The differences in cost of starting a microschool or homeschool co-op

I read this very interesting article from Education Next titled “A New Crop of School Models Expands Choice” by Michael Q McShane, director of national research at EdChoice.

In the article he examines the increasing popularity of microschools and hybrid schools. It’s a long article and well researched. It’s worth your time to read it if you are fascinated by alternate education models such as micro schools and hybrid schools.

Definition of a microschool

For the most part micro school are tiny private schools, meeting 5 days a week, fulfilling the compulsory educational requirements of the state. They are typically very small, usually fewer than 100 students. Most are operated as for-profit businesses. Most micro school students are private school students and are not considered homeschool students in their state.

Definition of a hybrid school

Hybrid schools are typically a mix of a microschool and homeschooling. They usually hold classes for homeschooled students one to three days a week and the students are educated at home the remaining days of the week. But some states allow hybrids to operate nearly full time (5 days a week) and still be considered as homeschooled students. Full disclosure: My daughters participated in a homeschool hybrid program that operated two days a week for high school and we were very impressed with the program.

Cost of starting a microschool

The section of Mr McShane’s article that caught my eye, because I am an accountant, is when he outlined the cost of starting a microschool.

Let’s put together a fictional microschool. First, we need a location. In my old neighborhood in Kansas City, rent for a simple storefront will run between $15 and $20 per square foot per year, so a 1,500 square foot space will cost between $22,500 and $30,000. You want a great teacher or guide? The starting salary for Kansas City Public School teachers is $43,100. Public school teachers get tens of thousands more in healthcare and retirement benefits, but even assuming just a 15 percent benefits cost brings the teacher’s compensation to just under $50,000. School operators also need insurance, utilities, furniture, and other incidentals that could easily crack another $1,000 to $1,500 per month.

So, let’s say, with some pretty conservative assumptions, you’re in the range of $85,000 to $100,000 per year in operating costs. Divide that by the student population. If you have 12 students, costs are $7,083 to $8,333 per student per year. At 15 students, it is $5,667 to $6,667. With local Catholic elementary schools running in the $6,000–$7,000 range, the cost of your hypothetical microschool is certainly competitive. But there isn’t much room for upward revision before the model becomes markedly more expensive than its more established neighbors.

Mr McShare does a good job outlining the operating costs, but I think he’s too low at $85,000 to $100,000 per year for 12 students! He also estimates the start up funds needed would be $10,000 to $25,000. That is a lot of money for a micro school owner to raise every year. So some owners turn to businesses that franchise the microschool model.

Is there profit in running a microschool?

Mr McShare does an excellent job of explaining several businesses including venture capitalists that see money to be made in the microschool movement.

Venture capital is investing big in alternative school models. Primer has raised $18.7 million in venture funding, including a Series A round led by Keith Rabois of Founders Fund, known for his work with PayPal, LinkedIn, and Square and his early investments in YouTube, Palantir, Lyft, Airbnb, Eventbrite, and Wish. Prenda, another prominent microschooling network, has raised $45.9 million over eight rounds of venture finance. Sora has raised $23.5 million. KaiPod Learning was selected for the prestigious Y Combinator accelerator.

He concludes, “Clearly, venture capitalists see an opportunity to turn a profit, but it’s not clear where the profits lie.” I think he is correct. It’s tough to make a profit running a microschool.

What about nonprofit homeschool co-ops?

While Mr McShare cannot cover every educational option in his article, he fails to fully address a very popular model that has been around for decades: the nonprofit homeschool cop-op. He does address a “co-op learning environment,” but he doesn’t see them as sustainable beyond the founders.

If, for example, a group of families starts a microschool or a co-op learning environment to educate their children, it could operate for the 5 to 10 years needed for their students to progress through it and then disband. The parents would give up their rental space, and the students would move on to middle school or high school or whatever learning environment came next. Because the school would not enroll a new class of students each year and thus incur an obligation to see those children’s education through, no student would be adversely affected. Especially if the school were designed to operate that way from the outset, no one would suffer.

Perhaps Mr McShane doesn’t know about the 3,000+ homeschool leaders in the I am a Homeschool Group Leader Facebook group that I moderate, the majority who run small nonprofit homeschool organizations. Many of these organizations have been around for decades. They add younger children each year and are sustainable beyond the founders.

But most important of all, these homeschool groups are nonprofit organizations. They are not motivated by profit, but are motivated by parents’ passion to home educate their children. Their leaders are homeschool parents with a serious time investment in making the program work. The teachers are usually volunteer, homeschool parents who cooperate together to offer classes to homeschooled children.

In my 20+ years of advising homeschool group leaders, I have found that homeschool co-ops typically charge only $50-$500 per child per year. Naturally a volunteer homeschool co-op does not offer a full curriculum, most only meet one day a week, they rely on parents remaining to help, and serve the elementary ages best, but the model works and is very affordable!

Obviously, I am a proponent of the nonprofit homeschool co-op model. I wrote a book and devoted 20 years to helping launch homeschool nonprofits. I am not blind to their limitations, but I won’t dismiss them for the new ideas cropping up either.

How can a homeschool co-op be so cheap?

Homeschool co-ops operate as nonprofit organizations and most rely on volunteer labor from the parents (a few hire teachers on a part time basis for one or two classes a week). A for-profit micro school business cannot use volunteer labor per Federal Fair Labor Standard labor laws. That is the main way homeschool co-ops keep costs low: volunteer labor.

Some homeschool co-ops also receive free or greatly reduced rent because they are nonprofit organizations. And faith-based co-ops frequently meet in churches. Most churches wisely do not let for-profit businesses use their facilities to avoid losing property tax exemption, but open their arms to homeschool nonprofits.

An added bonus of a homeschool co-op is the support and sense of community that the co-op offers to homeschooling parents. They are not alone in this difficult task. And the children know that they are not “weird” for being homeschooled or lacking socialization!

So hooray for the volunteer-based homeschool co-op! They exist, sometimes quietly, not asking for venture capital, but being grateful for volunteer parents and donations. The parents are building strong relationships of support as they homeschool their children. It’s a beautiful thing!

May the homeschool nonprofit co-op prosper and spread!

Resources to start and run a nonprofit homeschool co-op

Homeschool Co-ops: How to Start Them, Run Them and Not Burn Out

Money Management in a Homeschool Co-op

The IRS and Your Homeschool Group: setting up as a nonprofit and applying for 501c3 tax exempt status

Recorded Webinars on establishing a nonprofit, applying for 501c3 status with the IRS, board training and more! All geared for the homeschool nonprofit organization.

Carol Topp, CPA

Helping homeschool leaders

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