30 REVENUE STREAMS IN 5 REVENUE SETS
To Utilize To Take Colleges and Universities and Seminaries Into The Future,
Developing Revenue Streams to Compliment Tuition, Alumni Donors, and Endowments
To Facilitate Decreasing the Costs to Students and Inceasing the Rewards for Teaching and Scholarship
The revenue and profit possibilities are enormous. This piece is the result of work done for an actual, small liberall arts college in 2007 - 2008. The "30 in 5" as outlined below can apply to any.the colleges, universities, and seminaries that have the vision.
New dollars will enable those involved to be present at the school's new creation. And this is where the real excitement comes in: being present at the creation of a whole new institution of higher learning that can have a nation-wide impact.
The old "big 3" of tuition, donors, and endowment will no longer suffice for enabling schools to survive. Needed besides these traditional three are recurring revenue streams and solid operational structures.
Stage 1: Bridge loan to develop a master plan for rising from the ashes . to turn around and transform2
Stage 2: Engage the Master Plan, Part I: readying for financial stability, re-accreditation and enrollment of students
Stage 3: Engage in Master Plan, Part II: Open school again and march boldly into the future.
Stage 4: Scholarships
Stage 5: Recurring Revenue Streams
STAGE I: Obtain bridge loan of $4-5 million , to develop a master plan for rising from the ashes to turn around and transform, and ensure operating capital for 3 years.
- Donor. Get a donor or philanthropist to write a check.
- Either a charitable contribution
- Or a loan to be paid back through any of the revenue generators listed here.
- Securities based lending. holistic, sustainable credit facility for growth revenu
A security based lending instrument to be paid back as stipulated from other revenue streams
- Taking investible assets and depositing them into an investment house that would use them as collateral for monies that would then be withdrawn for ghe school
- Sometimes called collaterized lending and other times securities based lending.
- It takes about two hours in a conference call to start the process, with the money available within a week.
- The funds can be drawn out at once or over time, as if it was the provider of the assets own private merchant bank, as needed.
- Enables providing funds for without having to sell assets to do so.
- The asset (regardless of the asset class) is collateralized in a manner such that the owner retains control AND a return on the asset even as it is used to collateralize the loan or gift to the school that then enables the school to become liquid. They are structured so that the owner still makes a return (say 4-6%) and the investment bank holder of the asset while it is being collateralized, also makes 4-6%.
- Depending on the asset class of the asset, it will generate 50-90% of its face value.
- We have the people and institutions to make this work and have already engaged in the initial set up conversation.
3. Specially guaranteed CDs -- CDARS -- with designated IR (interest and revenue)
- For deep pockets, whether individual or corporate: federal government FDIC guarantee up to $50 with CDARSCDARS (Certificate of Deposit Account Registry Service®,represent the income stream possibilty in the "30 in 5" income streams list: #3.
- As the CDARS site points out, "It's the most convenient way to enjoy full FDIC insurance on deposits of up to $50 million ." Thus, "CDARS is the perfect solution for many depositors -- from non-profits (including foundations) and public funds to businesses , advisors (including trustees, CPAs, financial planners and lawyers) and individuals , as well as the socially-motivated." CDARS, even short term, can still get 100 basis points more than a T bill. And the institution I recommend obtains investment yields that surpass Wall Street yields by 300 basis points.
- A financial firm receives the funds to invest in CDARS, and distributes the funds (up to $50M, or whatever number from each investor, be the investor an individual or company) in $96K or $97K, depending, chunks to a network of banks.
- By denominating each CDAR at $96K or $97K, and not $100K, every dollar is accounted for and protected under FDIC. This the lowest of the low in terms of low risk, with every dollar insured. As a historic footnote, this is also a way to reduce monopolies in banking and give participating and qualifying banks access to liquidity for their banks, including minority banks (race, ethnic and gender).
- All or part of the CDARS' IR (interest, revenues) is to be designated for the college. A financial institution receives the IR of the CDARS and distributes to MBC per agreement. It acts like a rail road round house for the various spokes represented by the wheel of investment (millions split up among as many of the 2,600 banks in $96K and $97K chunks as needed) or by the wheel of investors with each spoke being a different spoke, which would in turn each jump to the wheel of investment.
- To set in motion: set up meetings with potential participants (investors, donors, corporations, friends of the college, etc.
- Also called a "Hypothecated endowment" by Dr. Ken Reeves, who helped Dr. Cone at Edward Waters (an AME HCBU in Florida) using this to enable them to turn around financially and get accredited.
- Once deposited, the college can draw on the projected interest and revenue for its use without having to pay it back. The entity (individual or company) holding the CDAR writes the IR off as a charitable contribution and doesn't get charged a capital gain.
- Individuals and companies can also have CDARS obtained through one of their foundations. This can be set up with money available to MBC within 90 days.
- As all major companies keep large amounts of cash on hand, often in T bills, this CDAR approach can be significant, even if all one asks for is the 1% over T bill rates from the return. Companies to start with are those known to the individuals at hand, as well as those known to the members of the board, whether in Atlanta or not. As economist Dr. Reeves, who is a brother in Atlanta asks, as Harvard, UCLA and others do this, why not small schools as well? He already has two companies lined up as well as three individuals.
- If ten individuals or companies set aside $10M each, that is $100M. Ask them to do this for three years. At 5% interest, that equals $500,000 each, or $5 million total each year, providing more than enough operating capital until traditional, recurring, and other revenue starts to come in, which means a jump on building the endowment. A higher earnings percentage will return a corresponding higher number. This means that for $100M over three years, the school would get $15M over three years,
- There is no risk to either the donors or the recipients. This is "perfect" for those with cash to park, or who want to generate investible returns without touching the principle. Thus this also works for charitable contributors to non-profits, all wanting maximum return and protection yet access and liquidity.
- A ladder basis can be used on different investment approaches that maximizes return and available liquidity: stagger the investments so that you have roll overs at whatever length desired between 30 days and 7 years (30 days, 90 days, 120 days, 1 year, 18 months, 2 years, etc., on up to the 7 years, whatever fits the needs of the investors and as negotiated with the college). As a footnote, the institution we recommend can do things for foundations that no one on Wall Street can do.
- Microsoft has $45B in cash. Most big companies have mountains of cash in T bills. CDARS can make them another 100 basis points. So a $10M "park" in CDARS can throw off $500 - 600,000/year. If you delivered CDARS at 5 or 6% and they are getting 4%, the 1-2% spread yields another $100 - 200,000 over T bills. And CDARS have less risk than muni's
- When first proposed, some failed to take advantage of this strategy on the grounds that they had never heard of them. Those that do so stay away out of ignorance. It is no wonder they are in financial straits. The CDARS web page helps to educate.
- CDARS are an excellent way for folks to use cash without risking the principle.Any group seeking to develop an endownment, such as a school, or other non-profits, could have donors park cash in their behalf and use the IR to build up an endownment which in turn, over time, creates an ongoing, sustainable income stream, particularly useful for those who get "giving fatique" for one cause as they want to move on to a new cause.
- When non-profits used CDARS, they get revenue from contributors' interest, while the donor will not be charged capital gains, and will get the charitable contribution deduction.
- Whatever the ladder of CDARS there are (from 30 days through 7 year), each has an amount that, aggregated with the rest, provides the amount to be collateralized with the CDARS for a bridge loan. The bank handling the CDARS can provide the bridge. Doing it this way mazimizes yield and minimizes fees. As each CDARS comes to matirity, its earned interest goes to paying down the bridge loan. Traditional requirements for any approaching such a financial institution is to provide citizenship, hopefully be a brand name person or company or institution or non-profit (in other words, not "Smith" in Amsterdam), bank statements with holdings, even with cash, and probably a financial statement and a tax return.
4. Begin setting up advisory committees for structuring the college, transforming to university, for daily operations and financial management, for curriculum and program offereings, for developing distant learning and satellite sites, etc.
5. Begin check lists, bench marks and deltas for the developed master plan for the MBC turnaround and transformation.
Stage II: Engage the Master Plan of Stage I: readying for financial stability and re-accreditation in order to facilitate enrollment of students in Stage 3.
- Begin conversations with the accreditation agency
- Begin conversations with the bond holder, to either invite participation or negotiate a settlement.
- Begin conversations with DOE to eliminate debt and begin the process of qualifying students for government loans.
- Begin conversations to negotiate educational deals with foreign countries:
- Offer slots in exchange for cash for each student.
- Example: Western Oregon University faced sluggish enrollment and financial ruin, and declared itself broke. It had insufficient state funding, over spent, and suffered mismanagement. Their solution: they recruited foreign students (which they did, mostly from China), and that one action alone brought them whole financially.
- When I was at Rutgers University in the 70s, its Livingston College, established to serve adults part-time as well as serve non-traditional students, survived by admitting many foreign students. Indeed, in the 70s, Rutgers had more foreign students than any school in America.
- Overcoming "giving fatique." Some big donors like to move on to new causes. Therefore give donors an opportunity to give a sustainable donation that keeps on giving after they have moved on. Two such examples are these:
- 2005 proposal for The Apollo Theatre in Harlem, to The Rev. Dr. William James, Ministerial Interfaith Association of Harlem, with whom we talked)
- Glide Memorial Baptist in San Francisco (a favorite of Oprah and Bill Clinton), proposed to Rev. Cecil Williams, CEO and Minister of National & International Ministries, and to Janice Mirikitani, Executive Director and President of the Glide Foundation.
- This could be done for the college: For those two above, the proposal was to have a donor give $3M towards making a film, with the normal 80% of profits going to The Appollo or Glide, with the donor then getting that amount to write off as a charitable contribution. And, depending upon where it is shot, 40% of the $3M gets written off as well, right off the top for the investor/donee. With the film producers in Atlanta, a similar arrangement could be developed with MBC. Think what MBC could do, especially in partnership with a Tyler Perry. The Diary of a Mad Black woman , filmed for $5MM, earned $50MM at the box office, staring Kimberly Elise. She is our Peter's film package. We are one degree of separation from Elise, Perry, Cosby, etc., not to mention one and two degrees from a host of others. Ditto the Board.
- Begin structuring and researching partners for adult learning, distance learning and satellite campuses in inner city communities, using the faith community, especially the AME.
- Begin planning to transform to a university, holding different colleges and schools in the university geared to a preparing students for a variety of careers, ranging from nursing (supporting regular nursing schools that don't offer lab classes), IT, science, hospitality, etc.
- Utilize pro sports connections, especially the NFL and NBA.
(1) Millionaire players need tax deductions: why not a college capital funds campaign?
i. NFL players in the stadium
ii. NBA players in the gymnasium
- (2) Hold near NF team scrimmage that precedes pre-season in colelge stadium as a fan night or premium
Stage 3: Engage in Master Plan, Part II : Open school again and march boldly into the future.
- On campus classes for traditional students: aim for college of 3,000. At $14,000/year, that is $42 million/year. Prior pricing: Tuition - $3,500 per semester and Fees-$3,000 for Room and Board fee.
(1) DOD funds will add to collge revenue
(2) DOD's new GI Bill will provide funding: market MBC to military discharging from service who want a college education.
(3) ROTC is a way to create career choices for those out of HS wanting to pursue a career in the military or to get the education military service provide before returning to civilian life.
(4) ROTC is also another way to positively reach young men with the equivalent of top sports training as well as a first career start after graduation. It is a manly (in the best sense of that term) way to help address the war on young Black men.
- Trade and technical courses and programs, etc.
- Summer school: 1,000 students, average of 2 courses each: $800,000
- Distance learning, on-line: this can be combined with on-campus classes as well as full distance. This is a great revenue generator, providing education without requiring the expense of classroom buildings, dormitories, larger cafeteria, larger library, etc. The University of Phoenix made its founders billionaires following this model alone. Think what those revenues could do for the college?
- Satellite sites (mini-campuses): it is recommended that they be in churches. A partnership could be generated either from a joint venture or invite in franchises, taking a percentage of their work. It would be used in conjunction with Distance Learning.
- Churches in inner city enclaves: establish satellite campuses there. We know or know who knows the founders or current executives of Phoenix University, Argosy, Apollo, Dunwoody, Herzing, etc. The idea here is not to create new but to engage with one of these in partnership to enter a whole new market: the inner city. Some can be in major churches in major cities, providing facilities and space without the need for capital spending and construction. These could apply in both Black inner city areas as well as barrio/Hispanic inner city areas. And Black owned educational franchises can also be a part of the mix.
- Adult learning, both evening classes and on-line: at 1,000 students, 1 course/semester at $400/course = $400,000. Continuing education could be done at both MBC and at satellite sites.
Stage IV: Scholarships and grants
1. Funds based on federal specific funds Key are things like Pell Grants, Hope Scholarships, and other types of grants and loans offered by the federal government to needs based students. That is the MBC demographic. With accreditation back, it can accept students who can help fund their tuition through these government programs. There are also government funds available for developing a campus master development plan.
2. Funds based on IRS "supporting organizations"
a. Supporting organizations: for deep-pocketed folks seeking tax deductions and reducing tax bite. This is a program in the IRS code. Create a trust fund with the funds (or revenue, depending on the structure) going to he college. This can be done on several bases, large and small.
b. A local trust could be solely for scholarships to those attending the college, or the funds could be shared, e.g., 75% for scholarships and 25% for social concerns area, or some other ratio. The donors can get up to 50% of their adjusted gross income declared tax-free. The board of each group can have donor family members, but they must be in the minority.
c. Local congregation scholarship funds specifying colleges and seminaries: can be established to provide tax breaks for the donor, college money for the student, with the stipulation that any accepting the funds must use them at an AME HBCU or AME seminary. Lutherans do it. Baptists do it. Why not have AME do it. It is wonderful for HS grads and provides another way to fund students who attend MBC. The local trust could also be shared, e.g., 75% for scholarships and 25% for social concerns area in the community, or some other ratio. The donors can get up to 50% of their adjusted gross income declared tax-free with carry forward possibilities. The board of each group can have donor family members, but they must be in the minority.
Stage V: Recurring Revenue Streams
- Donor gets 100% tax write off. Profits from film go to the college. The donor gets charitable giving credit for the profits made. I made such a proposal to both the Apollo Theater in Harlem and to Glide Memorial Church in San Francisco (February 2005). The guy I did it for didn't persevere. Think what MBC could do, especially in partnership with a Tyler Perry (Diary of a Mad Black Woman, whose studios are in Atlanta), which will leave money to help sustain MBC while the donor and his/her money moves on.
- Diary of a Mad Black woman, filmed for $5MM, earned $50MM at the box office, and starred Kimberly Elise. She is in my film package of which you have a copy in which this is explained. I am one degree of separation from Perry and from Cosby, not to mention one and two degrees from a host of others. Also, given the athletic stadium or ndoor auditorium: concerts could be held and recorded, with DVDs of concerns sold.
1. Dormitories: these are essentially apartment buildings: build accordingly and charge accordingly so that they are self building and self sustaining. Include retail and cafeterias in the larger ones. Utilize in summers for summer camps and summer gatherings.
2. Book Store/Electronics/Campus mini-department store. This could also be in partnership with a box store.
3. Site for foundations and charities: MBC can serve as a means to enable foundations and charities to achieve their goals by their providing MBC moneys that enable MBC to undertake the work and/or provide the venue for their goals to be pursued and achieved.
4. Receive funds from corporation for specific company related research on campus to meet their needs, especially in terms of science, biology labs, nanotechnology labs, communications/media tracks, etc.
5. Partner with corporation in research to share in the proceeds of marketable inventions/discoveries.
6. Enter into financial partnerships with those engaged in the mixed use buildings on campus that combine dorms with retail and/or cafeteria/restaurant, and other master plan buildings as planned. School can deter land value; but it is up to the market; the school is the anchor tenant. If stay as anchor tenant the landn is energized or else the land is not worth much. 5,000 students 10,000 students paying $15,000/years is $75 million/year. 5,000 students with 20,000 family and friends provide those to come to events and attend campus conference center and hotel. It will cost around $250 - 500,000 for renderings, marketing studies, civil and legal studies, even half of that amount, and learn alot
7. Hotel and conference center. Lease two acres for a hotel and conference center that can be used year round. Many campuses are finding them useful for family and friend visits, and for conferences held by various departments and programs of the school.
8. Establish a conference program to host seminars (MBC generated as well as non MBC ones), to keep campus conference center and hotel full and to "market" MBC to the networks of attendees.
9. Entertainment connections: Two movies have been filmed on campus, including the most popular DVD (either rental or owned), "Drumline." Some donors tire of donating to the same cause and seek new ones. To make it permanent, seek donors to invest in an entertainment pool, e.g., $5 million to make a film in partnership with an Atlanta studio, say that of Tyler Perry.
10. Potential leasing of stadium: use it for a new professional soccer team, as the stadium seats 15,000 (built for the 1996 Olympics). Why not a local based pro soccer team? Who needs avenue? Why not enter into a lease with them as well (saving 6-7 Saturdays for the college)?
11. Potential leasing of stadium to a new professional sports team. Why not enter into a lease with them ? Keep days the school lneeds.
12. Use the stadium for concerts. Record them for multi-venue content providing and DVDs for sale.
13 . Hold summer athletic camps (in both stadium and gymnasium). Develop a reputation. Summer kids will want to come to school there.
14. Hold summer non-athletic camps in the class rooms and auditoriums.
15. Selling the naming rights of the stadium (Comcast is paying the U of Maryland $5M/year to have their logo on the floor, at the center of their new Basketball arena).
16. Sell naming rights for various on campus buildings.
17. What else : what others do members of the Executive Committee recommend?
18. ETC. "Etc." is one of my favorite categories. It suggests flexibility and innovation. Clearly it suggests adding more. Stadiums and box stores anchor mixed used facilities and shopping centers. A campuscan be an anchor as well. See my 40 ways in 26 categories to generate revenue that was developed for pro stadiums that has relevance to even small collegesin a number of ways. In the same way such growth strategies and Internet strategies can also be adapted to the collge. Needed also are PR strategies as well as a solid system for maintaining communications ( 47 models ) on an ongoing and quick response as needed basis.
Developed originally for an HBCU: an Historically Black College and University, 2007-2008 (edited 8-30-08 & 9-5&18-08)
Updated to generic statement applicable to any college.