Strategic tech adoption and consolidation: Resilience option for SMEs in Education

I was recently invited to facilitate an online session at my church on how SMEs can build resilience amid covid-19. One thing that struck me was the high level of anxiety that entrepreneurs in different sectors had due to inability to predict how the future of their business environment would look like.

One sector that stuck out like a sore thumb apart from tourism is the education sector. Entrepreneurs playing in the sector are currently facing an existential challenge underpinned on no revenue due to directive by ministry of education indicating resumption of school in 2021.

The dilemma that most of these school’s face is that they are incurring fixed overheads of rent or mortgage, staff salaries among others cost that contribute to their value proposition due to such factors as location, facilities and qualified tutors among others with no revenue. The reality most are facing is that they will close before the end of the year save for a miracle.

Based on our SME covid-19 management toolkit; our recommendation to businesses facing no revenue such as players in the education sector is to consider two vital and corelated options; consolidation through mergers and strategic technological adoption.

Consolidation through merger entails tacking stock of the upto date financial position following the simple formula of summing up all assets and deducting total liabilities, mapping of school/s for possible merger ensuring evaluation of the value proposition of the combined entity.

The main advantage of merging is the ability to contain cost due to absorption of fixed overhead across combined revenue at least theoretically as well as reduction of cost due to for instance vacating one premise and using a one for both schools. A further advantage is the value created by the combined brand value in the form of goodwill from parents.

The second option that flows from the first is the strategic adoption of technology across the business model. Interaction with students as well as among tutors is bound to change due constraints imposed by the covid 19 pandemic which is projected to persist a couple of years maybe 2 to 3 years.

Private schools must identify integrated technology that will support customer journey from admission, student-tutor interaction, payment and examination among others. This may mean developing or leasing a customized e-learning platform that is combined with limited student physical interaction that meets Ministry of health and WHO guidelines, leasing students with IT infrastructure such as tablet as part of fee, term fee paid through monthly subscription due to reduced disposable income, exclusive bulk rate negotiation with internet service providers on behalf of students  among others.

The combined options may not apply to all private schools due to income disparities of end customer but consolidation through merger option cuts across.