In today’s challenging fiscal environment, universities are tasked with expanding their missions, creating new revenue streams, and gaining more students. Higher education administrators can find success and create predictable and sustainable growth through properly structured, managed, and financed hybrid health care programs.
Building and launching successful hybrid programs begins with an innovation-centered financial model that encourages entrepreneurship and ensures that programs are self-sustaining and revenue-generating.
In this article, let’s dive into the financial aspects of developing a hybrid accelerated program, providing a comprehensive breakdown of costs, from technological investments and faculty training to marketing and infrastructure. Additionally, we outline a formula to help calculate the return on investment (ROI) for these programs, enabling you to assess their financial viability and long-term benefits.
Financial Planning Best Practices for Hybrid Programs
Before diving into specifics, let's explore the fundamental elements of a robust financial model. Understanding both forecasted revenue and expenses is crucial for institutions aiming to implement hybrid accelerated programs successfully, ensuring informed, strategic decisions in program development. The right financial model accounts for needed resources, provides a holistic decision-making tool, and lays out a preliminary budget for programmatic and regional accreditors and local university stakeholders.
A detailed financial model should provide a multi-year forecast of enrollments and corresponding costs, while giving an in-depth understanding of the number and timing of instructors and staff required to support a program as it grows. Online and hybrid program enrollment growth requires an institutional long-term commitment to greater efficiency and improvement, while also driving investment in new program infrastructure, staffing, and dedicated administrative resources.
When developing a hybrid accelerated program, it's crucial for administrators to consider both top-line revenues and bottom-line margins. Often, there is too much focus on potential income without enough attention to the start-up and ongoing expenses that impact overall profitability.
Additionally, to ensure the financial viability of the program, it's important to have a clear calculation of the maximum investment the institution will make and to anticipate when the program will reach its breakeven point and when payback will be achieved.
Understanding the Direct Costs of Hybrid Programs
A thorough assessment of both direct and indirect costs is essential in the planning process. Direct costs are expenses that can be directly attributed to the development and delivery of the hybrid accelerated program. They include the following:
Initial Investments
- Infrastructure: Establishing specialized lab facilities for in-person immersions and equipping them to meet quality and accreditation standards.
- Technology: Investing in software platforms for online learning, cybersecurity measures, and tools for virtual collaboration.
Staffing Costs
- Direct program staff: Salaries and benefits for personnel responsible for daily operations and administrative tasks.
- Instructional design staff: Team members dedicated to creating and maintaining high-quality course content.
- Placement services staff: Staff who assist students in securing internships and job placements relevant to their field of study.
Ongoing Expenses
- Technology maintenance: Regular updates, troubleshooting, and tech support to ensure the seamless operation of online learning platforms. This also includes software licenses and renewals.
- Course development, refreshment, and maintenance: Continuous efforts to develop new courses and update existing ones to maintain relevance and quality.
- Faculty development: Providing workshops, certifications, and continuous professional development to keep up with the latest educational technologies and teaching methodologies.
- Accreditation fees: Regular fees associated with maintaining and renewing program accreditation, ensuring the program meets and upholds established educational standards.
Understanding the Indirect Costs of Hybrid Programs
Indirect costs support the overall operation of the program but cannot be directly traced to a specific activity. They include the following:
Support Services
- Marketing staff: Employees dedicated to promoting the program and managing marketing campaigns.
- Recruitment staff: Personnel involved in the admissions process and ensuring a steady stream of applicants. Proactive student recruitment helps maximize the outcomes from your marketing. Universities should assign dedicated enrollment advisors to work with prospective students and help guide them through the application process. Hire one enrollment advisor for every 100 new students you expect to join the program each year.
- Student success services staff: Staff providing academic advising, counseling, and career services to enhance student retention and success. Retention is the most powerful lever that you have for program success. Working professionals are more likely to drop out of programs for nonacademic reasons than for academic ones. Plan to employ one nonacademic student advisor for every 300 students enrolled in a program.
- Leadership staff: Individuals overseeing the program, ensuring alignment with institutional goals, and driving continuous improvement.
Other Expenses
- Administrative support: Additional support required for managing the hybrid accelerated program, including academic advising, student services, and administrative coordination.
- Impact on existing resources and facilities: Evaluating how the new program will integrate with current offerings and facilities to prevent overextension and ensure optimal utilization of resources.
- Advertising and marketing spend: Costs associated with promoting the program through various advertising channels to attract prospective students. Higher education marketing costs have increased dramatically over the past few years, as competition for a finite number of qualified students has soared. Many online channels tend to increase 10% or more per year on a cost-per-lead basis. To counteract higher marketing cost increases, institutions must regularly investigate new lead channels and diversify marketing spend mix.
Calculating the ROI for Hybrid Programs
Calculating the ROI for a hybrid accelerated program involves analyzing both quantitative and qualitative benefits. The more students you recruit, the more you’ll need to spend over time to maintain growth in the program.
Quantitative Benefits
For the quantitative side, methods for calculating ROI focus on key financial metrics such as tuition revenue, enrollment growth, and long-term financial benefits.
- Estimate total tuition revenue: Multiply the number of enrolled students by the tuition fee per student. For example, if a program enrolls 100 students each paying $20,000, the total tuition revenue would be $2,000,000. Also consider annual tuition increases and any applicable program fees that may be incurred on an on-going basis.
- Consider enrollment growth: Factor in the expected annual growth rate. For instance, a 5% annual growth rate would increase the number of students to 105 in the second year, further boosting tuition revenue.
- Analyze long-term financial benefits: Project revenues and costs over several years to calculate net present value (NPV) and internal rate of return (IRR), providing a comprehensive view of the program's financial viability.
Qualitative Benefits
While quantitative metrics are crucial, qualitative benefits also play a significant role in evaluating the ROI of hybrid accelerated programs.
- Enhanced accessibility: Flexible online coursework combined with on-campus lab immersions allows students to balance their studies with work or other commitments, attracting a diverse student population.
- Institutional reputation: Programs that successfully blend online and in-person learning are often viewed as forward-thinking and responsive to modern educational needs.
- Improved student outcomes: The combination of theoretical knowledge and practical skills prepares students effectively for the workforce, leading to higher completion rates and better job placement.
- Health care education: These programs are particularly beneficial in health care education, meeting the growing demand for health care professionals and addressing workforce shortages.
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Funding Models for Hybrid Programs
Now that we've explored the costs and ROI models, let's examine various funding and development models available for implementing hybrid accelerated programs.
Self-Funded
In the self-funded model, the institution uses its own financial resources to develop and sustain the hybrid accelerated program. This model offers:
- Complete control: The institution retains full control over the program's design, implementation, and management, ensuring alignment with the institution’s mission and standards.
- Retained revenues: All revenue generated from the program remains within the institution, potentially leading to higher long-term financial benefits.
- Flexibility: Institutions can adjust the program structure, pricing, and content without needing approval from external partners.
However, self-funding also comes with challenges, including substantial initial investments and significant administrative and academic resource demands.
Revenue Share with a Partner
In a revenue share model, the institution partners with a third-party organization that provides financial investment, expertise, and support in exchange for a share of the program’s revenue. This model offers:
- Reduced financial risk: The third-party partner shoulders a portion of the financial burden, reducing the institution’s upfront investment.
- Expertise and support: Partnering with an experienced third party can bring valuable expertise in program development, marketing, recruitment, and student support.
- Scalability: The partnership can facilitate rapid scaling of the program, leveraging the third party’s resources and infrastructure.
The main consideration is that the institution must share revenue with the partner, potentially reducing the overall financial return and requiring close collaboration to ensure alignment with institutional goals.
Fee-for-Service with a Partner
The fee-for-service model involves hiring a third-party provider to deliver specific services necessary for the program’s development and operation. These services can include marketing, recruitment, instructional design, and student support.
The institution pays a fee for these services rather than sharing program revenue. Key considerations include:
- Access to expertise: Institutions can leverage the specialized skills and knowledge of third-party providers without entering into long-term revenue-sharing agreements.
- Cost predictability: Fees are typically agreed upon in advance, providing clear cost projections and helping institutions manage their budgets effectively.
- Flexibility: Institutions can choose which services to outsource and retain control over other aspects of the program.
However, this model also has considerations, including the complexity of coordinating and integrating outsourced services and the potential for cumulative fees to add up over time. This model also carries with it higher risk and little recourse for the institution if the outsourced service provider doesn’t deliver the quality services and support that was initially promised.
Next Steps: How to Launch a Hybrid Accelerated Program
Understanding the comprehensive costs and potential returns of these programs is crucial for institutions considering their adoption. Evaluating both direct and indirect expenses helps develop a clear financial picture, leading to informed, strategic decisions.
Calculating ROI through quantitative and qualitative metrics provides a thorough assessment of financial viability and long-term benefits.
How an Experienced Partner Can Help
EIM offers a structured discovery phase to help institutions navigate the complexities of launching a hybrid accelerated program. Here’s how we can assist:
- Free consultation: Our process begins with a complimentary consultation to understand your institution’s unique needs and goals. We discuss the potential of hybrid accelerated programs and identify key areas of interest and concern.
- Pro forma development: Following the initial consultation, we develop a detailed pro forma financial statement. This includes an analysis of both direct and indirect costs, projected revenues, and potential ROI. The pro forma provides a clear financial picture, helping institutions to make informed decisions.
During the consultation, we’ll provide a complete picture of the services we provide to launch innovative graduate programs in health care.
By partnering with EIM, institutions can confidently move forward with the development of hybrid accelerated programs, positioning themselves for success in the rapidly changing landscape of higher education. What questions do you have? Let’s have a conversation.
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