To Close or Not to Close: Is That the Question?

 

Every year, a few independent schools make headlines for the wrong reasons: a sudden closure announcement, families scrambling for alternatives and faculty wondering whether they'll receive another paycheck. From the outside, these school closings can seem sudden. Those who work closely with struggling schools know better. The warning signs were almost always there. 

Shakespeare's Hamlet wrestled with the ultimate question of "To be or not to be?" Independent school leaders sometimes frame their own challenge in similarly stark terms, asking themselves, "To close or not to close?" But after talking with consultants who have spent years helping schools navigate financial distress, I'm convinced that’s rarely the right question.  

Instead, business officers, heads and trustees need to ask themselves: Are we having the difficult conversations while meaningful options still remain? With the right data, the right mindset and the right conversations happening in the right rooms, many of these outcomes are preventable. Business officers are uniquely positioned to help change the story. 

Avoiding the Worst-Case Scenario  

Chad Tew, founder and chief disruption navigator for  LearnCollab, spent 13 years as a school business officer before advising schools on mergers and strategic realignment. He is direct about what failure looks like: "The very worst way is leaders engaging in ‘magical thinking,’ believing for months that things will improve, and then at the last minute announcing they are closing because they don't have enough money for next week’s payroll. That's total dereliction of duty by the head and the board."  

The antidote is to raise the hard questions while there's still time to act, ideally when a school has at least 12 to 18 months of runway. Tew recently spelled out his advice on the process in “School Closure & Legacy Stewardship Framework.” He argues that contingency planning should never be confused with deciding to close. Instead, it represents an exercise in good governance that allows boards to evaluate facts, explore alternatives and prepare responsibly while continuing to pursue restructuring, partnerships, mergers and other mission-preserving strategies.  

Waiting until closure becomes inevitable narrows options, increases legal and financial risk, and makes it harder to protect students, employees and the school's legacy. Planning, in other words, is stewardship. 

Brenda Stonecipher, principal of  Stonecipher Consulting, helps schools facing potential closure. Too often, they call too late. "A lot of times when schools come to me, they are on their last circle around the sun." The schools that avoid that fate usually have someone in the business office who sounded the alarm before the closure became the only option. 

The Warning Signs Schools Can't Afford to Miss 

Both consultants point to a similar cluster of warning signs that often appear years before a school closes. The most common is a pattern of deficit budgets built on optimistic enrollment projections that never materialize.  

"Schools think, 'We're running a deficit, but we're going to increase enrollment, and then we'll be fine' -- but then they pass a deficit budget assuming those plans are going to be successful," Stonecipher says. 

Tew points to a subtler but equally telling indicator, where schools maintain enrollment by dramatically increasing financial aid. On the surface, enrollment appears stable. In reality, the financial picture continues to erode. Discount rates above 25% to 30% warrant close attention, Tew said. Rates above 40% can signal serious financial trouble. 

Both consultants also caution against cutting programs to balance the budget. It may feel fiscally responsible, but it often accelerates decline. "You can't cut your way to the top," Stonecipher asserted. Reducing the quality and value of program can trigger an enrollment spiral that leaves the school in a weaker position than before. 

Data, Courage and Honest Projections 

Both Stonecipher and Tew believe the business office must lead the effort to identify warning signs and act on them. 

No one is saying it’s easy. Heads of school often want to present boards with a positive picture, but when board reports soften financial realities, trustees cannot fulfill their fiduciary responsibilities. “A business officer has to weigh making their boss happy with providing accurate information to their board," said Tew. 

Once you get that level set and everyone knows where you are from a financial perspective, that's when you can start building toward solutions.

Stonecipher encourages business officers to share a financial status report that examines the past, present and future by presenting current financials with benchmarks, trend data and a multiyear cash flow projection. "Once you get that level set and everyone knows where you are from a financial perspective, that's when you can start building toward solutions." 

Business officers do not have to develop those skills alone. NBOA offers resources that help schools move beyond annual budgeting and think strategically about long-term sustainability. Using tools like NBOA’s  Long-Range Financial Model, which now includes scenario planning, and the  BIIS data analysis platform, which includes the financial sustainability heat map among other tools, helps boards understand not only where the school stands today but where current decisions are likely to lead. They can help replace magical thinking with data-driven disciplined planning. 

Beyond Closure: Asking a Better Question 

Boards that resist hard conversations about warning signs often need a reset about what they believe they are responsible to protect. Tew has seen boards tie their sense of mission to a building, a name or a tradition. "Nobody's mission says, ‘Ensure there are people in this building, and that the building is forever named Fred's Country Day School.' The mission is to provide an amazing education to kids." That broader perspective opens the door to options like public-private partnerships, charter conversions and unification with another school. 

Nobody's mission says, ‘Ensure there are people in this building, and that the building is forever named Fred's Country Day School.' The mission is to provide an amazing education to kids.

Some of the strongest strategic combinations happen when schools still have meaningful choices and approach those conversations from a position of strength. Tew prefers the term "unification" to "merger." The corporate connotations of "merger" can make boards defensive. He also warns against waiting until a school grows desperate before pursuing that path. "That's like saying I want to get married, but I'm going to wait until I'm heavily in debt, sick and unemployed. You’re not a very attractive partner.”  

What Success Looks Like 

Both consultants have seen schools succeed because they acted early. 

Stonecipher told me about small school in the Pacific Northwest that had dwindled to 62 students and was staring down closure. Leaders leaned into the school's identity around outdoor and experiential learning, overhauled the admissions process and launched a $1.5 million fundraising campaign to support the transition. They also stopped competing for students who viewed the school as a backup plan and focused instead on families for whom it was the destination. Enrollment has grown to nearly 80 students, approaching minimum viable enrollment. "It was a lot of work," Stonecipher says, "but it's been a real success story." 

Tew points to the unification of Moravian Academy, a traditional K-12 school in Bethlehem, Pennsylvania, and The Swain School, a progressive preK-8 in nearby Allentown. The schools increased collaboration during the pandemic by sharing governance and business operations, while maintaining separate brands. Annual giving increased after the unification because donors saw schools investing in their future, not retreating from it. 

The Earlier Question 

So, is the question really whether to close or not? I don't think so. 

By the time a board reaches that question, many of the decisions that shaped the answer have already been made. The better question is whether leaders recognized reality early enough to preserve their options. Business officers play a critical role in making sure they do by sharing the data they see and encouraging their fellow leaders to explore strategic options while they still can.  

Perhaps the better questions business officers and school leaders need to ask are: “To thrive or not to thrive? And what are we doing to make that happen?” 

Listen to this full episode of the Net Assets podcast.

Jeffrey Shields, FASAE, CAE
NBOA President and CEO
Follow NBOA President and CEO Jeff Shields on LinkedIn.