Starting and running a school is a challenging task, and ensuring financial stability requires careful planning and management. According to The Center for Education Reform, 42% of charter school failures within the first three years were due to finances, making it imperative to establish a solid budget from the outset. Read on to discover best practices that can help you achieve financial stability and create a thriving school.
Best Practice No.1:
Use your “petition budget” as your starting point
Most authorizers require new charter petitions to include a budget and cash flow projections, including startup costs and an operational budget for a given timeframe. The petition budget is the school’s founding financial document and should reflect the goals and priorities outlined in your charter. This means that you’ve already decided on student-teacher ratios, the different levels of professional staff that you want to hire, the expected costs of textbooks, any technology and equipment essential to meeting your mission, and the costs of getting students to enroll in your school.
The petition budget should include expected student-teacher ratios, the professional staff you plan to hire, costs of your facilities, equipment, textbooks, technology, and marketing. Although the petition budget serves as a great starting point, it needs ongoing work since there can be a significant lag time between submitting the petition and starting operations. This interval may have changes in governmental funding as well as costs of goods, benefits, and salaries that contribute to your operating costs and overhead.
Best Practice No. 2:
Make a wish list, then prioritize
When creating or updating the petition budget, include every last item on every stakeholder’s wishlist, no matter how trivial (even novelty erasers!) or unrealistic (baby grand pianos in every classroom!). Most of the time, you’ll end up with a huge deficit—and that’s okay. Your stakeholders (teachers, other staff members, and partner organizations) will feel heard and invested in the process. Then, when you begin to work backward and eliminate items that aren’t high on the priority list, everyone involved in the budgeting process will know that their requests have at least been considered.
Your petition budget should reflect the priorities spelled out in your charter, and spending should always be guided by your school’s mission. For tough decisions, conducting a marginal analysis can help to make the pros and cons more clear.
Best Practice No. 3:
Plan for surprises
Each year, the budgeting and forecasting processes will become more predictable, but expect plenty of surprises and unexpected costs in the first year. Be sure to leave room in your budget for unanticipated costs such as textbooks and supplies that cost more than expected, emergency repairs or maintenance, and changes in enrollment numbers.
The first year of operations will have challenges, and one of your preferred vendors may have been acquired by a large corporation that raised prices, your facility could unexpectedly require major repairs, or your enrollment may be lower or higher than expected. Make sure staff at every level understands this too. Showing staff your school’s monthly “burn rate” is a simple way to show how much you’re spending without overloading them with details.
Want More Budgeting Tips?
Building a solid budget is a vital step when starting a new school. Using your petition budget as a starting point, making a wish list and prioritizing, and planning for surprises are three best practices that can help you create a realistic and effective petition budget—but there’s more to learn.
Over the past decade, we’ve reviewed thousands of charter school budgets and helped guide countless schools through their charter school financing processes. To help you achieve your goals, we’ve put together this informative and thorough guide to share best practices and call out common pitfalls to avoid.
Download it for free and get tips for:
• Planning for long-term financial health
• Implementing best practices for achieving buy-in and setting internal controls
• Understanding key financial metrics to watch
• Utilizing tips on cashflow planning