Saving a Christian College

Weeks after abandoning traditional academic program to focus on adults, Crichton becomes latest small nonprofit institution to shift to for-profit model.
February 5, 2009

This may be about to become a familiar story: a small, tuition-dependent private college has agreed to become a for-profit enterprise.

Two weeks after Memphis-based Crichton College said it would eliminate its traditional daytime classes to focus on its evening college for adult students, the evangelical Christian institution's Board of Directors announced that it had entered into a "strategic alliance" with a California-based investor who stepped in to rescue a failing business college in Cleveland last year. The investor, Michael K. Clifford, has been involved in several other such transformations in the past, including those at Grand Canyon University, another formerly struggling college with a spiritual mission.

Takeovers of small private colleges have occurred irregularly but in slowly growing numbers in recent years, and with the country's economic situation in decline, predictions of major troubles for small, underendowed and tuition-dependent colleges may accelerate that trend. Crichton's situation offers a case study of one such data point:

For years, Crichton had depended far more than is healthy on fund raising to make its budget work. When the college diverged from its longstanding emphasis on adult students by expanding its enrollment of traditional-age undergraduates earlier this decade -- in large part through growth in its athletics programs -- it extensively discounted what it charged students for tuition. That decision expanded the college's revenue gap and required Crichton to regularly lean on funds from a small cadre of donors for up to a quarter of its annual $12 million budget.

Last fall, a consultant brought in by the college's Board of Directors rigorously examined its financial situation, and the picture that emerged was bleak: a $4 million budget shortfall for the 2008-9 fiscal year, with a fund raising goal of $3.3 million to help fill it.

Last October, the board considered a wide range of "strategic alternatives," from partnerships with colleges of various types to shutting the doors, said Sam Garrett, a vice president who was hired in 2008 to try to turn the college around. The board agreed to cut $1 million out of the budget through staff reductions and decided to wait until January to see how much money the college could raise.

Most of its fund raising dollars tend to come in by December, given donors' end-of-year tax considerations, but by the end of 2008 Crichton had raised just $300,000 of the $3.3 million in charitable contributions it had budgeted for, said Garrett. Several multiyear commitments made by a "number of very generous donors" were expiring, and when they chose not to renew, the board realized that the numbers were not going to work.

By the board's January meeting, Garrett said, its members "decided we needed to partner up" to survive.

The college's consultants had had discussions with "several local and regional colleges about mergers," as well as several for-profit investors, Garrett said. Many of them, he said, "would love to come in and take our adult population that already has a market in Memphis," but "we were looking for somebody willing to continue the vision and the mission and the legacy of Crichton, as well as to help us transition into being sustainable." The board settled on Clifford, and hammered out a deal in the last several weeks; the terms were not disclosed.

Clifford said he was attracted to Crichton by its emphasis on adult students and the "thought of focusing on preparing mental health professionals from a Judeo-Christian perspective." "I love the mission and the curriculum, and we just need to put money, management and marketing to work."

He said that assuming the deal can earn the approval of federal and state regulators and the Southern Association of Colleges and Schools, Crichton's regional accrediting agency, he expected to pour $3 million to $5 million into the institution, expanding its ground-based operation but also expanding its online offerings.

"This is not going to be the University of Phoenix, we're not going to have hundreds of thousands of students," Clifford said. "But while there are a lot of places for 17-23-year olds to go to school in Memphis, there's a big demand there for Christian mental health professionals."

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