreds of ways we can adopt a commercial mindset. But it all starts with thinking about the £7.99 concept and associated ideas.

Stefan Drew, FHE Marketing Consultant

About Stefan Drew: FHE Marketing Consultant Stefan Drew was previously director of marketing at two FHE colleges and for over a decade has consulted with colleges, universities and private providers throughout the UK, Europe, Africa and the US. LinkedIn  UnderFunded Education