Build the course yourself or license one?
Building keeps the upside and carries the whole downside; licensing sells the upside and removes the risk. The tree prices both against an enrollment nobody can promise, and hands back the build budget above which building stops being worth it.
Words on this sheet
- Cohort: One group who start together and are counted together: an intake of students, a class year, or the customers who joined in the same month.
School Intermediate Decision Tree Pro engine
After you install, this is the model to open.
Is the New Course Worth Building?
- In your spreadsheet, click the Sortia icon in the strip of icons down the right-hand edge. No strip? Click the arrow at the bottom-right to open it. You can also use Extensions, then Sortia, then Open Sortia.
- Click Start from a template and put that name in the search box.
- Pick the card with that name and click Load this template. It arrives on a new tab with real numbers already in it.
This one runs on a Pro engine, and every free install includes five full-quality runs on your own numbers, shared across all five Pro engines rather than five for each. After that, Pro is $199/year.
The answer
- License it
- $74,450 expected value a year, the best branch
- Build it in house
- $65,200 expected value, $9,250 behind
- Leave the slot empty
- $0 the branch you are on today
- If only one cohort fills
- -$74K vs +$10K build loses money, license still clears
Two ways to fill an empty slot. Build the course for $140,000 and keep everything it earns, or license one for a $20,000 set-up fee and 38% of the fee income, which takes a cohort from about $34,000 of contribution down to about $15,700. Both face the same uncertainty: three cohorts a year fill, two fill, or one half-full cohort a year. Open the Decision Tree tool and click Run.
Licensing comes back at an expected $74,450 and building at $65,200, so licensing wins by about $9,250 over three years. That is not what anybody in the room expected, and the risk profile says why. Building earns $166,000 if the course fills and loses $74,000 if it does not, and it does not fill in 25 of every 100 runs. Licensing earns $121,000 at the top and still makes $10,000 at the bottom.
The report puts the standard deviation of the winning policy at 42; work the build branch the same way and it is 92, more than twice as wide. The royalty is not a cost, it is a price for somebody else carrying the build risk, and on these numbers it is priced about right. Now the number that turns this from an opinion into a decision, because the build cost is the one thing the department actually controls.
Building is worth $205,200 of gross contribution before the build cost comes off, so the two options are exactly level when building costs $130,750. Under that, build. Over it, license. Go back to the production estimate with that figure in hand: if the video can be recorded in a week rather than a month, or the assessment can be reused from an existing module, the decision flips, and now you know precisely how much has to come out.
Notice too that leaving the slot empty is on the tree and is worth zero, so both live options beat doing nothing and this is a choice between two goods rather than a rescue. What the tree does not price is what you own at the end. A course you built is an asset you can revise, translate, sell to another institution or teach for years; a license stops the day the agreement does.
That is real value and it is not in these ten nodes, so treat the $9,250 as the price of the option rather than as the whole answer. To make it yours, put your own contribution per cohort on the three build outcomes, get the royalty rate from an actual licensing quote, and set the three enrollment probabilities from how your last two new courses really recruited.
The model
It arrives on a tab called Template: Is the New Course Worth Building, carrying these columns:
- ID
- Parent
- Type
- Label
- Probability
- Value ($k)
Once it is in your sheet
- The model arrives with real numbers in it and runs as it stands, so you can press the button first and understand it second.
- Change the numbers to yours. The sheet marks which cells are inputs and which hold formulas, and most labels carry a note explaining the row.
- Press the run button at the bottom of the panel. It is labeled for the tool you are in, and the result lands on its own tab, with a written reading of it beside the figures.
Never used Google Sheets? Start here goes the whole way, in seven steps, and assumes nothing.
Next question
- Does a small cohort need fewer replies?How Many Responses for a Course Survey?
- How often does the cohort miss its budget?What If the Cohort Does Not Fill?
- Two tasks both have slack. Can you spend it twice?When Will the Course Be Ready?
- What are the odds you land an A?What Grade Will You Get?
- Exactly what do you need on the final?What Do You Need on the Final?
- Do the decision rules agree on what to build?Which Option Wins, and at What Odds?
Every model like this one, and the method behind them: Decision trees.