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Innovation in Leveraging Assets
As institutions seek additional revenue sources outside of academic programs, 13 percent of the respondents to BKD’s survey specifically talked about opportunities and ideas to do this by leveraging existing assets. This includes leasing property, sharing staff or administrative functions with other institutions and even leveraging intellectual property.
According to the 2018 Survey of College and University Business Officers study from an Inside Higher Ed study, about a third of CBOs said they favored the idea of sharing administrative functions with another college, with 37 percent saying it was very or somewhat likely their college would share administrative functions with another college in the next three years.
In addition to leveraging staff, schools are exploring innovation by leveraging their existing property. Some institutions are looking where they have idle assets and seeking long-term deals. One example includes Howard University’s land-lease for condominium development through private-public partnerships and short-term revenue opportunities by renting vacant dorm rooms on Airbnb.1
Howard University isn’t alone, as other schools are exploring opportunities with Airbnb. According to its website, Niagara University in western New York had three apartment units available in summer 2018 to generate revenue during a time most students have returned home, but also to give students in the hospitality and tourism management program experience running a small business. With the help of university staff, students in the program were responsible for room preparation, check-in and checkout and concierge services.
However, while institutions consider this a short-term revenue opportunity, some have seen issues with students taking this model upon themselves. According to The Associated Press, in October 2018 a Northern Arizona University student faced disciplinary action after posting their dorm room on Airbnb, potentially giving unrestricted access to the residence hall.
Cell Towers on Campus
Westmont College in Santa Barbara, California, is taking a different approach. It’s renting space on its library rooftop for cell service towers. The goal is to expand cellphone coverage on campus, as well as generate revenue from the leased space. The process took several years of planning, filing permits and holding community meetings. The first cell provider is up and running and providing a modest income stream to the college. Additional providers may be invited to do the same.
Real Estate Developer Lease Arrangement
Other responses included partnering with a local real estate developer to lease school-owned land and having the developer build, finance and own the property. Then, lease two of the four floors to the university for student use.
LEVERAGING INTELLECTUAL PROPERTY
Purdue University has made a significant investment in the area of research and development. Recognizing the talent at its disposal, Purdue uses a program called “Firestarter” to help connect investors/founders to the innovation ideas generated by Purdue’s faculty and students. They foster those ideas with an organized approach to community and help inventors move from concept, to production and distribution. As a result of their efforts to license intellectual property, Purdue generates approximately 140 licenses per year.
LEVERAGING ASSETS WITH SUBSIDIARIES
Pacific Union College (PUC) is a private liberal arts college comprising the college itself and its wholly owned subsidiary Howell Mountain Enterprises (HME). PUC is uniquely positioned within its community to serve not only its students, but under the umbrella of HME, the surrounding area as well. Through the use of its existing assets with HME, PUC has explored and started to generate additional revenues through a variety of initiatives, including:
- Bon Appetit Pizza Parlor – This startup requires minimal capital investment, which would be split between HME and Bon Appetit. It’s an on-site restaurant company offering full food service management to various companies.
- Hardware Store Expansion – HME operates a hardware store (affiliated with Ace Hardware) that serves the local community. Through a review of its current operations, management determined the product mix had not kept up with recommendations from Ace Corporate. In addition, the footprint of the hardware store was limited by the location of the bookstore. Management elected to relocate the bookstore in order to increase the hardware store’s footprint. With improved operations and an increased footprint, annual sales are estimated to increase around $1 million.
- Rental Property Economic Analysis – PUC holds certain real estate properties that it rents to employees and others in the community. PUC conducted a thorough review of the rental rates, which had not been done in several years. This analysis revealed PUC was slightly behind the market in the rates it was charging to occupants. Adjusting these rates will lead to an opportunity for an increase in annual revenue of approximately $150,000.
In each of these cases, the institution evaluated either intellectual or capital assets already at their disposal and sought to redeploy these assets in a different manner to yield a better return. For institutions looking to start these initiatives for themselves, we recommend creating an alternative revenue “task force” to do the following:
- Evaluate the balance sheet for underused assets that could generate additional revenue if put to use. Raw land, low-occupancy buildings and underutilized equipment (including labs) should all be reviewed.
- Evaluate the institution’s ability to leverage intellectual assets.
- Evaluate the ability of the institution to generate entrepreneurial revenue streams through startup businesses that could generate additional revenue.
Before they get started, the task force should:
- Establish a specific, measurable goal, e.g., increase revenue by $1 million annually to achieve a target net income of 5 percent of revenue.
- Commit to an action plan. Too often these initiatives generate great ideas, only to be stymied by uncertainty or fear.
- Set a deadline and incorporate an element of accountability for those involved.
Read more about how colleges and universities are innovating to leverage assets by downloading our 2019 Higher Education Outlook.
1NACUBO, "Possible Futures for Higher Education’s Economic Model" by Jacalyn A. Askin & Bob Shea.