Post-OPM Strategy: Develop a Detailed Financial Pro Forma

Preface: The OPM landscape is shifting, and it is not my intention to cast OPMs or the decision to partner with them as good or bad. The purpose of this article is to present neutral information senior-level leaders may want to consider when making decisions regarding their online strategy.

My first article provided an overview of 7 Key Elements to Guide a Post-OPM Strategy. This is the second part in the series where we take a deeper dive in the critical importance of a well-developed financial pro forma.

As universities increasingly look to online education to drive enrollment growth and new revenue streams, one foundational element is often overlooked - the development of a comprehensive financial pro forma. If you are unfamiliar, a proforma, at its core, is a multi-year projection of costs, revenues, and profitability scenarios. Without this critical roadmap, institutions leave themselves vulnerable to missed targets, budgetary shortfalls, and strategic misalignment.

From my experience leading the transition to an insourced online learning model, I cannot overstate the pivotal role our pro forma played. It served as the data-driven foundation for evaluating the true costs and benefits of our former Online Program Management (OPM) partnership versus building internal capacity. The insights gleaned from this financial model ultimately guided our decision-making process while optimizing for institutional objectives.

Developing a pro forma is equal parts science and art. The science lies in projecting metrics like program pricing, marketing spend, student acquisition costs, enrollment funnel benchmarks, projected new student enrollments, variable costs for recruitment and technology, as well as fixed costs for overhead and support services. Compiling historical data, analyzing competitors, and leveraging market research are crucial inputs for forecasting these metrics accurately. However, the art comes in navigating the unavoidable assumptions and contingency planning.

What is the market telling you and how do you project tuition revenue based on enrollment trends? How will staffing expenses increase over a multi-year period? What are the breakeven points and anticipated ramp periods for new program launches? Tackling these questions requires strategic thinking and close collaboration across your institutions finance, enrollment management, and academic teams.

Once built, the pro forma becomes an invaluable tool for institutions to pressure test their online strategy from multiple angles:

Financial Viability: Assess whether the projected net revenue and profitability aligns with institutional goals and expected returns on investment.

Resource Optimization: Model out staffing and technology requirements to adequately support projected enrollment growth without over or under-building internal capacity.

Market Alignment: Evaluate whether programs map to workforce demands, price sensitivity, and emerging learning modalities.

Risk Mitigation: Run scenarios like economic downturns, enrollment shortfalls or competitor changes to identify potential risks and develop contingency plans.

Perhaps most importantly, a proforma provides quantitative justification to leadership to confidently launch online initiatives and secure stakeholder buy-in across campus. It should become a living document which is revisited (at least) on an annual basis. Checking your assumptions and forecasts allow you to refine your model for the next year.

As the online education landscape evolves those who build and refine their pro forma-driven approach will capitalize on opportunities through a thoughtful strategy and data-backed decision making. Investing upfront to construct a robust financial model provides the cornerstone for long-term programmatic success - allowing the online portfolio to deliver on promises of growth, serving students, and fulfilling the institution's mission.

So where are you on your OPM-journey? I would love to hear from similar institutions.

Let’s connect, I promise I’ll pick up the phone (or zoom call).