Let’s demand an Ace of Cost Base

We all talk about income in education. Income, income, income. That’s all I hear. And there’s a good reason for that. There’s no doubt that in education, as in all public sector organisations, Government doesn’t want any public perception of fat cat principals, or directors of training providers with huge bonuses. So income it is. But thinking about nothing more than income often leads education providers to debate the wrong topics. Let me explain what I mean.

No fatcats here - just a very large fish!

With that in mind, rather than discussing what impact dropping funding rates will have, it would be better for all providers to have a clear idea of the expected cost base of delivering an Apprenticeship. That would enable providers to understand the potential margin available for each framework, building in the ability of providers to budget for investment. Because that’s what we’re here for – to deliver high quality education and to develop the best offer which meets and serves our community’s needs.  And to do that, we need to understand the margins available.

Let's learn from business and think in margin and cost base terms - not just income!

At the moment, there’s a debate raging around income for different Apprenticeship frameworks. In fact, I recently spoke on a panel at an Apprenticeship conference, and one of the questions I faced was ‘what effect does reducing funding rates have on quality?’ In my view that’s the wrong question to be asking. We should really be asking what an acceptable margin is. But we can’t. And we can’t ask that for a couple of key reasons. The first of these is that clearly the concept of margin – or profit – for an educational provider is unacceptable. Why? Well, clearly we aren’t profit making institutions, so raking in huge sums wouldn’t be appropriate. What is appropriate is that we’re able to deliver a high quality education, while also achieving enough income to top slice an acceptable margin that will allow us to cover our fixed overheads and to invest in the organisation’s human and physical resources.

If we think in margin terms, we can reinvest that in our learning environments, such as our recently launched Construction Extension - that'll then help develop even more students!

The second reason we’re unable to answer the question of what margin is acceptable, is that we simply don’t know the answer. Yes, I hear you cry, we do. Well, we should, because hopefully the Institute for Apprenticeships is looking into the cost base of each framework, and then feeding that information into the sector. But they aren’t. Or at least, if they are, they certainly aren’t letting the sector know.

So we have a two pronged problems. We don’t know what the margin is, and worse than that, we can’t even really talk about margin. I think things need to change. Ultimately all education providers have the same goals to enhance and serve their community. We can only do that, if, like business, we examine the opportunity to grow and develop our own offer. And we’ll never be able to do this until we start speaking openly and honestly about the margin we all need to do that. 

So let’s stop just thinking about income, and let’s start demanding action to understand the true cost base of each Apprenticeship framework, so that we can start understanding the potential margins that we can reinvest for them.