Capturing Alternative Revenues

Strategic Lessons and Compendium of Tactics for Increasing Nontraditional Operating Revenue

Topics: Administration and Finance, Transportation and Parking, Auxiliary Enterprises, Space Utilization, Facilities and Operations, Revenue Enhancement, Alternative Revenues

Introduction

 

The Gatorade Problem

Growing non-tuition revenue is a perennial focus for business leaders. Now, as some colleges and universities face slowing or flattening tuition revenue, and all institutions seek ways to better fund ambitious strategic priorities, capturing nontraditional revenue has become an even greater priority.

Unfortunately, despite increased effort, alternative revenue success remains difficult to generalize or replicate. Top auxiliary revenue institutions more often benefit from single breakthroughs or strokes of good luck than replicable, best-practice strategies. We call this phenomenon the “Gatorade problem.” Shown here, Forbes applied the popular technology metric of research income yield—research expenditure divided by research-related income—to higher education. And in most cases, top performers were significantly buoyed by the gains of a single, smash-hit product, such as Gatorade. Other institutions such as University of Kentucky benefit greatly from natural assets on campus, such as coal.

Of course, colleges and universities cannot replicate either approach. In short, there is no formula for multimillion-dollar ideas.

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No Silver Bullet for Increasing Revenue

But Hundreds of Replicable Ideas Consistent with Mission

Instead, leaders must pursue a highly diversified strategy, applying dozens of tactics across multiple areas of the institution. Fortunately, the Business Affairs Forum has identified 200 replicable revenue-generating tactics. Select categories and subcategories of some of the most promising opportunities are shown here.

While few tactics will alone generate tens of millions of dollars of additional revenue, at least in the short term, they can collectively sum up to significant dollars. The full library of tactics, with additional detail and revenue estimates, is provided in section two of this report.

Of course, not every idea is practical for each institution because of unique logistical or cultural reasons. However, this extensive list provides the initial due diligence necessary for the leaders or task forces charged with creating new revenue streams, and ensures institutions consider all options and leave no stone unturned.

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Isolating Important Lessons Learned

Recurring Themes Across Most Successful Revenue Approaches

Beyond individual tactics, there are also larger patterns or common themes to successful revenue growth. We have distilled four executive imperatives to guide leaders’ alternative revenue efforts. The strongest tactics, those with largest potential revenue or highest ease of implementation, typically address one or more of these imperatives.

When selecting tactics to pursue, leaders should apply the imperatives as a filter, prioritizing tactics that directly touch one or more of the imperatives. Business leaders should also use these four imperatives as a checklist, ensuring their selected group of tactics collectively address all four.

Note, these imperatives are not confined to specific categories of revenue, such as advertising or space rental. Instead, colleges and universities can apply them broadly to multiple revenue sources. For instance, institutions could take advantage of student desire for convenience by launching targeted intersession courses or by introducing simple service fees.

More detail on these imperatives, as well as illustrative case studies, can be found in section one of this report.

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How to Use This Publication

Two Resources to Help Leaders Capture Nontraditional Revenues

To assist college and university business leaders in growing alternative revenue, the Business Affairs Forum offers two distinct resources within this publication.

The first resource, Imperatives for Successful Revenue Growth, details four executive-level imperatives for generating nontraditional revenue. Through illustrative case studies, this resource will help guide leaders on which types of tactics to pursue and which might work best on their campus.

The second resource is a compendium of 200 proven alternative revenue tactics, with detailed descriptions and relative dollar estimates. This resource serves as both necessary due diligence for leaders or task forces leading the effort as well as a library of revenue tactics to choose from.

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Capturing Alternative Revenues

Imperative #1: Capitalize on Student Demand for Convenience and Flexibility