Figuring How Much Revenue You Are Losing Due to Attrition

Following a recent workshop presentation on customer service and retention, I was asked by one of the attendees if I would supply the way I figure ROI from retention and customer service. She wanted to compute how much money customer service issues were costing the university so she could  show literally that poor service costs money. She was not the only person who has asked for the formulas I use in my work so I decided to post this one for everyone’s use.

The following is about Customer Service Factor 1 (CSF1) The Value of Retention (or the Losses from Attrition). CSF1 helps a college figure out how much revenue/money it is losing from its actual attrition.

The formula is expressed as

CSF1 = [(P X A= SL) X T]

In the formula, P represents the total school population; not just the starting fall freshman number. Most schools use the fall incoming freshmen numbers and that is an error. The assumption is that attrition occurs most in the first six weeks of the freshman year. That may be close to correct but the reality is that students are leaving colleges and universities in any one of their six plus years of a four-year degree and in the four plus years of a two-year degree. 

Students leave your school throughout their experience at the school. In fact, some schools are beginning to realize this and worry about the Sophomore Bubble. But the really need to worry about the super soph sluff, the rising junior jilt, the junior jump, super junior split, the fourth year flee and so on. Colleges need to be concerned with every student every day of their attendance for it could be his last.

So we look at the total population.

A equals attrition. Again not just from freshman but an annualized attrition rate. And this rate is to include ALL students who leave for any reason. It does not matter if the student says he or she will be back. They are not back in the population and bringing in revenue until they actually do return. If they pay a “place holding fee”, that does not count them as an student until they are actually back in classes.

If your school is like most everyone I work with you likely do not have a clear fix on an annualized attrition rate. Many schools have never figured it A simple way to figure annualized attrition is to look at graduation rates and subtract them from 100. This will show an attrition rate. 100% minus graduation rate of 62% equals a 38% attrition rate. If you want you can average it out by taking an average of five years of graduation rates to subtract from 100%.

SL stands for students lost annually from total population and revenue production. And T equals tuition at the school.

So here is what showed up when we analyzed CSF1 for a particular college which for our purposes we will call Mammon University. You may know it. Its motto is Omnes Por Pecunia. Anything for a Buck. More on Mammon U later.

Its total population was 500 students.

Annualized attrition was at 39.6%

So SL (students lost annually) was 198.

Times an average tuition of $13,000. 

The school uses a differentiated tuition scale per program.

So, the formula becomes:

[(500 x 39.6% = 198) x $13,000] =

a revenue loss of (sound of a trumpet flourish but on a kazoo since Mammon U cannot afford a real trumpet since it has lost) ($2,574,000)!!!!

To carry this forward a bit into a more positive note, we can plug in other numbers and see how an increase in retention could add to the bottom line and thus the ability to pay for full time faculty, staff, their benefits, increases for adjuncts, instructional equipment, tutors, research release, new curricula and programs, maintenance, …. All those pesky costs that make a college or university better.

If attrition dropped by 5% for this school and we substitute 5% increased retention for attrition percentage in the formula.

CSF1 = [(500 x 5% = 25) x 13,000] =

$325,000 more revenue.

Any school, college or university that doesn't want at least another $325,000 in the budget?

Plug your school’s numbers in and see how increasing retention affects your budget and instructional strength.

If you are not happy with your retention numbers and the large revenue loss from attrition, call us today and we will help you increase your success. NRaisman & Associates, 413.219.6939 or email by clickinghere.