The College Financial Health Show for December 10, 2024. A detailed review of Bethany College (WV)

Good morning.

It's time for the show. That is, of course, the College Financial Health Show with Matt Hendricks and Gary Stocker. It's also December 10th, 2024. Welcome back, or to those of you joining us as a first-time viewer, thanks for joining us. So Matt and I have reviewed the financial health and viability of 52 private colleges since we started the show back in early August of this year. Some have shown to be financially strong, some have opportunities to turn around a tough business situation, and too many find themselves potentially watching their last dollars circling their financial drain. We're going to do a different show today. There's a product we want to focus on for today's show. The product is called the College Financial Health Strategic Compass. The name is new, the visualization tool we're going to show you is not. 3 weeks ago, we did a cursory review of Bethany College, the one in West Virginia, and today Matt has created a custom Strategic Compass dashboard for Bethany. He's going to step you through the data and the visualizations and show how similar dashboards could be used for really any private college or university in the country. For those joining us live, feel free to use the comment section. I'll monitor that as Matt goes on. Hi, my name is Gary Stocker, founder of College Viability.

And I'm Matt Hendricks. Okay, so as Gary mentioned, we're going to talk about Bethany College today. I'm going to be really careful. I mean, we have a lot of detailed data I'm going to show you. And it's tempting to draw conclusions about, you know, what the administration's done, what they haven't done, but I can't see all that, of course. So I want to be really honest about that. And some of my data is lagging a little bit. So it's quite possible that some of the policy options that I'm going to offer up for them, which are several. They may have tried these, they may not have been viable, or, and so on. But the point of this whole discussion is that the tool I'm going to show you gives you sort of clearly gives you a path to get back to sustainability, I think, right? And it's actually, when I was doing the prep for this, it's a little bit more optimistic than I expected. So I'll show you some of that, several policies that they may not have tried that they can try. And some support for those policies if they haven't even. So there's probably some stuff they haven't thought about that I'm going to be able to bring up. All right. So before I get into the strategic compass, let's do a quick review of the financials from our previous show for Bethany College. And so I'll share that and then show you why you need this more detailed tool, the strategic compass, to dig deep and really think strategically about policy. All right. So this is Bethany College in West Virginia, their net income margin, as we mentioned last time, they've had many, many years since at least, I mean, several years, only one year, I think positive. Yeah. 2018, bunch of years with negative net income. Again, that's just code for profit for a nonprofit, right? Negative profits every year and really big ones. And remember this red series here is a set of 9 colleges that have closed. And so they're always negative, but notice how Bethany is just far worse even than the closed set, which is remarkable. My conclusion last time, and still stands, is that this school probably would be closed right now had it not been for some very generous government support, one from the Attorney General, which has allowed the school to borrow over $21 million in restricted endowment funds. My understanding is that's not universal across all states. Some states, that's— the Attorney General is just not going to allow that, whereas it appears they have a very supportive attorney general in West Virginia, which is great for Bethany. But, you know, there could be a debate about whether that is good in general. Perhaps, you know, you protect that restricted money and make sure that it goes to more viable institutions. That's the alternative, I guess. But I'm not going to get in that debate right now. Another thing is that all of their debt is held by the, you know, the U.S. Department of Agriculture. Again, those are probably loans. That wouldn't be issued by a private bank. They're just really risky in my view. And, you know, they're being sort of propped up again by a public entity giving them these loans. So that's my conclusion again, is that they probably wouldn't exist right now without the support of both the AG and the USDA. Okay. So let me talk a little bit about the runway here. So the question is, how long can this school survive with their current trajectory? So this loss right here is -20%, but in dollar terms, it's about $5 million.

I need to jump in there. Are you showing us the visualization? We're seeing your notes for the presentation.

Oh my gosh, sorry. Yeah, let me switch to the right screen. I'm going to stop here and then show the rest.

Maybe that was the case.

Oh, I'm sorry. Yeah, share. Wrong screen. Okay. Yeah. Sorry about that. Can you see it now?

Yeah.

Okay. Sorry. Yeah. So what I was pointing out before you could see it was this loss right here is a -20% net income margin. It turns out in dollar values that if you look at their audit, it's about a $4 million loss. But really their audit is probably not correct in that their interest from their borrowed money from their endowment is not included in operating expenses, which I think it should be. So really it's like a $5 million deficit that they need to close. And you think about, okay, so I was just trying to get a sense of the runway for this school. If they continue to lose $5 million going forward every year, which hopefully they do not, but if they did do that and the attorney general allowed them to continue to borrow from their endowment funds and just take all of it, which is, again, I'm not sure the attorney general will allow that, but perhaps their runway is about 5 years. And you get to that basically because their endowment's $50 million. 20 million of that, 21 million of that or so is already gone, I think, right? The school's taken it out of there and spent it on operations. So it's not like cash sitting around anymore. It just exists on paper. Another $5.5 million or so of that is in a trust, right? I don't think they can touch that money at all. The Attorney General's not going to have access to that or anything like that or give them access. So really they're left with about $25 million or so. And again, that gives them about a 5-year runway if the Attorney General allows them to continue to extract all this money and write themselves loans from their restricted down payment funds. So that's sort of what they're looking at with the status quo, looking at maybe a 5-year runway with some big assumptions there about whether the AG is going to let them proceed with that. And so again, we talked about last time they have a going concern on their audit for good reason. These big losses, they're basically sustaining themselves with borrowing from the endowment. None of that's sustainable for over 5 years, can't continue to do that. All right. So, so the question is, how can they right the ship? And that's where the strategic compass comes in. So I'll start, I'll show you one thing here before I go into the strategic compass. You can also see this on the strategic compass, but the first question is, what is it? Is it a revenue side issue or is it an expense side issue? Got to be one or the other or both, right? So let me show you the expenses and revenues on the same graph here. So this top graph is change, the percentage change in total operating revenue since 2016 and total change in operating expenses on this graph since 2016.

And again, if you would please point out the red line again one more time.

Yeah, again, the red line is closed schools, right? So these are the set that just didn't make it, right? And You can see the closed schools, I have to hand it to them, they're very aggressive cutting costs, right? They cut their costs by about 13%, the median school did. But it just wasn't enough. Their revenues fell by 17%. Okay. So one of the things I'm basically going to argue is that Bethany should be acting more like this red line on the cost side. And there's some strategies on the revenue side that they may be already implementing. And I think they need to continue that and make it clear to everybody what's happened, why their revenue fell. and how they're fixing it. Um, so anyway, the, the key here is that the blue line is Bethany. The revenues are down 9% since 2016. Of course, not good, but making things worse is that their operating expenses are up 6%. Okay. So again, that's not ideal. If your revenues are falling, you should be cutting your costs. So really my view here is that they have both a revenue and expense side issue. And the nice thing about having an expense side issue is that you can fix that fast, usually, right? Whereas revenue side issues can take 4 to 5 years, as Gary and I have talked about many, many times. It's just a really slow dynamic process to change net tuition revenue. You need really to get to a new steady state, which can take 4 years or longer. So I see lots of opportunities on the expense side. Expenses are higher. They should be lower. They can be much closer to this red line actually than what they are right now and sort of cut their way to a close to balanced budget to at least make that runway longer and get the revenue side back up. All right, so that's sort of the idea that I have just looking at this right away. Okay, so let's take a look at the strategic compass. And so this is for Bethany College. What's the point of this thing? The point of this thing is to bring in all the data that we can to get an outside-in view of the school and then give us the best possibility we possibly can get to dig deep into policy questions, right? I don't want to just sit on the surface and say, hey, yeah, they have an expense problem and then throw it back to them and say, hey guys, figure out your expense problem. I can say a lot about where those expense problems are with this app, and I'm going to dig into that. So really the point of this is to let the data tell you where your school is weird, where it's odd. And 99% of the time in my experience, where your school is odd, those are where the problems and opportunities are in terms of policy. And honestly, I think policymaking is very easy once you understand where you're weird. The policy fixes are just obvious, I think, at that point. And I'll just show you what I mean by that by showing you this example with Bethany. All right, so first, let me just give you a little sense of how this works. So there's an AI not really fancy AI, it's a nearest neighbors machine learning algorithm to try to find the peer set. It's called KNN for short, K-nearest neighbors. Basically, intuitively what it is, is you have the whole world, the whole United States population of universities, right? And colleges and have all the characteristics of private colleges, universities and private. Yeah. Private and public. I have for-profit. I have them all together, all the data. And what I do is feed all the characteristics of these schools into a big database. And in this case, we're talking about Bethany. So you have this target school of Bethany. And basically what the algorithm does is on all those characteristics, measure the distance between Bethany and all the other schools in the world or in the country on every metric, and then sort of summarize that distance, right? And selects the K. K, I picked, right? The number I usually pick, 35. It'll pick the 35 closest peers on all, on cumulatively on all of those metrics.

And not just geographic peers, right?

Yes. So one of them is geographic, like how far away in miles as a bird would fly is the school from Bethany? How big is the school in terms of, you know, enrollment, different types of enrollment, graduate enrollment, professional student enrollment. Um, how selective are they? What's their size of their endowment? How big is their revenue? What kinds of revenues do they have? How big are those? What's their Carnegie classification? So there are at least 2 dozen, probably, yeah, more than that, uh, in this algorithm. And it's measuring essentially how similar other schools are to Bethany. And then I select the ones that are 35 that are the most similar usually. And that peer set here is the K&N peer set. Actually, in this case, it looks like I did, I didn't do 35 in this case. I did, I wanted to do 35 total. So I did 35 from that, or I did like, I think I did 25 or so from the K&N. And then there's a self-reported peer set. And I get this, so the school, every school almost reports a peer set to the Department of Education. And I use that as well. And it's nice to have different peer sets. So I usually do several peer sets to just check how robust results are, but this is their self-reported peer set. A lot of them are overlapping with the K&N peers, although they did pick a lot of schools that are far bigger than they are, which is problematic for doing strategic benchmarking because you get a bigger variance if you don't have sort of a, a range below and above in terms of size. Any questions on this, Gary? Does it make sense how this works?

So I've got to see how you applied the Strategic Compass to the rest of the, the reports on the left.

Yeah, yeah. All right. So let's take a look at, I'll just start digging in. Like I said, they have an expense issue and a revenue issue. Let's start on the expense side and see how far we can drill down. And this is what, where the, the app is really, really useful. So there's lots of ways to look at expenses. By the way, I'm not going to do a lot of switching, but you can switch to different peer sets if you had this tool. I'm just going to go with all the schools lumped together, all 35. And again, that's the K&N set plus their self-reported peers and show you the result. So basically they do have a spending problem. It's confirmed right here. They're about $3.6 million in fiscal year '22 higher spending than you would expect. And quick, quick show you why I say that. This is total expenses. Versus operating revenue and number of students, FTE enrollment, and total expenses on the vertical axis. If you take all of the peers for 3 years, uh, looks like I have 4 years actually, 2020, '21, '22, and '23, and put them all in this 3-dimensional space, you can see it's almost linear, right? It's like a plane, right? The plane is— long story short, the plane is where every school really would be if they're like average for their revenue and size. Okay, and see those red dots there? I'll back up a little bit. Those red dots are Bethany. All right, I hope this is clear. Maybe it's not super clear, but three-dimensional graphs, a little bit tricky. That's why I have the summary results above. But, um, 2023, their, their actual spending was $25 million. Their predicted spending is $21. 6, right? The reason— the way I say that predicted spending, it would be the value rate on that plane given their revenue and size. And they're always high, right? They're high all the 4 years that you can see there above the plane. That's not ideal. You want to be at the plane or potentially below it, right? Spending less than expected and getting excellent results. So the question is, okay, so they got about a $4 million $3.5 million or so overspend. Where is it? All right, so you can look at it in many different ways. You can see it's spread across a lot of different functional categories, academic support, student services. These are upper administrative. This is like your housing, food service, and I'll show you, I can dig deep and show you exactly where that high spend is. Turns out this happens to be a bad food service contract or a high one, maybe not necessarily bad. I'm not sure what all the context is, but. Their food service bill is far higher than normal. Okay, so you can look at functional expense. You can look also at natural expenses. So again, you have the same difference here, but you're looking at it a different way. So right away I can see it's not really staffing that's causing their high spending, right? Their benefit spend and salary and wage spend is actually right about normal for their size and revenue. Although I think there are some things they can do to optimize. which I'll show you. Their high spending is really this category, right? And, and they, this is all reported from IPEDS. So it's operation and maintenance of plant. Whoever submitted this, actually, this is not correct. Um, what they did is put $12.3 million here and zero on other. Um, I double-checked this with their audit and I can show you, but I want to save a little bit of time. Their spending on operation and maintenance of plant is actually about normal at $2.3 million. What's not normal is There's about $10 million here in all other natural classification. Turns out it's almost all in service. I can actually show you on their functional expense. Maybe I won't spend the time to do that, but it's almost all probably in contractor spend. All right. Like $10 million compared to expected value of $10.6. So almost all of the overspend appears to be in contractors. All right. So that will be a key clue. So we're starting to dig into where, where the spending is abnormal. And again, that will lend policy options to us. A couple other things to check. Their insurance contract is not ideal. It's about double what's normal on— this is from the 990s. They got $600,000 insurance policy versus normal for their size and revenue is about $300K. So again, something to check there. Another $100K extra on advertising promotion. Again, something to check. All of these are policy options, right? Double-check your insurance policy. Do you have the right coverages? Are they just too expensive? Do you need to shop around? Lots of things to check. That's $300K potentially.

And even on the other side, Matt, on that one, information technology, they tend to be underinvesting in IT.

Yep. Yep. So again, another thing to check here. Um, although I would be reluctant to spend more money if I were them. They got to try to get— they have this really short runway and they got to extend it and get back to a balanced budget as fast as possible, right? But yeah, something to check. IT spend is lower than normal. Again, there's policy questions there. Are we doing the right thing on the IT side? Are we— do we have in-house IT rather than like an external provider that typically will be better and potentially more efficient? Those are all questions that it's the job of the administrators to figure out. I can only show you so much, right? But I, you know, I can direct you to the right spot. That's really the point here, to be efficient and smart about policy. Okay, so that's that. So on the expenditure side, we can continue to drill deeper. All right, and so I'll show you a little bit first on the staffing side, although I don't think there's a lot of savings here, as I already showed you. The number of staff they have overall is about right. They have 98 full-time non-instructional staff, again, with that same regression analysis with the 3D plot I showed you, the expected value is 96. So they're like right on where you would expect them to be for full-time staff. Although they do have some odd areas like this one, they have 6 extra people here. These are likely, um, teacher's assistants. All right. So I would double-check that if I were them, check SOC code 25.2, 25.3, 25.9. You might have 6 extra folks here, and that turns out to be about $380,000. So you might want to look at that. Okay. Another thing, $160,000 average salary for the management staff. That's very, very high compared to normal average for other schools is $110K, but they're low on numbers. So it's really odd here. Again, weird things, policy questions. Do we have the right number of management staff? And they probably don't, they're probably low and their pay is high. So this is interesting to check there. Um, there was another one, service staff. This is, uh, either— there's a lot of groups in here, right? There's 31, 33, 35, 37, 39. These are all BLS, Bureau of Labor Statistics occupation codes. They have 4 extra folks here. Uh, I would dig into that. It's security, it's grounds crew, it's healthcare providers, it's food service staff, potentially childcare workers, I believe. Um, so look at all of these. You can just go straight to your HR office and get the file, right? And figure out where all these folks are and then ask simple questions. Do we need all these folks, right? Does it make sense? Another one here. This is maintenance staff. Mostly, um, they got about double the number of maintenance staff, about $110K extra spend there. But honestly, there's not a a lot of savings here, right? Maybe like $300K or so if you optimize this, but everything's going to add up at the end. Let me show you the full-time faculty side. Come on. There we go. Again, the faculty numbers look about right overall. They have 42 full-time faculty. That's exactly where you'd expect them to be. Average salary is about right. Although there's some quirky things, and this is where they can save money. They have 13 full professors and 14 associate professors. Those are far higher than normal. You've got 3 higher than normal associates and 2 higher than normal full. And they don't have any like contract faculty down here. So one policy option, really obvious, right? You can consider a faculty buyout, right? Buy out some of your more expensive faculty and replace them with assistants or replace them with contract faculty, right?

Also, the faculty changes— could the faculty differences be associated with the different types of majors they offer? Different kinds of programs they offer?

Oh, it shouldn't be. It's possible, but you know, really the rank should be independent of the field of study. Uh, but I think, you know, that, that may be, that may be not entirely true for some sort of professional degrees where you might have like practitioners come in, but, uh, generally you're, you know, the ranks are going to be the same across departments. So there may be, you know, like $300,000 or $400,000 to save here if you do a buyout and then you know, buy your younger or cheaper faculty. Like I would recommend that even if they weren't in financial distress, just because you don't want your, you don't want to all of a sudden retire all your senior faculty and have very few senior faculty left, right? It's not ideal to have that. Another thing to check here is it looks like they have serious salary compression where the associates make about the same as full. That's really common in schools that have financial problems because they just don't give raises, right? That's not good for morale. It's terrible, actually. And again, they can probably write this. What looks like what needs to happen here is the full profs need a higher salary and the associates need a slightly lower salary on average. But again, I have to dig in closer to the— and the data looks like their starting salaries are quite low. So all of this can be tweaked. and, and really it's not definitive here, right? But you want to get in and, um, use the institutional data, dig deeper on all of this stuff. This just kind of gives you the idea of where to focus. Looks like, yeah, salary compression, potential issue with the distribution of faculty. Um, yeah.

And again, Matt, for those— why switch screens— for those saying, well, we're different, we're unique, you're looking at comparisons to a statistically and self-chosen set of peers. It's difficult to say that doesn't apply to us because it is a statistical comparison, not just some random numbers coming up.

Yeah. And then you can see here on the 3D plot, like all these schools will say they're unique, but look, they all have basically the same makeup of faculty for their operating revenue and students. They're on like a linear plane here. So yeah, the data will tell you. Yeah. Yeah. Okay. You're unique, but everybody gets staffed really the same way. Okay, part-time staff. There could be an opportunity here as well, if I remember right. Yeah, they're overall, right, they have, they're low on instructional part-time faculty, 12, they're missing about 12 folks there. So there might be an opportunity here to swap some of those senior faculty positions out for part-time faculty. Remember, this school only has 500 students, right? So you don't want to, you know, maybe the part-time route is good here. Um, another is, I mean, they're low on maybe some marketing folks, but you can dig through. There's not a lot of savings here as well. Here's where the savings is. Okay, a couple things. Let me just show you first of all the food service contracts. That's where they probably have the biggest opportunity to save money just with one, one change in policy. And So here's their current food service contract in fiscal year 2023. It's $2.7 million. And I hope this is really clear. That dot is pretty high in this plane. This is full-time equivalent students down here and the food service contract up here. Okay, so what this means, long story short, is they're paying $2.7 million, and if they're average for their size, they should be paying about $1.3 million. So that is $1.4 million in savings if they can get their food service contract down to what is normal for their size. And ideally get it down to what's, you know, Westminster has, right? Go just really simple. Check who Westminster uses for a food service vendor and talk to them. All right. You know, I understand there may be contracts that are hard to get out of and stuff like this, but this school is very close to the end of its life, right? You need to tell your vendor, we need to get you down to $1 million somehow. Right. Not $2.7 million. Okay. And I'm just kind of curious now, who is Westminster's food service vendor? Let's double check. So that's in this Eden Park Hospitality. Fresh Ideas. $1 million. Fresh Ideas, Westminster in Missouri. And their current one. Yeah. Eden Park, $2.7 million. They're exactly the same size. One is $2.7 million, one is $1 million. Okay, so there's, there's one, there's one policy right away should be done tomorrow. Call your vendor and tell them, hey, we need you guys to be closer to Westminster's contract, right? All right. So there's that. Next one is the number of independent contractors that they have. It's not outrageous. But again, the context here is this school's really close to dying, right? They have 12 contractors above $100,000. $110K reported on their 990. They should have about 9. So there's 3 contracts there, each with a minimum of $100K that you probably don't need, right? So it's at least $300K. So you're talking, you know, $1.4 million from the food service. You cut out another 3 contracts. Yeah, you're close to $2 million.

Um, that's per year. That's per year.

Yeah, per year. And probably not affecting your mission at all. All right. And I have other ideas here. So take a look at this EAB contract is rubbing me the wrong way because it's $400,000, $500,000. And let's see, where is it down here? $600,000. And it looks like, yeah, there's their first year with EAB. Was this year and they paid him $186,000. Oh, okay.

So their enrollment has been down for the last 8 years.

Yeah, this is the issue. Make sure you check that your contracts are paying off. All right. I believe they hired EAB to help them grow their enrollment and ultimately grow their net tuition revenue. Right. And so keep this in mind. They first started working with EAB in fiscal year 2019. Perhaps the first year, maybe that was late in the fiscal year, the perhaps the first year that they really started working with them is in 2020, where they started implementing their, their strategy, right? It's your job to check that it's paying off, right? And hold your vendors accountable. Take a look at what happened shortly after they hired EAB. Um, let me just show you the, the one that, um, first first blush here what the issue is, I think. Okay. See what happened here with their net price. So again, this is the price that they're charging to a student with a family income of $110K or so. And this is the price before EAB got involved. It's pretty normal, actually a little bit low. All right. Compared to their peer set. And then look what they did in fiscal year 2019 or 2020. They reduced the price all the way down to $6,400. From $22,000. So either this is a massive problem with the data reporting or they really, really reduced their net price more than I have ever seen going from $22,000 down to $6,000.

So if the data is correct, if the data is correct, they were essentially giving away the store to try and get students in the door.

And it's probably correct because here's $75K. They did the same thing.

Yeah.

Here's another family income. Exactly the same thing.

Yeah.

Here's another family income, same thing. The chances of this being a data problem is almost zero. Okay. So, and it's multiple years where it's low. Yeah. So I believe their problem is really simple to explain here. What they basically did was give away the farm in 2020, coincidentally at the same time that EAB kind of came online. So I suspect they got some bad advice. To reduce their net price and they did it. They did it and they did it in a huge way. And the problem is they more than slashed their price in half, right? And their revenue is going to fall because take a look at their, their FTE enrollment also decreases at the same time that they did that. And let's take a look at their freshman class, first-time students. So from 2019 to 2020, they get a slight bump in freshman class.

You're talking, but they gave away the store to get those students in the door.

Yeah, they basically gave away all the revenue to get 10 students. And at the end of the day, um, what really matters though is their net tuition revenues. Take a look at that net tuition and fee revenue. And you can see, this is where they did it. Boom. They lose. 5.7 to 4.1. They basically lost $1.6 million in one year because of that change in price. And they held. So the problem I have is it's okay to make mistakes, right? But it's probably not okay. I would say it's not okay to continue to do the same thing for multiple years. And it's not, it's not a good look. It was clearly, it was a bad idea, right? And they should have known that right away in fiscal year 2021. Uh, or even during fiscal year 2020, it was a bad idea to do this. Don't continue to do it, right? Go back and, and fix it. And it looks like they've slowly come to that realization here. So 2021, they held it there. '22, they started to increase it, but now it looks like they're being aggressive and getting back to a normal price. That should happen way faster, in my opinion, but again, I'm not there. I don't know what's all happening with them, but ideally you would have the strategic compass. You can see this right away and diagnose the problem and fix it. Honestly, a similar thing happened at a school I was working at, University of Tulsa. EAB was very against us increasing our net price, and I argued that our net price was very, very low and that we could increase it without losing any students. And they argued against that, and they ultimately did increase it and increase students at the same time. So take a look here.

And Matt, as you've said many times before, let's reinforce, and you mentioned this earlier in the show, this is a 4 to 5 year problem because those students that started in 2021, 2022, maybe not so much 2023, they're with Bethany for 4 years.

Yeah. Unless you're going to increase price on existing students, which like never happens. Yeah. You're stuck with that. You're stuck with a freshman class for 4 years that pays about a third of what their other classes were paying. Uh, yeah, it's, it's tough. Um, okay. So here's the thing, like they could have done a quick experiment here in 2021, just brought this thing right back up. Right. And that's what I argue for tests, test things that could bring this back up and just check, does it, are we going to lose our students when we bring this back to normal? And I suspect no, right. When they're increasing the price here, let's take a look at their FTE enrollment.

Is there still below the peer group, even if they bring that price up?

That's the thing. That was my argument against the EAB. at my old school is like, when you're already the cheapest school, it does not matter if you reduce it even more. The decision is still the same. You're going to go to the University of Tulsa because they're the cheapest. It doesn't matter if they're cheapest by $10,000 or cheapest by $20,000 generally. Um, so take a look at this. Their, enrollment increases at the same time that they bring the price back up. So again, any worry about, losing enrollment by bringing your price back up. It was not founded here again, because their price was just so low. And this is the second time I've seen this. Um, it was my own school and then now this one. So, um, yeah, that appears to me to be the main issue on the revenue side. Um, they, they were losing enrollment, but it wasn't catastrophic. What was catastrophic was losing all the revenue from the enrollment that you have. Um, and they're fixing that and at the same time getting enrollment back up. So that's excellent. So there's room, there's room for optimism here. Okay. So, okay. I showed you the— let's do— oh, I had some other contractors I wanted to show you. Just some other things. I may be wrong, but $300K for textbook rental program seems pretty high. Check it, right? Again, the same thing. You have to check and don't give the benefit of the doubt to the contract. Double-check this. What's the revenue you get from this contract? What's the cost? What's the alternative? Should be doing this every year. I mean, really, do we need to be spending $400K on HVAC? The school, like I said, is near death. We need to be realistic here about what we need to do. Again, it's not a criticism of them necessarily. Maybe they have done this, but I just want to make sure that they are.

The point is, this is what the data shows. And the tool lets colleges— this was customized for Bethany College. The tool lets colleges look at this in a way they've never had the chance to look at it before in an easy visualization format.

Yeah. And so let's give them some credit. The freshman class, I believe, is the biggest they've had in a very long time. First, it might be a record. Let me double-check this. Yeah, this freshman class is excellent. They need to do this 4 years in a row. They need 240 students 4 years in a row. Right, Gary? Yep. And yeah, don't, don't mistake this for total enrollment. This is just one class, right? You need to do this 4 times in a row to get back to, you know, your old enrollment. All right. Let's take a look at the funnel. Although they're doing things well here, I am disappointed. And so 2020 is that inflection point where the freshman class starts going up. And the main reason their freshman class is getting bigger is they've got a surge in applications, 131% increase in applications from 2020 to 2023. That's amazing. So we can learn something from this school. Everybody does some things right, right? And like, they're definitely doing the application side right. Here's a problem I have though. Why are we being selective? They used to admit everybody, 95% plus. Now they're only admitting 65%. That is not jiving with the facts on the ground here. Again, this school is near death. We should be admitting 95% plus still today, right now. So that's something that's a really simple thing to fix, right? So again, I'd be asking that if I worked there, why are we being selective at all? We shouldn't be. Yeah. Admit everybody and then, you know, get as big a freshman class as you can. What are we doing?

Because it's not like their graduation rates are stellar.

No, this is ridiculous. All right. Do you want to die and be selective or be less selective and survive? It's a really easy decision. Uh, percent admitted. Okay. Uh, their yield rate is awful. All right. And not a shock. This is a school that's struggling, but I think they can overcome it, right? If they just admit everybody, it doesn't matter if the yield rate is still 10. And I'll show you why I say that here in a second. They're doing a good job getting their transfers up, although it's still low. They're still missing about 30 transfers. Some easy stuff to do there that we talked about in the past, make sure that they have articulation agreements with every every 2-year college that's even remotely close to them. Just get them all on the books, make it really easy to transfer. Um, and yeah, there you go. Uh, let me show you what I think they need to do. Even though they're growing, they're still not projected to get back to where they were in 2015 in terms of undergraduate enrollment. And the big reason is, again, their admission rate is not near where it needs to be. It needs to go back to where they were in 2021, 2019. 2018 and 2020 needs to be about 94%. And take a look. Do you see that? I just moved this policy lever. If they admit 94% and just do everything else the same, even have that terrible yield rate, everything will be fine. Not right away, right, Gary? How long does it take?

4 years.

It's going to take them until 2029 or so, and they'll get back to— they'll get back to where they need to be on the revenue side or enrollment side, and ideally on the revenue side if they get their price you know, keep that where it's normal. Um, another thing that's good about this school, and I really like to learn about what they've done, is their international enrollment has surged. That's excellent because they tend to pay full price, right, Gary? Yeah. Um, so that is excellent. Not sure what they did there, but I think a lot of schools could learn from that. So they're doing some things well. There's a lot of room for optimism here for sure, but again, the runway is small, so We can't have any mistakes going forward. And I think it's a big mistake to have the admit rate where it is. Yeah. Okay. Enrollment projections. I showed you that market share. Okay. Last thing I want to show you is there may be something wrong with their recruiting strategy. Let me show you their change in freshman market share during this time that they've been growing. So what I'm looking at here is the number of So I'm looking at freshman market share. I'm looking at the number of freshmen they get from a state relative to the number of freshmen total that come out of that state and go anywhere. All right. And what you want is positive numbers here. That means that you're getting a higher percentage of students from a state. Your market share is growing, basically, if you understand market share means. So their market share is growing in Ohio. It's growing in West Virginia quite a bit, which is great. Growing in Florida, growing slightly down in Maryland, but there's a problem potentially with Pennsylvania. And let me just pull up Pennsylvania here. Pennsylvania, by the way, let me just show you on the map first. They should be getting a lot of students from Pennsylvania. Okay. The reason is Bethany College is right here. Right here, and Pittsburgh is here. Okay, so they have another school that we can compare them to that's Wheeling, also in West Virginia, and they should be getting a lot from Pittsburgh as well, right? So we should have this funnel of students coming from here, and these two schools should look similar in terms of their market share, uh, at least have similar trends. But they don't. All right, and that's the thing, and this is why I think we need a policy, policy sit-down here. Let me show you Pennsylvania. And compare Bethany to Wheeling. Yeah, Gary already sees it. So they used to get, for every 10,000 students coming out of Pennsylvania, they used to enroll 8 about, right? Now they enroll 2. All right. That's not ideal.

All right. Right.

So it's nothing to do with demographics. They're just getting fewer of the kids that come out of Pennsylvania. Okay. I mean, maybe that's too strong. Could be something to do with demographics, but I mean, they're losing market share. Uh, so that's, troubling. And the thing that's really troubling about it is they used to be far better in Pennsylvania than Wheeling College. Well, Wheeling's just basically doing its thing, still enrolling the same amount as they always have. Yet Bethany's lost huge amounts of market share in West Virginia— or not in West Virginia, in Pennsylvania. So here's the thing. The data says this: we're not doing well in Pennsylvania compared to what we probably should be. Sit down and figure it out. Is there something— are we— I mean, it could be something really simple. Maybe we're not— I don't know, maybe some of the enrollment people are being split across states, right? Maybe your least effective person is working in Pennsylvania. That's not ideal. You should split it up so that you, you know, don't put all your eggs in one basket. Really simple things. Make sure you're using the same strategies in Pennsylvania as you are in the other states. And this should sort its way out. It should go back up, right? Ideally. Yeah. But again, it could be some low-hanging fruit there for them to check out. Okay. That's it for me on, um, there's a lot more in the dashboard, but we don't have enough time. Let me just summarize it up. Um, so my thought when I was going into this, I thought this school was definitely going to die, but I don't think that. Um, now I think they have a chance because they have some positive things going on. International enrollment. They have bigger freshman class. They appear to have figured out the price problem, although it took very long. Shouldn't have taken that long. Um, and they have all these strategies they could do on the expense side. So you got the option for a faculty buyout. You have some staffing areas that are over, that are high. You have some serious potential savings on the contractor side. They used to only have 5 contractors over $100K. Now they have 12. So again, this is a school that's near death. I would say, you know, in econ, we're always like, okay, compare marginal benefit to marginal cost. I would even go further than that in their case. I'd say, can we survive by just canceling this contract?

Yeah.

We cancel this contract. Can we continue to do our thing? And if the answer is yes, probably cancel it. Right. So they may have already done that. They canceled the EAB contract, by the way. So I wonder why on the right track there. Um, uh, but there probably are many others to cancel. All right. I would go through, I'd call up your food vendor tomorrow and say, hey, we can't be doing $2.7 million for 500 students. Like, come on. Yeah. Either we're going to just drop out of this deal and you can sue us or you're going to, you're going to deal, you're going to work with us on price, right? You know, maybe it's more complicated than that, but you got to be, well, you got to level with your vendors here. This school, like I said, the runway is very short. Keep bringing the net price back up. International strategy is great. Again, check that strategy in Pennsylvania. I don't like it at all. It should be at least grow. They should be growing their market share in Pennsylvania, not losing it. It's a really important market for them. So I'm an optimist all the time. I think they can survive if they do all of these things. But again, there's no room for mistake. They got to do it now. All right. And they can't afford to do these mistakes for multiple years. Guess it's not going to happen. Yeah, uh, they won't survive that going forward. All right, I'm gonna stop sharing then. And, uh, or maybe I should— I keep— I'll stop sharing. I'll share.

Yeah, let's stop sharing because those watching live and those watching the recording viewing that will be out later today on December 10th, you saw really just a fraction of the data and the policy levers that Matt talks about used for Bethany College. And again, this is the West Virginia version, not the Kansas version. And imagine if you had access to this kind of data for your college. You know, and again, our college is doing well, that can use this to do even better. If you're looking at consolidating, maybe some mergers, maybe you want to use this kind of tool to look at how you can make colleges you're thinking about merging with stronger to even enhance the merger opportunities. But this is a tool that I'm going to reinforce again, the peer data set that, that Matt has developed, it's proprietary, it's unlike the others can develop a similar thing. And you're compared to others. You know, if you want to say that you're different, and Matt talked about this, feel free, but you're not. You're in a higher education business. At the end of the day, you provide a diploma that says, 'I graduated— excuse me— I graduated with a diploma from this college.' It's a commodity product. And so, Matt has given Bethany kind of a freebie look. Although, if you're from Bethany, drop me a note. I'll find a way to get you access to the whole app so you can use it on your own. If you want to have more of a conversation, email me or Matt, and I'll include both of our contact information in the show notes, and we'll set up a chat to talk about how you might be able to use the Strategic Compass for your college or organization. So with that, I'm going to call that a wrap. For those watching live or listening, listening on the recorded version, thanks for making time. For Matt Hendricks, I'm Gary Stocker. Next time we'll be back, or next week, next Tuesday, we'll be back with reviews of Christian Brothers College in Tennessee, Jacksonville University in Florida and Carroll University in Wisconsin. Until then, from Matt Hendricks, I'm Gary Stocker. Good day.