A well-known brand of school in Chennai with a strong waitlist,a unique positioning,strong positive word of mouth was struggling financially. Despite reaching a critical mass of over 1200 students the school was not doing financially well. The revenues were stagnant, costs have been escalating and EBITDA remained elusive. In addition the promoters had spent substantial CAPEX on building and land, with present operating profits the ROIC was way lower than industry benchmarks.
The school promoters engaged LoEstro for a 6 month long engagement to identify the levers of
profitability and guide the school team to implement changes to turnaround the school financially.
LoEstro team kickstarted the engagement by listing down different levers to profitability and then deep diving into each of them to identify areas of development and subsequent action plan. The team started from the very fundamentals of the school operations and analyzing the revenue and cost items individually.
We adopted a structured and exhaustive approach to put the school on path to profitability
1. Identify levers – Relevant revenue and cost levers for the school were identified as the starting point
2. Benchmark – Loestro team did a thorough research to identify the Industry benchmarks
3. Analyze – Each revenue and cost lever were compared with the industry benchmarks, and
gaps were identified. The team went into details of each and every parameter like space
usage, section size, teacher workload, housekeeping expense, security expense etc. to
explore ways to rationalize each and every item
4. Recommend – Loestro developed a customized action plan for the schools keeping in mind the school value proposition
5. Finally, we assisted the school team in implementation in a phased wise manner. An action
plan was drawn with clear implementation steps and ownership.
Our study brought out some interesting nuances about the Chennai market that led to a change in the initial hypothesis of the group. The value proposition and the characteristics of the school was finalized along with the financial model. The group also agreed on the recommended entity structure and started implementing the same.