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Having financed the extension of their existing sports facilities to include a new swimming pool, changing rooms, offices and support services, the school’s governors thought it prudent to investigate the running costs for the new facility using various assumptions.
The operating costs of the new facility, including the costs of enhancing pool safety by employing a lifeguard to cover lessons and likely use by staff, parents and other local schools, were estimated at £160,000pa. It was against this financial background that the governors considered the income potential of the new pool facility.
Simple lettings
Adopting a simple lettings policy of hiring the pool by the hour at prevailing rates outside school hours would generate a gross £60,000, but would necessitate a revised management structure and additional annual operating costs of £20,000.
While this route would impact on the school’s budget by £40,000pa, other, more ambitious, commercial options were considered.
Adding value
Adopting a commercial strategy of adding value, the school identified that by delivering its own swimming lessons, a further £40,000 net could be generated. The external facilities company would establish the business over three years by handing over a viable and sustainable business by year three. In addition to increasing pupil facilities, the school could deliver educational benefit to the local community as part of its public benefit strategy.
By adding this value, the operating deficit could be reduced to £80,000. It was, however, felt that even this deficit could be challenged by a more robust approach.
Dual use: part-time
A holistic approach was then adopted by the governors who accepted the principle of developing the school’s sports facilities as a full dual-use centre.
Firstly, they considered the impact of opening to the public 4pm-10pm daily and at weekends, incorporating the pool, fitness suite and sports hall. The forecasts indicated that a break-even could be achieved, meeting all operating costs from income. While this removed the ongoing burden on the school, it did not offer a way of repaying the set-up costs and operating losses incurred during the initial phase, or indeed provide sufficient margin for error should future external income fail to increase as anticipated.
Dual use: full-time
The governors felt that a commercial strategy should be considered. Fundamental to the viability of a dual-use centre is ensuring maximum use of the space to minimise overhead costs. The direct cost of sales is marginal once the management and corporate structures and costs are established. The principle of operating throughout the day in a fully commercial manner can minimise overheads and therefore be profitable if the design of the facility and school timetable are sufficiently flexible.
Various business models can also be adopted. In this instance, a charitable trading company was created which in turn engaged an external facilities company under a management contract to provide an experienced management team to implement the business plan and recruit and train new managers who will take over the running of the centre for the school when the contract concludes.
As the process developed, it was apparent that the school would benefit from restructuring its own timetable, this in turn enabled the trading company to maximise commercial opportunities available, with the consequence that the centre will be available on more occasions to the local community and other schools.
Adopting this holistic approach while placing the school’s requirements first, allowed the school to consider the viability of various operating models, from full private membership to simple pay and play. Balancing risk with access and the opportunity to facilitate public benefit, a mixed economy was developed.
Mixed use
When open, a restricted number of memberships enjoy limited access at premium prices. High margin, added value activity run by the centre will mitigate the effect of lower margin, higher risk activity. An attractive programme of classes and courses will be available throughout the year. In keeping with the centre’s mission statement, access will not be limited by age, ability or economic circumstance, while affordable pricing structures allow various pay and play options. Banded pricing enables the centre to offer schools and local community groups access at affordable rates, in many instances below those offered by local authority venues.
The management and school are now developing strategic partnerships with sports development officers and local groups, thus supplementing key elements of the town’s leisure and sports programme.
In order not to place too excessive a demand on facilities or the school, a funding package has been arranged that allows the sports centre to adopt a prudent development plan with income forecast to grow steadily, maturing over five years. Costs level out in year three. Operating forecasts are modest, with surpluses achieved in year eight, with capital interest payments met in year two. Capital can be repaid from year eight.
Critical to the success of the scheme is the commitment of the school governors and the company’s board to a sales-driven strategy, acknowledging the implicit cost of launching a commercial business on this scale.
Prudent forecasts, aggressive cost control and commercial management procedures will allow the business to grow and to meet all costs without any impact on a school’s long-term resources.
By reviewing various financial models and the school timetable, it was possible to create a company which can maximise the commercial opportunities available. | 
