We analyzed financials from 111 Christian colleges and found a ratio every president should know:
Salaries and benefits ÷ (net tuition revenue + auxiliary revenue).
In plain English, how much of the revenue from tuition after institutional aid, housing, meals and other auxiliary operations goes toward paying your people?
The relationship with cash flow was striking.
➖ Below 70%, 37% of schools had negative operating cash flow.
➖ Between 80% and 90%, 56% did.
➖ Above 90%, 79% did.
The tipping point in our analysis was roughly 75%. We call this “The 75% Rule.” Above that line, the odds turned against the institution.
| Staff cost as share of revenue | Schools | Negative cash flow | Median cash margin |
|---|---|---|---|
| Under 60% | 10 | 10% | +7.0% |
| 60–70% | 30 | 37% | +3.8% |
| 70–80% | 33 | 36% | +2.5% |
| 80–90% | 16 | 56% | −2.5% |
| Over 90% | 19 | 79% | −8.4% |
Of course, it’s a warning signal, not a guarantee. Some schools below it still burned cash, and some above it did not, as fundraising and other revenue can hide the burn.
But presidents should pay attention to this rule.
At 75%, three quarters of your student-generated revenue is committed to compensation before you pay the utility bill, repair a roof or cover other operating expenses. Again, gifts and other revenue can help close the gap. The question is how reliably they can do it.
And this ratio can deteriorate even when you freeze hiring.
If enrollment falls, the denominator shrinks. If you increase institutional aid without generating enough additional enrollment, it shrinks again. Your staffing can stay exactly the same while your financial position gets worse.
That is why this conversation has to extend beyond staffing.
Presidents need to ask:
➖ Does our staffing reflect the enrollment we have or the enrollment we keep hoping will return?
➖ Are our enrollment and financial aid decisions producing more net revenue?
➖ Will our growth plans generate enough revenue to cover the people required to deliver them?
You cannot answer those questions by looking at admissions, financial aid and payroll separately. Those decisions work together, and their combined effect shows up in cash.
Start with your number. Then look at its direction.
A good KPI gives you time to change the outcome, not just explain why you missed it.
If you lead a Christian college, ask your CFO to calculate this ratio for the past three years and your current budget. Put it on the next cabinet agenda.
If the trend raises questions your team needs help answering, let’s talk.
At TG Three, we help Christian colleges connect strategy, enrollment and financial decisions so growth strengthens the institution.
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