How To Make Cash Outs Work To Your Schools Advantage
by John Graden,
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UNITED STATES, Dec 11 — If you can keep a steady flow of new students coming in, an ideal situation is high cash outs and high monthly billing. This is being accomplished by some schools that take a somewhat unconventional approach to their cash out and upgrade strategies. This may seem to contradict my previous suggestion that monthly tuition is the lifeblood of the school, but it doesn’t. In the second, you are getting a student who has not cashed out to do a small cash out of $500 to be part of the Black Belt Club
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f you can keep a steady flow of new students coming in, an ideal situation is high cash outs and high monthly billing. This is being accomplished by some schools that take a somewhat unconventional approach to their cash out and upgrade strategies. This may seem to contradict my previous suggestion that monthly tuition is the lifeblood of the school, but it doesn’t. What makes this work for the long haul is the high monthly billing. This is simply a different and somewhat riskier way of getting a high monthly cash flow and high cash outs. It’s no secret that students are at a high risk for dropping out in the first 90 days.
Coming to class twice a week adds a new stress to life for a student, and it takes a little time to get in the habit. For this reason, there is a fiscal logic for attempting to cash out students during this period, because a percentage of them will stop attending anyway; and when they stop, so does your cash flow from them. The danger is in cashing out all of your new students and not having new ones coming in or a way to get the cashed-out students paying again. Here is a strategy that works remarkably well. Again, be careful, because it can blow up in your face big time, and it has been the ruin of many schools. You can’t just cash students out. You MUST work the upgrades and market for new students just as hard as the cash outs.
Cashing Out The First Program Let’s say your students join on a 12-month agreement that is $199 down and $150 per month for 11 months, which totals $1,849. That would be your base tuition with no discounts. Some students will take this offer. You also offer a 10-percent discount for early payment, which might be five equal monthly payments of $332, which totals $1,660. You offer a third choice, which is $1,399 in full, a $450 savings over the monthly option. This is the program you may really want your students to take and, with this kind of savings, many will. Let’s compare some numbers to illustrate the pros and cons of this. If 10 students join in a month on the standard $199 down and $150 per month program, you will get $1,990 in down payments, and your monthly cash flow technically should increase by $1,500. I say technically because no one collects 100 percent of their monthly tuition.
The reality is that some students will drop out, while others will bounce their payment so, with each passing month, that $1,500 that was supposed to come to you will dwindle. In contrast, if half of your 10 enrollments paid in full, your in-house income would be: 5 x $1,399 = $6,995 5 x $199 = $995 Total = $7,990, which is $5,991 more income Yes, compared to the first example, your monthly cash flow is cut in half, but you weren’t going to collect 100 percent of it anyway. Look Good So Far? It does, but, like most good things, there is a dark side. Over the course of a year of following this strategy, you may find yourself with a school full of students who have already paid for their lessons. Unless you have a way of creating new students or upgrading these paid-in-full students, you face a serious cash-flow problem. Students who pay in advance are better leveraged to continue training than students who are paying monthly tuition. In other words, the guys who pay are the most apt to stay. So, through natural attrition, the majority of your dropouts will probably be students who did not cash out. Since your monthly cash flow is dependent on the students who are paying monthly, it will shrink with each drop out. This is why an upgrade is so important. You want to get all of your students on a new program as soon as you can, especially those who have cashed out.
This is where the Black Belt Club and Masters’ Club are so critical. Cashing Out the Second Program By following specific Black Belt Club strategies which I have covered in previous articles, you can create a ready-made and desirable upgrade path for your students. Here are two tuition strategies for these upgrades: Option One Offer three choices for tuition similar to the New Student agreement outlined above. Just deduct what they have already paid in the first cash out from the new program, and use the remainder as the basis for the new payment plan. For example, your New Student Program has a $1,399 cash out total. That paid for 100 classes. he total program from white to black belt is 300 classes.
That is a combination of the New Student Program (100 classes) and the Black Belt Club (200 classes). Since the student has paid for the first 100 classes, the new program will be for the remaining 200 classes. The new payments start immediately, and the time or number of classes is added to the first program. This agreement would add the remaining time to the new program. So, if the New Student Program expires in six months (or 50 classes), your new agreement would be for 250 classes or 30 months. Payments would start right away, and this agreement would supersede or replace the current one. By upgrading now, a student can avoid future tuition increases. Option Two For students currently on a monthly payment program, offer Black Belt Club or Masters’ Club as an upgrade for an annual fee of, say, $500, on top of their current tuition.
In the first scenario, you are getting a student who cashed out to get back on monthly tuition. In the second, you are getting a student who has not cashed out to do a small cash out of $500 to be part of the Black Belt Club. Either way, your school is getting monthly tuition back from the students, so you are enjoying the best of both worlds: high tuition gross from new student cash outs, plus high monthly billing from the upgrades to Black Belt Club, Masters’ Club, Leadership Team, etc.
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If you can keep a steady flow of new students coming in, an ideal situation is high cash outs and high monthly billing. This is being accomplished by some schools that take a somewhat unconventional approach to their cash out and upgrade strategies.
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