Failure is when you don’t try

(By Julius) 16 August 2012

Just this morning as the winter cold ebbed and spring glanced my way, I pondered the most traumatic business week of my life, 21 months ago. It was the week I decided to shut Julius Events College, and it happened in November 2010.

What cascaded from that has shaped me. Now I am more risk averse and have lost some of my imaginary invincibility.

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Mid 2009 the college faced its five yearly accreditation audit and that process was, in my view, botched by the regulator. It dragged into 2010 and we took the regulator (VETAB) to the Administrative Decisions Tribunal in NSW, to force resolution of a few sanctions they had applied. In essence they denied us several new courses we needed to add, for reasons we believed were nebulous. But they had re-registered the college until 2014, so it was business as usual.

Except private colleges are very long term businesses that rely on annual intakes of students. Every September to November our course inquiry tempo would be monitored, open days run, and last minute school career talks held. We sweated the numbers.

From 2005 until 2009, we built our full time numbers from 13 in 2005 to 50 in 2009. But 2010 slumped back to 32. Why was this? One reason was competition who did not require up front payment from students, because they had Fee Help. The other possible reason was that in the second half of 2009 we were flat out satisfying our regulator at audit, and trying to shape our government application for VET Fee Help, which we could not supply to our students. Fee Help is where the government pays the tuition fees (we charged $14,000 for one full time year Diploma) and claws the money back from the students future taxed earnings.

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Most registered training organisations (RTO’s, or colleges) that delivered Diploma courses full time had achieved Fee Help status, we faced two barriers. The first one took several years to overcome.

UNIVERSITY ARTICULATION

It meant our Diploma student had a pathway to further study, and we found this at Charles Sturt Uni Wagga where Pat Sproule, brilliant guy and head of TV studies, went out of his way to help us align our technical production Diploma in such a way that students could do electives in Semester Two that satisfied all his year one requirements. Our class of 2010 could, and some did, graduate to enter year 2 at Charles Sturt. A great outcome, and that was the first half of our Fee Help battle won. A big stuff-you to all the other universities that ignored our requests for discussion – and after several years of knock backs, you do get frustrated with taxpayer funded bureaucrats.

The second half of our Fee Help application relied on the college asset-to-debt ratios and profitability – which was a problem since standing alone, the college never made a cent. CX Magazine shored it up, and we ran the two firms in a co-mingled way, since there was one owner, and one director, and that was me.

Our accountant diligently and lawfully reconstructed our balance sheet and shifted things so that the college presented properly. We were ready to apply for Fee Help towards the end of 2010.

FAIL POINT

In 2009 at the height of the GFC I bought a house with my wife, and satisfied the bank my business was viable. Right up until the first week of November 2010 it was, but then three trigger points were set off and by my estimation, we would be insolvent very quickly.

How can this happen?

Firstly we had achieved and relied on a government funded part time course offering that started late in 2009, under the Productivity Placement Program – PPP for short. It was wheeled out as part of the GFC stimulus package, and it provided payment of $1,500 for each student commencement, then progress payments through their course.

PPP was new, no one knew how it would work. The sting was that we were accredited for working people only, not unemployed. The definition of a working person, for the PPP, was that they had worked one hour in the week the enrolled. Can you believe that? They also had to pay us the equivalent of a TAFE fee, which ranged from $50 if they were Aboriginal through to $1,100 for someone without concession claims.

We discovered our PPP students, attending two nights a week, were very different to our young school graduates studying full time in the day. The PPP cohort were from all walks of life, and we didn’t screen them selectively like the full timers, where we would try to weed out kids with rock star dreams and DJs whose mum or dad pushed them into our course. The night guys ranged from illiterate to brilliant, 20 years old to 70. And they dropped out in large numbers.

We started the first course with 20 people, and one term later had 12.

Through first half 2010 we started two more classes, and were managing reasonably. PPP had papered over the slump in full time student numbers.

In October 2010 the government awarded us an extra 41 places, to fill and claim before end of 2010. We set about recruiting again, running adverts in local newspapers. It worked for us three times previously across almost a year, but now we were struggling because there were a lot of private colleges offering all kinds of night courses – and we found out some of them were not actually charging the required TAFE equivalent fees. They were also not framing their advertising in the required format. We baulked at this, and continued to advertise and recruit lawfully. Our 41 places resulted in just 12 people starting. The PPP bubble had burst late in October 2010.

Forward enrolmentrs for 2011 were bad, just 19 kids. We had $72,000 in pre paid fees as well, a number I always carefully monitored because I knew if we failed to run the course I personally had to refund the money. I could have hid behind the shield of the Proprietary Limited company, and been legally insulated against claims, but personally I could never do this. The money advanced to us was from parents, paying for their kids education. To put that money at risk was never going to happen.

So we entered November with new knowns instead of unknown knowns. All that remained was one Open Day, a last roll of the dice, on the first Saturday of November. Usually these events garnered between 3 and 6 enrolments from 40 or 50 people attending. This one had 25 people, no one enrolled.

SCHOOLS AND CERTIFICATE THREE IN ENTERTAINMENT

When we started the college we had a very healthy short course, Certificate Three in Live Production, Theatre and Events. You could do a week of Lighting Basics, then Sound Basics, come back later and do Vision Basics, then finish off with STAGE OH&S and some core unit assessments.

In 2008 the NSW Board of Education allowed high schools to deliver the Vocational Education and Training (VET) course, Certificate Three in Live Production, Theatre and Events.

This killed our short course profitability. We went from a peak of 22 students in two lighting classes, down to struggling to start a class with 4 students in 2010.

No one has ever explained to me just why the schools went from Certificate II to Certificate III. Just this week my step son Jack (year 10) told me his two VET choices at Kurringai High School are Cert TWO in Hospitality, and Cert THREE in Entertainment. He chose Hospitality.

My ranting and raving about the sheer impossibility for a school leaver with a Cert III getting work has fallen on death ears, so I’ll now stop obsessing about this ridiculous and heart breaking, misleading and usually poorly delivered course dished up by well intentioned but industry ignorant school teachers. Who are usually from the music or drama dept.

One more thing, before I never again mention this: if you already have a Certificate III then you are NOT eligible for a government funded traineeship. Almost all career advisors and VET teachers I have spoken to do not know this. So the best and brightest kids miss out on a job as a trainee. Absolutely ridiculous, and another reason to revert to the Certificate TWO in schools. But no one cares.

THE END

I held a directors meeting with myself, and ordered a solvency test from a lawyer who specialises in corporate law. He agreed with me: the college would fail midway through 2011, before the end of Semester One if we continued on the trajectory we now knew. He advised me to shut down and wind up.

Which is what I did, that fateful November. We finished the end of year exams and assessments for the full time students, and got all our PPP students to the end of the current Unit of Competency. Then we told them, and of course the ongoing PPP classes were variously upset. They received a statement of attainment for the Units they had achieved to date. Some of them went to Nirimba TAFE and picked up where they left off. Life went on.

A few full time students parents were very upset their kids could not return in 2011 to redo Units they had failed, but what could I do about that?

I had just enough liquidity to refund every cent of the course fees paid in advance. I sat down with a cheque book and wrote away my last cash. I was left wearing a mountain of personal debt, but I am proud that all staff were paid out, including super. I still owe Greg Kean at Lots of Watts a small fortune in college building rent, so I expect one day he will haul me in to roll cables or drive the truck to work it all off.

These days I am rebuilding my decimated fortunes, one month at a time.

Thankfully I had CX to fall back on, and it feels great to be doing the job properly instead of delegating to others which is how CX was run for the great college decade of 2001 – 2010.

One other thing – in August 2010 we hosted a 20th birthday party for CX and a couple of hundred of you celebrated with us. It cost some serious $, as any good party should. I was asked about this in the context of the college failure just a few months later – as in, why did I spend the money?

In August 2010 I honestly thought we would be running a college in 2011, and believed the PPP and the Fee Help would kick in to make the business profitable. Plus CX itself was not struggling – the party was confirmation we planned to be around for another 20 years!

Thanks for reading, it helps to get this off my chest.

PS: I have the results for all students who attended our college, and can confirm or re-issue qualifications. I plan to hold these until 2030, provided I live that long!