US Educational Services Sector
Industry Profile Report
Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters
Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.
Call Preparation Call Prep Questions, Industry Terms, and Weblinks.
Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.
Industry Profile Excerpts
Industry Overview
The 111,543 educational services establishments in the US provide instruction and training across a wide variety of subjects. The sector consists of formal educational services providers (elementary and secondary schools, colleges, universities) and specialized education services providers (technical and trade schools, tutoring services).
Demographic Challenges
The decreasing birth rate and smaller families have led to a gradual decrease in the number of children in the US, a factor that affects school enrollment and revenue from government sources.
Dependence on Government Funding
Public K-12 schools and universities are highly dependent on public funding.
Industry size & Structure
The educational services sector is comprised of 111,543 establishments that employ 3.8 million workers and generate $95 billion in annual revenue, according to government sources.
- The educational services sector represents 1% of the nation's Gross Domestic Product (GDP) and employs 2.9% of the country's workers.
- The sector is fragmented with the 20 largest firms representing 15.2% of revenue.
- In addition to employer establishments, the educational services sector has 895,000 owner-operated establishments with no employees. The owners of nonemployer firms typically perform the work and may outsource support functions like marketing and accounting.
- The education and health services sectors shed 167,000 establishments in 2021, which equals about 8.2% of existing establishments, according to the Bureau of Labor Statistics. However, the two sectors added about 250,000 new establishments, which is equivalent to 12.3% of existing establishments. As a result, the sectors had a growth rate of 4.1%.
- The education services sector is forecast to grow its employment base by 5.8% overall in 2021-2031, which is comparable to the national average of 5.3% for all jobs, according to the Bureau of Labor Statistics.
Industry Forecast
US Educational Services Sector Industry Growth
Recent Developments
Aug 18, 2024 - PE, VC Investment Decreases
- Private equity and venture capital investment in the global education services sector decreased to $4.60 billion in 2023, its lowest annual value in three years, according to S&P Global Market intelligence data. The number of deals decreased by 40% year over year to 190 from 317 in 2022. Deal count for 2023 was the lowest since at least 2019.
- Costs for special education services have skyrocketed in many places as state and federal funding for those services has stayed flat or decreased, according to Education Week. Some states lack the resources and infrastructure to support people with disabilities as they transition out of the K-12 school system. The maximum eligibility age for special education services varies across states. Courts have recently compelled schools in some states to offer services to students for longer time periods. Since 2021, at least nine states have shifted the maximum age to 22: Connecticut, Hawaii, Illinois, Maine, Minnesota, Pennsylvania, New York, Rhode Island, and Washington. Most of those states now require services through the student’s 22nd birthday or the day before, though Illinois requires schools to offer services through the end of the school year during which the student turns 22.
- Elite higher education institutions — selective schools that draw from national applicant pools — will still be able to fill classes with qualified students when an expected multiyear decline in the number of traditional-age college students begins, according to Carleton College professor Nathan Grawe, author of Demographics and the Demand for Higher Education. Less prestigious four-year colleges and two-year colleges, which tend to draw students living locally, will suffer most from the so-called "demographic cliff". The consensus view is that America will hit a peak of around 3.5 million high-school graduates sometime near 2025, according to The Chronicle of Higher Education. The college-going population is then expected to shrink across the following five to 10 years by as many as 15 percentage points. Decreasing enrollment is problematic because most schools depend heavily on tuition, so the finances of a college that has fewer students than it is capable of serving are negatively impacted. Ernst and Young’s consulting arm EY Parthenon estimated in 2020 that excess capacity at US postsecondary schools is costing schools between $27 billion and $51 billion annually. Schools often raise tuition or decrease offerings to cover the deficit. Schools that are financially unstable are more likely to shut down.
- Educational services sector employment continued rebounding during 2023 and exceeded pre-pandemic levels in mid-2024, according to the US Bureau of Labor Statistics. Educational services sector sales are forecast to increase at a 4.12% compounded annual rate from 2024 to 2028, comparable to the growth of the overall economy, according to Inforum and the Interindustry Economic Research Fund, Inc.
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