The Schooling America podcast covers issues and ideas relevant to leaders in American education. We bring in the brightest minds in administration, philosophy, culture, and beyond to reflect on topics that directly impact schools, organizations, and the children and families they serve. From cultural issues to operations to curriculum and pedagogy, Schooling America seeks to enrich the ideas, strategy, and execution of education institutions nationwide.

On the most recent episode, “The Benefit of Market Analysis for Small Schools,” Erik Twist and Ben Lindquist sit down with founder Ali Ghaffari and headmaster Patrick Sullivan of Divine Mercy Academy, a small Catholic school in Maryland, to discuss how market and competitive analysis aided their school’s business planning process. Below, you will find edited excerpts from the conversation:

Erik Twist: Because you’re running a school, there are curveballs every day and there is no algorithm. You never know what variables are going to be thrown at you. And yet here you are, stepping back to do this strategic planning, and you’re doing something that I think is actually kind of unique for a small school: creating a financial tool and conducting a market analysis. A lot of school leaders out there running smaller institutions would think, “Market analysis? That’s what the big guys are doing. We’re not a big for-profit company or a big school system. Why would we ever do a market analysis? Why should we care about that?” So why do you guys care about that? Is it that you’re trying to find a long-term facility, or are you thinking about five years out, ten years out, and the demographics of that, or a play on both? Help us understand why a small school would be as future-oriented and data-sensitive as you have been.

Ali Ghaffari: We are currently in “hyper-growth” mode. And in education, a good lesson always starts with the end in mind. Divine Mercy Academy starts with the end in mind: our end in mind is nothing short of sainthood. So, the hundred-year strategic plan is to get all these kids into heaven. Now, you might call that pie in the sky, right? And you might ask, “how do you package that? How do you make that into an elevator pitch?” We bring that back down to earth. So why is this small little startup doing a market analysis?

The reason for the market analysis is that we want to start with the end in mind. We want to clarify our objectives so that we can lay out the roadmap ahead. We have a lot of families who are joining; we have tutors who want to join; they all want to be part of this community. And there is a tendency to constantly be in reactive mode, as more people join. As more resumes and more applications come in, it’s very easy to sit back and constantly be in reactive mode. The temptation is to say, “Okay, let me just—I just gotta go to work every day and keep it going.” But the reality is that there’s a need to pump the brakes, to pull back the lens, to look at things from 10,000 feet and ask, “Okay, where? Where are we going? What’s the game plan here?” So that we don’t just rest on our laurels, saying “We’ve got all of these people here—so I guess that means we’re fine. Financially, academically, culturally, we’re fine.”

There needs to be an end in mind; we need to constantly have our eyes on the horizon asking what we want the school to grow into: “Where does Our Lord desire this school to go? And how can we take the energy and the dynamic culture and continue to drive that, towards that end?”

I think that in-house, we can pat ourselves on the back, and we can say, “Look what we’re doing! Look how great we are!” And in response to that, number one: it is in reality the Lord who is doing this work for us; we are humbled to just be working shoulder-to-shoulder in His vineyard. But second, we also need that 10,000-foot perspective to show us where we need to go, and that while it’s good now, there will come dry periods where things aren’t as as “hyper-growth” as they always were. And it’s important for us to keep our feet firmly planted, while at the same time looking ahead to the horizon and saying, “Hey, look this is where we want the school to go. We have our game plan. We know how we’re getting there. And some things are going great with that; some things are more challenging. We know our marching orders.”

Erik: I want to explore—because I think it’s an important thing for school leaders, especially within the Catholic, the classical, the Christian tradition—I really want to explore this balance that has to be struck between having a teleological vision and moving from that vision to execution.

So, to set that up, Ben, I have a question for you before we get into how Divine Mercy Academy is actually executing upon that 10,000 foot view. How have you worked with Divine Mercy to build that 10,000-foot view? Where are the things that were most important to adjudicate as you all worked together: what are the things that we need to have, and at what resolution, as we think about the overall strategic picture that Divine Mercy is going to execute against? What data were you working with Divine Mercy to grab?

Ben Lindquist: There are three things. And these three things are always core to a business planning process. First, we look at the market of families. We ask where Divine Mercy already enrolls families: where are they located? And where are there other eligible school-age families that would be likely to enroll, and who are likely to be attracted to the Divine Mercy vision and mission? So we actually pull census data. We look at census trends. We look at the changing dynamics in those trends. Right now Divine Mercy is actually situated in a very unique place, essentially on a peninsula where there isn’t much direct commuter access to the school. So, about half of the families in the school are commuting as much as 25 to 35, or even 40, minutes to get to school every day. So, we’re taking into account those geographic factors as well. Those are the contours of the family landscape.

The second factor is the competitive landscape. So: where are there other schools with a similar vision and mission that would be offering a similar orientation in their programs to Divine Mercy? And then also the broader public school landscape: the district in which Divine Mercy is situated, other surrounding districts, any other schools of choice that Divine Mercy is competing with. What we’re seeing today is a far more fluid and dynamic competitive landscape than we’ve ever seen in recent American history. And so, we take that into account and anticipate that, in order to carve out a path for Divine Mercy to have healthy growth. So that’s the competitive landscape.

And then the third and final factor is financing. Divine Mercy has been building an advancement team and function that has grown dramatically, and we want to see that continue to grow. It’s happening organically as Divine Mercy builds networks of donors and learns how to draw those networks in to support it philanthropically. But we want to ramp that up. And then we’re also looking at tuition and fees: the financial model we built allowed us to manipulate the tuition and fee pricing for Divine Mercy, and to see the impact of that on the cost structure for the school, especially teacher salaries and compensation. This financial picture is the third piece of the business planning.

Erik: That’s a lot of different data to look at. So, Ali, how are you now taking that information? Walk us through from an operator’s standpoint. How do you go from having this kind of overall cartography to making key tactical decisions? What will the next six to eighteen months look like for you based on the larger strategic work that you’ve engaged in?

Ali: The workup in the market analysis showed that our location is viable: our current location is a place where the population is growing, and it has a substantial Catholic population. And further, the flip side of the inconvenience of being on a peninsula is that there aren’t many competitors out here with us! We pretty much have an open ocean of space.

Erik: Were you skeptical of that prior to having that information?

Ali: Yes; it was a question mark that we couldn’t answer at that point in time. We had people saying, “There’s a future here” and others who said, “No, there’s no future here.” And we were at a standstill: is there or not? How do we prove that?

Erik: Exactly. Interesting.

Ali: Yeah, that was helpful. And so now we are actually in the middle of discussing a ten-year lease at our current location. So, this has very much helped us walk into that conversation with confidence, knowing that we have a good chance, if we keep doing things right, of continuing to flourish at our current location. So that’s been the first thing.

Second was how we position ourselves in the market for tuition and how we’re charging for our services. And the summation was, we are higher—but just a smidge higher—than all the other Catholic schools in the area, because we’re offering something different, something we believe is better. Although we’re not so high that we alienate our base, which is the large Catholic families who are all-in for the Catholic faith. And so whereas I had thought, just based on my own instinct, “Let’s undercut our competition by 15%, just to get people in the door. And then we’re going to come up, you know, $500 a year,” to have the experts come in and say, “Yeah, actually, you’re right on where you need to be” was a nice confirmation. I could sleep better at night, realizing that we hadn’t [undercut ourselves], we weren’t wildly off from what we needed to be doing.

But at the same time, they were able to give us some additional hints and say, “Hey, if you’re able to provide some more after-school activities, and more unique offerings, you might be able to provide a broader, more attractive offering.” And so, we had some work to do on that as well.

And then the financial calculator itself is helping us to discern this ten-year lease and the rent amount as we have people sending in other locations. I got one today: 13 acres, $2 million, and it’s right by my house, which [laughs] would be very convenient. But we can throw that into the calculator and say, hey, does this make sense for us or not? And so that’s helping us.

And then the role of funding is so important as well, since as we grow, having additional students brings a large growth in our budget every year, and we’re trying, as rapidly but as prudently as we can, to increase our teacher salaries. Right now, that’s far below what our Catholic competitors and public school competitors are offering: we want to increase that as quickly as we can. But with admissions, there are no guarantees; sometimes you get the kids coming in, sometimes you don’t. While we’ve been fairly steady, we don’t want to assume that we’ll have fifty new kids coming into the school every year. So, we have to be prudent about that.

And so that leaves other fundraising. Right now, student tuition is covering about 55% of our operating expenses, so we lean on fundraising for 45%. And the work that Arcadia did actually reveals a large weakness that we have, which is that we’ve leaned very heavily on just a few major donors. We haven’t really established a program that brings in steady midlevel and small donors to provide a nice, strong base in case one of those major donors ceases to give for whatever reason, to keep us from all of a sudden going into emergency, “the place is on fire,” mode! And so we’re now working on that, bringing in a board member with twelve years of expertise in fundraising at the Naval Academy. We’re hiring a director of advancement with fundraising experience at Hillsdale College. And we’re bringing in a CRM, so we’re going to start building this up and professionalizing: that’s our next six months. So, it’s exciting.

Hear the rest of the conversation, along with previous episodes of Schooling America, wherever you get your favorite podcasts.

Arcadia Education provides deep market, financial, and business analysis to help you make informed and confident strategic decisions. Contact us to learn more.