TWICV special with Rebeka Mazzone CEO of FuturEDFinance

Gary (00:03)
Welcome back to yet another special episode of This Week in College Viability. Hi everybody. My name is Gary Stocker, founder of College Viability, where we look at the financial health and viability of public and private colleges across the United States. A really special guest, another data nerd, if you will, is joining me today. Please welcome Rebecca Mazon, who is a founder and CEO of Futured Finance. Rebecca, thanks for making time to join us today.

Rebeka J Mazzone (00:31)
Well, Gary, thank you for inviting me to join you. This is a topic that I absolutely love and I am so excited about college viability and just thinking about the future sustainability of higher ed. So it's an exciting topic.

Gary (00:46)
So like me and like many, many others, I think the new one starts every week. You're kind of a higher ed data entrepreneur. Tell us a little bit about featured finance.

Rebeka J Mazzone (00:58)
Thank you. So I'd say I refer to myself as a recovering accountant. So I did start in the field of accounting, but really I love thinking about strategy and how to use data to make decisions. So data informed decisions. So everything that I do is really centered around developing and using these operational metrics to ultimately

to strategy and think about how to drive future financial outcomes. So, you know, I feel like the whole conversation around the future sustainability of higher education is so relevant to what we do.

Gary (01:42)
And you and I have talked quite a few times offline. And one of things you consistently share with me, and I'm interested in your comments on this for our audience, is you consider finance a lagging indicator of a college's financial health. What do you mean by that?

Rebeka J Mazzone (02:00)
Well, think that, you know, anytime you look at finances in general, if I were to run a statement of activities or a P and L right now out of my system, what it would show me is it would show me all the things that have already happened. So it's a tally of all the revenues and all of the expenses. But what happens in colleges and universities is that we often

don't really look at that information on a true all funds basis. So looking at restrictions and making sure things are recording, recorded properly. So we once a year after our audit get this really good full snapshot of our financial information. So not only is it several months old, but more importantly, even if it were real time, it still is a tally of everything that already happened. so financial information,

only becomes useful when you use what has already happened and use it to predict the future. And this is something that we historically have not done a lot of in higher education, but for -profit companies do it all the time. So the idea of really looking at, you know, what does this data tell us about where we're going to be five years from now and overlaid upon, you know, what we know about what's happening in the economy around us.

Gary (03:24)
Rebecca, in the last handful of years or so, I set up Google alerts for all sorts of college related finances and viability issues. In the last handful of years or so, colleges have regularly said, here's how we're going to fix whatever financial or operational or enrollment, graduation rate problems that we have. And rarely are they even successful with that. But it takes so long.

come about, why do these turnaround plans, Rebecca, take so gosh darn long to come to fruition if they ever

Rebeka J Mazzone (04:02)
Well, that's a very long topic that we could probably spend a lot of time thinking about. I'd say there's a few things that happen in the process. So if I just think about a simple example of we've decided that we're going to sunset one of our academic programs. So there's just not a huge demand for it anymore.

Gary (04:06)
Hahaha

Rebeka J Mazzone (04:24)
Well, the problem associated with that is that you have to think about the current students that are in there and you have to think about teaching them out. You have to go to your accreditor and make sure that they're notified that you're eliminating this particular program. And then if you also have faculty, 10 -year faculty who are part of that, who will be eliminated as part of the elimination of that major, there are contracts. And so, did we have to give them a one -year notice prior to...

you know, not even choosing to renew their contract. But I would say even way before any of that happens, there is this idea of shared governance. And so the idea of this is that it's not like a for -profit company where the CEO just decides we're going to eliminate a product line. It requires this conversation with both the academic and administrative side.

under shared governance to really talk about and think about the impact that that has. And that's an important process because it really is meant to maintain the integrity of the curriculum and the learning experience for the student, but it ends up taking a really long time. And so those are that that all presumes that you've actually have the data to make the decision. And I think our bigger problem in higher ed is that we don't

Gary (05:40)
Yeah.

Rebeka J Mazzone (05:45)
We tend to do a lot of trimming around the edges, cutting 2 % here, 3 % there. And with the challenges that we're facing, with the demographic cliff, a shift in consumer demand or consumer expectations over the value in education, fighting against inflation, I think we have to really look at our business model in a very different way and think about bigger, more radical systemic changes.

And that is, you know, I think, I think even thinking about how to get started down that road is almost impossible. So the bigger problem is that everything that we do tends to be trimming around the edges, cutting a little bit here and there. And we find ourselves never really being able to catch up and make the changes that we need to make to affect financial health five years from

Gary (06:38)
Yeah, yeah.

I'm gonna give you a chance to stand at the top of the mountain and speak to every college leader out there. And the context behind this is you've written about seven imperatives to be a finance strategist. I think that's an important modifier, a finance strategist. And just the chance, if every college president in the country would listen to you, share the top two or three of those imperatives, especially for colleges watching their

dollars circle the financial drain. Share those top two or three.

Rebeka J Mazzone (07:19)
So I would say developing a future oriented mindset is probably right now my number one. So I think in finance and accounting we're really good at understanding and reconciling numbers right now as they are. But as I said earlier everything right now has to be converted into what is this going to look like five years from now.

What is this going to look like at the end of this budget cycle? So I think making sure that any time you get information that says, well, budget actual, here's where we're at right now. The more important conversation is what does this mean about where we're going to be by the end of the year? Because if we're on budget or not on budget, we should know that. And what does this mean five years out?

how does this impact us? Because remember, if we have lower enrollment this year, it affects us for the next four years. It's not just a one -year impact. So future -oriented mindset is number one. Number two would be to connect operations and finance data. So it very much is in line with college viability and all the things that we've talked about around understanding the drivers. So thinking about how much

Net revenue are we bringing in per student? What is our discount rate per student? How many students on average do we have in a classroom? What is our average cost per athlete per sport? So it's really understanding. We spend a lot of time talking about the dollars, how much money you're making, how much money you're losing, but nobody else understands that. So how can you connect that finance data to an operational metric?

Gary (09:01)
Right, right.

Rebeka J Mazzone (09:09)
that your audience understands and your provost understands faculty load, class sizes, student counts. You your athletic director understands number of athletes on a roster. And so I think it's us trying to convert and connect to the finance data in a way that others can understand it. And that's how to democratize data and really start the process of data driven decisions.

So then number three for me would be creating agile and responsive projections and forecasts. So, you know, I think it's one thing to do a five -year projection, but this fall, as we have some institutions that have experienced the, what we're calling the FAFSA debacle, and we suddenly have lower enrollment,

I have one institution that's a great example that they had 40 students less than what they had predicted coming in the door. And it was really easy to say, okay, we net 25 ,000 per student. So that is a $1 million impact. And so every conversation turns into what do we do about it? Because it's not a $1 million impact just this year. It's 1 million this year, it's 750 ,000 next year.

Gary (10:31)
That's right. Yeah.

Rebeka J Mazzone (10:34)
You know, it has a multi -year effect. So it's really thinking about, you know, how can you be agile and responsive in all of your sort of forecasting or projecting.

Gary (10:36)
Yep.

Rebeka J Mazzone (10:54)
okay.

Gary (10:57)
So for those in the audience, stay tuned because Rebecca just mentioned ratios. And one of the fascinating aspects of what Rebecca does is this focus on ratios. We'll talk about that in a second. But before we go there, I want to talk about revenue. And Rebecca, I have ranted and raved for a long time about colleges in trouble going to revenue and generate more revenue.

STEM, healthcare, whatever, to solve our problems. And what I share and what I believe to be true is while the idea of generating new revenue is fine, most of these colleges ignore two facts. One is the cost of startup. They've got to pay salaries, they've got to do marketing, they've got to find space, they've got to create content.

And then they have to recognize there's a lead time before they generate any materially significant revenue. And I think I read somewhere, Rebecca, that most new programs rarely come to successful fruition. And you've written, and I'm going quote something that you've written before. And it says, during a transformation, this is a college transformation, the easiest lever to pull for many organizations is to grow revenue. You continue, if you grow, you need more people.

This is true of any business, but especially true in a service business like education, where our people are our product. then, is it realistic, Rebecca, in today's overcrowded, oversaturated higher education market, to really believe that financially struggling colleges can drive materially significant new net revenue from programs and majors?

Rebeka J Mazzone (12:37)
I would say the simple answer is no. I think it's what we desire to do. So it's amazing to me how many institutions I work with that their plan involves growing enrollment. So additional students in the door, additional fundraising, and all of this is happening with a backdrop of a decline in the population, but also a big shift.

Gary (12:56)
Yep. Yep.

Rebeka J Mazzone (13:05)
in consumer demand or consumer expectation about the value of higher education. So I think that growing revenue right now is a really difficult proposition, but I also think that it's not impossible. So I would say turnarounds require a very thoughtful and hard two -prong approach. And I think the first prong is

really examining right sizing. So what are you doing to think about the, you know, the thing we've added new programs over time, but we haven't grown enrollment. So some of our programs should have been some sunset a long time ago. We might not need all of the buildings that we have, all of the athletics. So I think all of those traditional things, but I would also say that there are the change in consumer expectation of education

is something that I think we really need to question because there are a lot of people out there that will say, well, traditional degree programs are not going to go away. And yes, maybe that's true, but what I do think is absolutely going to happen is that there is more of a shift toward knowledge.

what are the skills and knowledge that I need to have my future career? And really asking the question of does that need to be in the form of a degree or does it need to be in the form of a degree as it exists today? And so I think us trying to really look at this from a consumer perspective when

You know, we're just in a world where there is a shrinking population of traditional, you know, 18 to 24 year olds going to college. And, you know, so that population is shrinking. Plus they also have a different demand. So they're saying, well, I don't, I'm not sure if I want to go to have the traditional college experience. So I think it's forcing us to really look differently.

at how we're building our models in order to really think about revenue generation in the future. Because so many of our models, like I think about accounting and the whole curriculum for accounting bachelor's degrees is all focused on CPAs in public accounting who presumably will go into tax or audit. But 80 % of the jobs or also people don't

don't stay or go into those fields in the first place. So should we be focusing more on the skills and competencies that are needed to fill the roles associated with accounting, even if it's not a bachelor's degree? And I think there's so much opportunity to examine this from the consumer space, from the students, from the parents, from the employers, and really

Gary (16:02)
Yeah.

Rebeka J Mazzone (16:15)
digging in deep to what are the skills and competencies and knowledge that they seek in those roles before we even think about does it have to be a degree or what is the degree that we're offering.

Gary (16:30)
Yeah, interesting. And now from my perspective, Rebecca, highlight, and I talked to a lot of higher ed folks, a lot of data folks. I teased that you and I are both data nerds and data entrepreneurs. I like the second one more than the first, but we are who are. And your approach is that it's a ratio.

And we've talked about per FTE, some kind of numerator over denominator that's per FTE. Share with the listeners your approach to using those ratios to help colleges both look at where they have been and look at where they're going.

Rebeka J Mazzone (17:06)
Yeah, so as I shared a few moments ago, I believe that every dollar, so every number that is in the form of a financial statement should be divided by a unit of measure that others understand, easily understand. And so that means they don't have to be exact. And so one of the examples that I gave is, you with the FAFSA debacle, I have a client that

had a 40 student shortfall in enrollment for the fall. And what was really great is that everyone on the president, the president's cabinet all knows that every student brings in 25 ,000 net room and board. So most students are on campus.

So it's easy to really distill it and it's not an exact number, but 25 ,000 is easy to remember, it's a round number. And so they were easily able to say, okay, that's a million dollars this year, what do we need to do to try to offset that million? But then to take that same example one step further, the provost knows that the target,

is a 17 to one faculty student ratio. So when we look at average class sizes and what the average class size needs to be for economic equilibrium, we had reset to that number about a year ago. And so now if we have a drop of 40 students and you have a 17 to one faculty student ratio as a target, it also tells you that you need to start looking at.

to, and I use the term faculty, but it's to FTE instructors, right? So does that mean that we have to look at our adjunct pool? Do we look at our non -tenure faculty? So how and who is, you know, those are things that, you know, that are obviously they're really difficult and they're important, but at least instantly we were able to look at that and say, okay, this is the target for how this impacts

Gary (18:45)
Right, right, right.

Rebeka J Mazzone (19:09)
faculty, but also look at how does this impact our residence halls. So we have some really small residence halls. We have some floors, right? So does this mean that we ultimately try to think about whether we take one of our residence halls offline for this fall semester? So I think having that information, having some of those really critical ratios allows us to make

allows everybody to make more real -time decisions or to have more understanding and input into what the possible decisions might be. know, it just, empowers people and I think it converts, instead of talking about losing money, it converts the dollars into actions that everyone can think about taking almost immediately.

Gary (20:04)
Yeah, and again, the racial piece that you and I've talked about is fascinating. And I we've talked about doing some stuff together on that. And for the listeners, stay tuned. We might have something for you to look at in the coming months that might help you be able to compare yourself and these ratios that Rebecca's talking about to other colleges, both on the public and private side.

So Rebecca, it is August of 2024, and we're about to start that fall term. And this is a question I ask all the guests on the This Week in College Viability podcast. It is the elephant in the room, and that's the FAFSA debacle, and that's the debacle with a capital D. And just from your perspective, you work with a lot of college leaders, a lot of colleges.

Give us from your personal perspective your thoughts on the best case scenario for enrollment this fall and even the worst case scenario.

Rebeka J Mazzone (20:55)
okay. I, hmm, I'm not sure if I could absolutely say best case and worst case, but I will say that I really strongly believe that the way that this will shake out is that we absolutely have lower enrollment in total. So we have fewer students going to college because of FAFSA. But I will also layer on top of that that

think that there is a lot of shift in consumer demand. I think we're seeing a lot of students that are taking that one gap year, which is actually turning into three gap years for some of these students. So we're seeing that happen at the same time. So I do believe that enrollment across the sector is going to be down, but I also find it really interesting right now that there are winners and losers.

So it's been surprising how many institutions I've spoken with where their deposits are up. And I keep saying that I would approach that very cautiously and look at it in the context of my housing. So have students signed up for housing and meal plans because I have heard a lot of talk about double deposits. And in fact, I have one of those children who deposited at two schools because we were moving

Gary (22:10)
Interesting.

Rebeka J Mazzone (22:21)
decision deadlines around. So she deposited with one of her backup schools while we were waiting for aid information from one of her primaries. And so I think that we, think some of those deposits are going to be ghosts in the system. But I do think that overall we're going to be down and we're going to see winners and losers. And I think the schools that, you know, that went up are speaking to

Gary (22:28)
Interesting.

Rebeka J Mazzone (22:51)
a population of students about value proposition that resonates with them and schools that are on the decline are are not you know really helping students to understand the value proposition. So it's going to be it's I think this is the beginning of of a continued interesting time related to the just the change in consumer demand. FAFSA just made

Gary (23:12)
Hahaha

Interesting.

Rebeka J Mazzone (23:17)
worse and I feel like every year we get some anomaly. It's like we you know we had COVID and then we had all this herf money come in as an anomaly and now we have FAFSA. It's like constant anomalies every year.

Gary (23:25)
Yep.

Interesting. Rebecca Mazzone, the founder and CEO of Future Finance has been my guest today. I'm going to, of course, include her connection information or contact information in the show notes. Rebecca, fascinating stuff as always, whether we're recording it or just talking on Zoom or the phone, fascinating stuff that you have. Thanks for being a guest.

Rebeka J Mazzone (23:51)
Well, thank you again for inviting me and thank you again for really making this data accessible to me and to schools because I think really starting to understand, you know, what do your measures look like and how do you really understand how to create a financially sustainable institution is so important right now.

Gary (24:15)
So this is Gary Stocker, of course, with College Viability. And we always appreciate those listeners making time to listen to the content that we provide. And we'll do this again with our regular Monday news and commentary this week in College Viability. And you're all encouraged to listen to that as well. Thanks again. We'll talk soon.