Despite some circumstantial and minor resurgences in certain regions of the country (and also in other countries), it is already almost certain that the pandemic—as we have experienced it over the past two years—is over. The high vaccination rate that Brazil has achieved, as well as the widespread coverage of the vaccination program, have provided us with significant additional protection against new variants and new waves. Brazil has likely learned to live with the virus under normal conditions—and this coexistence is likely to continue for a long time to come, if not forever.

Schools have gone through several phases throughout the pandemic, each of which required a different approach. After so many ups and downs, now is the time to take a structural look at the situation and assess: What has changed? How should the recognition of these changes alter each school’s strategic approach?

The market has undergone significant changes when we compare the current situation to that of March 2020. We have listed the most important changes below.

• Many early childhood education schools have closed. More importantly, many have seen their finances deteriorate to such an extent that they will eventually close as a result. This news is of particular interest to schools that offer more than just early childhood education, as demand for them is expected to increase. This effect has not yet been felt because not all families have returned to school with their young children. When that happens—and we believe it will be soon—schools are likely to feel the impact of the closures of those that could not withstand the pandemic. From a strategic standpoint, schools with nearby competitors that offer only early childhood education and charge similar tuition fees can now approach them to propose a partnership aimed at acquiring their student base.
• The volume of school purchase and sale transactions has increased. This was a trend that had already been taking hold in the years leading up to the pandemic. This represents both a risk and an opportunity for schools. It is a risk due to the entry of competitors with greater capital and more professional operations. It is an opportunity because, at any moment, a group capable of paying the company’s true value may express interest in acquiring its shares. But take note: the intensity of this trend is unlikely to even come close to what previously occurred in higher education. There are fundamental differences between K-12 and higher education, and these differences tend to make aggressive consolidation in K-12 difficult. Schools will continue to be sold, but there will still be significant room for family-owned businesses with a clear competitive edge. To succeed, however, these family-owned businesses will also need to professionalize their management.
• The scholarships and discounts offered have increased significantly. The average percentage rose by as much as 6 percentage points before beginning to decline—but that decline, so far, has been very slow. Schools have recovered only 2 of those points. There is still a vast amount of ground to be made up—which can only be achieved through extensive negotiations with students’ parents. Please note: the initiative to reopen these negotiations should come from the school, not the parents. It is high time for schools to take a very proactive approach in this regard.
• Revenue from after-school activities is lower than before. There are two reasons for this: a) fewer students in Early Childhood Education, a program that typically attracts very high enrollment; b) changes in family structures, meaning that after-school programs are, for now, no longer appealing to them. In the first few months of the 2022 school year, these activities have been recovering, although they are still far from where they were before the pandemic. The two factors highlighted above are likely to lose momentum as families’ lives return to normal. It is now up to schools to promote after-school activities to their own students more than ever before. There is latent demand waiting to be tapped.
• Debt has increased. Many schools used this strategy as a way to protect their cash flow during the pandemic—a perfectly sound strategy, by the way. Now is the time to use current profits to start paying off that debt. Many schools, which have already stabilized their cash flow, could even pay off some or all of the loans they took out in a lump sum. A special note is in order here: a large portion of these loans was taken out when the Selic rate was 2% per year. Now it has surpassed 11%. So, in these cases, it’s not worth withdrawing funds from investments to pay off loans. The return on these investments is, in many cases, higher than the discount offered for early repayment.
• The number of early childhood education students has decreased. They are gradually returning, but there are still many spots to be filled before demand returns to pre-pandemic levels. There are, therefore, many students to compete for. Now is the time for schools to more aggressively promote their strengths and unique features in this program. Many people waited until August to enroll their young children. The reward, therefore, is significant and will go to those who best communicate their value to the market.