Some have asked whether certain expense and revenue relationships typify the successful institution. Here are six I have gleaned from working with a variety of clients:
1. Salaries and benefits should not exceed 80% of net tuition revenue.
2. Direct instructional salary and benefits should not exceed 35% of net tuition.
3. Spending on institutional advancement should not exceed 50% of unrestricted funds raised (primarily annual fund receipts).
4. The freshman discount rate should not exceed the rate for seniors by more than five percentage points.
5. In the current environment, private institution net tuition should exceed $14,000 on an FTE basis. High cost areas will require more.
6. The net contribution for non-traditional programs should exceed 40% of revenues after accounting for all direct costs.
Do you have some of your own? I’d love to add to this list. Remember, these are relationships between revenues and expenses.