Education Might be Pretty Good in a Recession
Colleges have been receiving a LOT of new applications from students, at both the undergraduate and graduate levels. I can’t say that I’m surprised. Whenever there’s a recession, people use this time to increase their IQ, retool their skill sets and/or hideout before (re)entering the workforce. This is in addition to the general trend of increasing numbers of high school graduates.
Businesses that service the education space, while not recession proof, are in a pretty good position, recession-wise, depending on the nature of the business. These companies are hurt by the recession, since their customers make budgetary cuts, and thus, may slash certain spending. However, this issue tends to be a little mitigated because they offer solutions that either save money or produce incremental increases in costs that are mostly offset by the benefit.
Think about it.
More students, means more tuition & fees. Attracting students…and then retaining them is key to making money. Duh! After all, a four year student pays more in tuition, fees, books, room and board, than a student who drops out after the first year…and way more than a student who doesn’t go to that particular institution. You’d be surprised at how many institutions still don’t get this…
Nonetheless, intuitions are generally seeing more applications. Imagine being in admissions and receiving 75% more apps than last year. You’d pray for a solution that could help you more efficiently and accurately manage the influx (this is classic benefit > cost). Companies like Intelliworks make such apps.
So that’s one aspect. Another is the non-traditional route, where students are doing distance learning or some hybrid (maybe some lecture and some web-based learning) or are “non-traditional” students, like working adults. Institutions such as Strayer University and the University of Phoenix have long been fixtures in this space. Others, like K12, hit the primary education space. They’re content companies…they provide the curriculum.
Other companies provide the tools to make learning easier and better, thus, enhancing retention rates. I’m thinking of Blackboard, which provides the software for web-based learning (among other things). When I was in school, we used a different app, but had the same functionality – profs could post lecture slides on the site; student groups can post their work from a group project, etc. It made learning a heck of a lot easier.
And think about other companies in the vertical, like Princeton Review. No doubt that before the increase college applications, there was an increase in college admission test taking.
So, I don’t think that revenues will necessary sky rocket for these companies. But I do think that, among the companies in a recession, education companies can make a case for being well position in a recession.
