"How much money do I need to have to open a University?" It's a question that I have been asked frequently over the years, and while I wish there was one simple answer, the truth is that it is quite complicated. There are lots of different factors that influence costs:
- How many programs will you offer? Are you planning on offering programs on campus or online?
- Who will be managing your university? Do you need additional faculty and staff?
- Do you have a learning management system (LMS) in place already?
These are just some of the questions that need to be answered before a budget can be established. In this article, I will try to address these questions and others to give you an idea of what you can expect. Using these answers and my feasibility study as a template, you can accurately estimate your costs over the first 3 years.
Campus costs vary considerably based on whether you plan to offer courses online or in person. At a minimum, state regulators and accreditors expect you to have a physical office that students have access to. Rental costs for this can range from $99/person per month to $300/month for shared offices.
There also needs to be a secure location with a locked door and a fireproof cabinet for the storage of confidential information. The cost of renting a small administration area may range from $500 to $5,000 per month (depending on size and location).
If you are offering on-campus instruction, you must have a location that can accommodate the number of students you expect to teach as well as your faculty and administrative employees. The basic guideline is that each student requires 15-25 square feet at your facility at the same time.
These figures do not consider social distancing during a pandemic, so you should expect to have even larger spaces available until that situation is resolved.
Before you can acquire your license to operate and start enrolling, you must have qualified instructors in place. You need to go through a recruitment and hiring process and then onboard your faculty to address this. This all happens before you have your first student.
As the licensing process in most states can take from 4-12 months, you will need to keep your faculty engaged and interested. A good option here is hiring them as adjunct faculty and involving them in syllabus reviews, and other similar activities to keep them interested. Realize that you will need to compensate them for this time and salaries can range from $12,000 - $90,000 annually based on location and role. Salaries are likely to be your highest expense at this time, so keep this in mind as you will have no revenue coming in.
Administrative staff also needs to be in place in your institution. These positions include the admissions director, student services director, registrar, librarian, human resources manager, and accountants. Start with part-time staff to minimize costs, but expect these roles to become full-time in the future. Plan for an hourly rate of $40 to $150 per person based on skills and location.
Equipment and Technical
Another critical expense is your technical expenses, including the hardware and software that you use to deliver your courses. Students' papers, projects, examinations, and grades are no longer kept on paper. All of this information is now stored in a school management system and a learning management system.
There are lots of different options available, but a good starting solution is Google Business Solutions. Here students, faculty, and staff can all have a place to store their files as well as a unique email address. The basic learning management system - Google Classroom - is not the perfect solution, but it is a good way to start. Other solutions that offer greater capabilities include Canvas and Moodle, but you should budget for setup and configuration costs as these solutions are more complex.
Accreditors and regulators need to see that your students have access to research materials. By having a library, you are demonstrating that you meet their requirements.
This can be a physical library with the proper number of books relating to the courses you are teaching, or it can be an online library. Your librarian should be able to assist you in building the right solution. Postgraduate degree students will need additional research materials that you should also consider.
The list above does not account for all of the different expenses. You will need to consider others, but it does give you a bare minimum to budget. To conduct a more thorough analysis, you will need a Feasibility Study.
1. Preliminary Analysis
At this stage, you are looking at your project from a higher level before significant time and money are invested. Some simple questions that should be addressed include:
- Is there a need for your institution in the market you are targeting?
- Will the new operation be able to compete with existing businesses?
- Are there any obstacles that need to be addressed?
2. Projected Income Statement
Income statements need to cover direct and indirect costs while also accounting for growth. As you would do for a budget, subtracting out expenses from income determines the ability to generate the anticipated income.
3. Market Survey
The primary goal of a market study is to come up with a realistic estimate of income. To do this, look at the population demographic and trends in the community. Also, consider competition and the products and services they are offering.
4. Business Organization
You will make a detailed analysis of everything you need at this stage. Look at the location, equipment, people, and any other costs that you might incur to start up.
5. Opening Day Balance Sheet
Before the company begins generating income, the Opening Day Balance Sheet should reflect as accurately as feasible the assets and liabilities. Make a list of all equipment that will be required for normal operations.
6. Review and Analysis
Look at everything you have gathered through critical eyes. Make sure that you have accounted for all costs and sources of profit. Also, look at any risks and ensure that you have contingency plans in place.
7. Go/No Go Decision
With all of the other steps completed, the final stage is making that decision. What does the analysis say with regards to overall profitability? If you are not seeing the income you expect, you will need to stick to your guns and close the opportunity down. However, if you are seeing your minimum income reached, you should decide to "Go" forward.
Starting a University can be one of the most lucrative and intellectually gratifying activities. It is also a very time-consuming project that needs careful planning.
A wise man once said, "If you want to build a tower, you first sit down and decide how much it will cost, to see if you have enough money to finish the job." Starting a University is the same. If you do not know your costs, you might lay the foundation but fail to complete the project.
Make sure that you spend the time up front to determine all of your costs and sources of funding so you can be successful. To help with this, you can use the feasibility study template that I have developed. If you want a copy of this template for free, call me or email me.
Are you planning of opening your own university? Let me help you with that. Get in touch for a free consultation today.