BUSINESS PROBLEM
A HOME SCHOOL COMPANY
You are the CFO of HSSC, a home school services company that provides curriculum and home school management for over 15,000 students.
HSSC is a privately owned, for profit company. However, the owner started the business for altruistic reasons, and the profits earned on services have purposely been small. Now the company has a problem.
The cost of HSSC employees, costs for printing and production of curriculum, and costs for student service administration have all risen steadily over the years.
Now the company is at risk of running at a deficit unless changes are made to maintain a stable financial position.
As CFO you’ve been tasked to examine all aspects of the business and make recommendations to build long term financial stability for HSSC.
BACKGROUND
HSSC provides home school management services for grades K-12. The HSSC business model provides the following products and services for home schooling.
Student and Instructor curriculum,
Parent/Instructor training,
Student enrollment and management,
Student testing, scoring and record keeping,
reporting, administration and regulatory
compliance management.
HSSC also operates a learning center on the company campus, which serves as a testing environment for new curriculum.
HSSC operates with three discrete divisions, each with the common focus of serving the student population.
Curriculum development which includes text, work book, testing materials, and instructor guides.
Multi-media production facilities, including print, video, web-hosted and/or interactive. (NOTE: Approximately 65% of the curriculum is printed based and 35% is electronic media based)
Student management services which includes enrollment, test management, grade management, extra-curricular activity tracking, achievement records, and completion and compliance records.
Relevant cost information:
Number of students: 15,000
Average fees per student per year: $ 1,500
Current year forecast of HSSC
revenue: $22,500,000
Prior year cost of operation: $20,775,000
Number of HSSC employees: 139
Cost of curriculum development: 39 % of costs
(Creation = 18%, media development = 16%, revision and testing = 5%)
Curriculum development costs have been increasing by 5% per year.
Cost of multi-media production: 37 % of costs
(Print = 22%, electronic = 15%)
Media costs have been increasing by 6% per year (print media by over 9%)
Cost of HSSC Learning Center 9 % of costs
Learning center cost have been steady.
Cost of administrative services including HSSC management: 15 % of costs
Admin services costs have been steady.
AS THE CFO AND BASED ON THE INFORMATION YOU ARE GIVEN, WHAT WOULD YOU RECOMMEND TO ENHANCE THE PROFITABILITY OUTLOOK FOR HSSC?
Please enter your responses in this document, in the format that follows:
INTRODUCTION: Provide a one or two sentence introductory statement.
DESCRIPTION OF THE PROBLEM: Provide a short statement of the problem.
FINANCIAL CONSIDERATIONS: Provide a short statement for three areas you would examine that might enhance the financial situation. Prioritize them in a 1,2,3 list.
RECOMMENDATION: Based on your review and considerations, develop a recommendation for immediate action. (Doing nothing is not an alternative).
CONCLUSION: Write a one sentence call to action to execute or perform your recommendation.