A Financial Health and Viability Review for Cottey College (MO) April 29, 2025

Well, let's take a look at our next college, and we're going to Missouri this time. We're going to Cottey College. The floor is yours.

All right, Cottey College, really interesting school. A very small, wealthy— very wealthy, and I'll explain why in a minute, uh, small in that it only has about 300 students.

Yep.

And very wealthy for its size. So let's pull this up. I'm actually going to refresh this. Everything is back to the default. So Paddy, Paddy College. Okay, so first thing I saw was these alarming negative change in net assets from operations. I dug into these a bit more because this looks pretty catastrophic and it's a bit of a challenge to figure out exactly what's happening because they have an affiliate as well, which is called the PSE. Oh, what's it called? I had it written down. Sisterhood. Yeah. PEO Sisterhood. And so there's transfers going back and forth. And in these years, actually looks like, you know, COTI is doing quite well. There's actually, are actually not doing very well. They're getting money like $3 million from PEO. But I don't know what their arrangement is, their agreement. Um, back here it was the opposite. Uh, COTY was giving money to PEO, so, uh, it's a little bit tricky to track what's happening there. But we can look at some things that can't be hidden, which is, uh, we can look at their total net assets. This is like your net worth, right? And take a look at how that's been changing over time. And there's not a lot to like there. That's at the 25th percentile. Although growing, so it's not catastrophic. Their net assets, net worth, in other words, has grown by 21%, but that's far lower than the median of 46%. Another thing to look at is unrestricted net assets, and that's really their net worth that they can use for whatever they want, right? It may not be liquid, but it's not restricted by donors, and that shrunk, right? And that's abnormal. Again, it's weird to be shrinking. It should be growing. About 35% is the median. So some red flags there. And if you take a look at their endowments, another big red flag, the endowments growing, but it's not growing very well. This is well below the 25th percentile in terms of growth, about 15% growth when normal is about 57%. And what do you suppose is the reason for the low growth? We see this all the time. The appropriations are off the charts right now. 8% draw, 7%, 6%. The last time they had a normal draw was fiscal year 2021, it looks like, and even that was a bit high. And then they had some big draws back here. So all of that is working against their endowment net assets, unrestricted net assets, and so on. Um, so they are in financial stress for sure, just looking at these metrics. You need to bring that endowment draw back down about half of what it is right now. Um, and, and fit your budget within that much lower operating revenue. Um, all right, so here's the thing though. This school is super wealthy. Let me just show you how wealthy it is relative to its size. So let's go to the endowment value first in millions. They have a $108 million endowment, which may sound pretty normal, but again, the school is tiny. So on a per FTE, look at that, that's $400,000 per student. This is one of those schools that's really awesome in my view, that basically they could probably make, um, if you just looked at their appropriations, they could probably make the school free, right? Um, if they set it up right. Um, I don't want percent, I want value. And the reason I say that is their per-student endowment appropriation. I know this is too high right now, but it's like $23,000 per student that they just get from their endowment.

Right.

Some schools have a smaller budget total.

Right, right.

From tuition and donations and all that. So they're in a great position, very wealthy. Although these draws are now too big, the draw should really be about at the moment, probably about $20K or $15K per student. But still, that's massive, right? Just to put that in perspective, let me put WashU in St— everybody knows WashU, right?

Yeah.

Washington University in St. Louis, one of the best schools in the country. Huge endowment. COTI is right there with them.

Look at that.

Pretty amazing, right?

That's a great analogy, man.

Amount of assets they have to support their students is off the charts. And it's really a cool situation. And because of it, you can see their net tuition revenue. They can basically be free. I said they're not free right now, but let me get Washington off there. Kind of messing up my graph. All right. So the net tuition revenue total is tiny, $2 million, right? It's basically because Yeah, they're small, but they also pretty much are free. I mean, this is really close to free, right? $8,000.

$8,000.

Yeah, $8,000 net tuition per student on average, although they've increased it a bit. It looks like with their current financial struggles, they may be charging a higher price right now to bring this up. It's interesting to see that this is near their record high for net tuition. Per student. Their net tuition revenue is pretty much $2.2 million for the last several years. In fact, this is near the highest it's ever been.

Um, and for those that don't know, this is an all-women's college.

Yeah, $2.2 million. I mean, this is as high as it's been in a long time, even though their enrollment is falling off, it appears. It's kind of interesting. It's a really cheap school. We wouldn't imagine that they would have problems with enrollment, but especially given the resources they have, they can probably provide, you know, world-class, pretty flat education. But yeah, so actually enrollment, looking at it now, their last recorded enrollment's only down 8%. This is a projection based on their fall headcount. It's error-prone potentially, but it looks like they're looking at a smaller enrollment going forward based on what happened with their fall 2023 headcounts. But it'd be interesting to dig into that and do the Strategic Compass. We can project forward and see what enrollment's going to look like. But this school just has a ton of resources, and I think it would be pretty easy. And I'll show you some things they can do to balance their budget. Another thing with the last school, we saw that advertising spend was off. I just wonder if maybe they can market some more. There's this sudden drop here in advertising in '21. It's never really come back on a per FTE basis.

That's two colleges in a row we've seen that happen.

Yeah, two colleges in a row struggling a bit with enrollment, and at the same time they've got low— I mean, actually, that advertising spend relative to their operating revenue is about right, but there was a sudden drop. And so it's kind of, I wonder if there wasn't some consequence of this, right? Going from $600,000 to $200,000 in one year seems pretty dramatic change in the marketing approach. It may have been the wrong approach. So this is again, a really important thing about data is you can go back and figure out, okay, well, what mistakes were made and can we reverse some of these mistakes? Not saying that this was, but it could be, right? So should check it. All right, on the cost side. So they have lots of— the school is super wealthy, right? So the cost side has to be the problem. And I'll show you a lot of this right now, starting with employees. All right, per FTE employees, I mean, just off the charts here for number of staff per students.

Would that be common for smaller colleges?

Because you need to be— but this is why you can use this chart down here to find other peers that are similar. So I can, I can fill, I won't take the time right now, but you can filter this by other schools that have about 300 students and figure out how many employees they have. You may find that, you know, just like school at 300, it's okay. But even given their really, really high operating revenue, that's really high staffing still, really close to the 75th percentile. So again, I think there's room to reduce the staff there. Another thing is it may not just be the staff count, it could be the compensation. One thing that I flagged here, which I haven't shown on the show before, is I have benefits spend. Where am I seeing it though? Other employee benefits. Yes. Okay. We have this like skyrocketing benefits spend here in 2023. That's curious. Per FCE, it's really high raw value. Yeah, increase from $1.5 million to $2 million. I would double-check what changed with the benefits package here. This looks to be significant change, and it's quite high relative to their revenue again and relative to their student body size. So what this means is it could be a combination of too many staff, as we already saw, and an overly generous benefits package. I'll just say I've worked with clients where They had a 12%— one example was a 12% contribution to retirement. Turns out that was really high relative to their peer institutions. They also had a very expensive health insurance plan that were— they were able to get a different plan that offered similar benefits for far cheaper. So those are things they can look at here. I look at that benefits package. More stuff here that I don't often show, but it's worth mentioning. The travel budget, travel budget again, super high even though their revenue is really high, right? Take a look at that travel budget. What's help— what's going on there? Curious thing is I have conference spend like, and that's super low, right?

Goodness.

Zero, right? So there could be some issues with accounting or maybe all that travel spend is just people flying around, not not going to conferences, doing something else. I'm not sure.

I guess yet another example of the data being the source to ask important questions.

Yeah, they don't have a food service contract. That in itself is another thing to look into. Um, oh yeah, and again, their— all their contracts are down here. And as you can probably imagine, they have a bunch of contracts, and I'm not going to put them up here, but I'll just say they have in, in one fiscal year that they often have two consulting contracts that are over $100K. That's not normal. They also have— what else? If you check their fees for services spend, off the charts again. So my advice to them, check the vendor contracts, check the staffing. All right. Check the travel spend, check the advertising spend, which should be probably higher. You got to reduce your draw on your endowment. To make that around 4.5% or so. So, lots of stuff to do on their end. I'd be happy to help them do it. But those are the big high-level things that I think they need to focus on right now. I'll pass it back to you, Gary.

Yeah. And as I bring my screen up, you know, for those that are interested in the Advanced Financial Compass that Matt uses for his part of the show, and you hear him reference the Strategic Compass, and again, the best way to approach that is drop me a note and I'll leave contact information in the show notes and we'll do a demo. We'll show you the example of an actual strategic company. We can talk about how it would apply to your college. Matt may or may not join us for that conversation, but it provides an in-depth analysis, Matt, that I don't think anybody else anywhere provides. Is that fair?

Yeah, and we make a report, we have a bunch of meetings with you, we do follow-up research, lots of, lots of valuable stuff that we can provide for way cheaper than $100K, as we found out again.

And so drop me a note, I'll be glad to set up a time to do a demo of the product for you and decide— you can decide, of course, if it's good for you or not. Let's take a look at the 2025 College Viability App. This is the executive analysis version. Graduation rates— we're looking at 4-year graduation rates for Cottey— not exceptional, but they're averaging above 50%, and that's my threshold. Um, they're not as high consistently as Franklin Marshall or the last college that we'll look at. Let's take a look at their admissions yield, just to make that a theme today. Also, Matt, their admissions yield— interesting— was 40%. Look at the drop. Just compared to the other two colleges we're looking at today. Something is going on where students admitted to Cottey College in 2016, a lot higher percentage of them said, "Yes, I'm gonna go there," than is happening in 2023. I can't even engage in educated speculation on why that may be the case, but that's a precipitous drop, Dr. Hendricks.

[Speaker] Yeah, it could be related to that higher price that we saw, but it seems really high 'cause the price is low overall, right?

[Speaker] Price is low, yeah.

How'd you imagine you're going to get a better offer from another private school?

That's a great point. And then interestingly, it's from the 2025 College Majors Completion App. We look at that at the college level and we look at it by, by major, by market, and look at the number of associate degrees. Now, I didn't know this until I did the research on this college.

They had—

look at the, look at the, the numbers for their liberal arts associate degrees in 2020 through 2023. I didn't even know Cottey College offered associate's degrees. Because when we look at their bachelor's numbers, they're minuscule.

Hmm.

So we're going to take a look and see what exactly the offerings that Cottey College focuses on. And the graduation rates could still be accurate, but that's a heavy associate degree program there, right? And most of those are on liberal arts and some other liberal arts kind of topics, I guess, uh, liberal arts majors as well on that college. Cottey College is a rural college in the middle of Missouri somewhere. Matt, what's your, what's your assessment?

I like it. I mean, they have great resources. You know, it's hard to, hard to ask for more assets to be running a school of that size. So I just wonder if the assets are being allocated efficiently. There's a lot of spend in various areas that don't seem to be closely linked to the mission just on a high level. So if I were a board member, I'd ask questions about that travel spend, the contractor spend, the staffing. you know, dig deep in all of that stuff and figure out how to make the budget sustainable and fit within this massive endowment draw that would be sustainable of about $15,000 per student. Seems like an easy, uh, ask, but maybe they try to do too much with their budget.

And we have— I'm going to go back to the endowment draw at Cottey College because we talk about this on, on many of the colleges we review on the show. And let's speculate what happens if they don't get that endowment draw down to around that 4.5% level in the coming decade.

Yeah, their endowment will just continue to flatline or grow much slower than other schools. And eventually their, their huge advantage right now is that they have all of this money that they don't really have to earn in sales, right? They don't have to make net tuition revenue to, to make $15K per student. Right now, $15K per student is a decent amount of money, but in 30 years, that's probably not going to be very much money. So that's the risk, right? If your endowment doesn't grow faster than inflation, you're going to have—

as their board is looking at that fiduciary responsibility to make sure Cottey College stays in existence into perpetuity, that's really a big deal.

Yeah, it's just going to make them harder, harder and harder for them to compete the more they're endowment growth falls behind other competitors, right?

So you just got done watching the financial health and viability review of a college you're interested in, a college you want to follow. And you heard Matt Hendricks, you heard Gary Stocker talk about some of the observations that the data that you see both in the Private College Advance Compass and in the College Viability apps and the College Majors Completion apps, it's the data you can use to make more informed decisions. Now, can you get this anywhere else? I don't know, Matt, that this kind of data is available anywhere else, especially at the rates that we have. So drop me a note. Again, I have contact information in the show notes. Drop me a note if you have some interest. Let's do a dog and pony. Let me show you the apps, um, more specifically to what you want. Let me show you the Strategic Compass, which is a phenomenal tool at a price that is so low that you will want to buy two of them. I'm being silly, but they're, they're great. Great tools, and you're going to find your competitors using them. And if your competitors are using them, you're going to find yourself at an even more competitive disadvantage because they're going to have data to make decisions that you aren't. So for Matt Hendricks, I'm Gary Stocker. Thanks as always for watching the show. We'll be back next week with 3 more colleges to review on the College Financial Health Show. We'll see you then.