The Business Behind Test Prep Tutoring Ep 475

Summary Notes


In this podcast, the host outlines a lucrative business model for aspiring entrepreneurs, particularly those skilled in academics or standardized testing, to earn top 1% income levels with minimal startup costs. He emphasizes the strategy of selling the outcomes of tutoring—such as improved test scores and college admissions—rather than time, and advocates for a group tutoring approach which maximizes earning potential. By charging $35 per student for semi-private sessions and teaching multiple groups per day, individuals can earn $1,120 daily. The host shares insights on leveraging free public spaces, like libraries, for sessions, and underscores the importance of referrals and a strong promotional strategy, including offering initial sessions for free to build credibility. The scalability of this model is also discussed, with the potential to expand by hiring other tutors, thus multiplying income while maintaining high profit margins. The host concludes by comparing the financial and time investment of this business model favorably against the traditional path of attending college.

Summary Notes

Business Opportunities for Students

  • Starting a business as a student can lead to significant profits.
  • The potential to earn surpasses the average income of the top 1% in the U.S.
  • Business can be conducted part-time, accommodating a student's schedule.

"The best businesses start for students, where you can earn $1,120 per day in profit, not revenue, meaning you're above the 1% earning in the nation, in the wealthiest nation in the world, while you're still in school."

This quote emphasizes the high earning potential for students who start their own business, highlighting the possibility of surpassing the income of the wealthiest 1% in the nation.

Business as a Game

  • Wealthy individuals often view business as a game.
  • The podcast aims to document and share business lessons.
  • The goal is to help others grow their businesses and potentially partner for greater success.

"The wealthy, these people in the world see business as a game. This podcast, the game, is my attempt at documenting the lessons I've learned on my way to building into a billion dollar portfolio."

The speaker shares their perspective on how the wealthy view business and states the purpose of the podcast, which is to document and share valuable business lessons learned from personal experience.

Test Prep and Tutoring Business Model

  • Traditional one-on-one tutoring is not as profitable as selling the outcome of tutoring.
  • The model proposed allows for part-time work with substantial income.
  • Selling the outcome of tutoring aligns with helping students achieve better test scores and future earnings.

"And the business was test prep and or tutoring. So most people go about test prep, tutoring the wrong way. What they do is they try and get one on one clients who will pay them $40 to $60, maybe $80 per session."

This quote introduces the concept of a test prep and tutoring business and critiques the common approach of one-on-one tutoring, which is less profitable.

Selling Outcomes, Not Time

  • Successful tutoring businesses focus on selling outcomes such as better jobs or test scores.
  • Helping students prepare for standardized tests is particularly valuable.
  • The outcome of tutoring can be directly tied to the student's future income.

"You want to sell the outcome of tutoring, which is to get into either a job that's going to pay more or be able to pass a test of some sort, or ideally the standardized tests, which in my opinion, are the most valuable tests that you can help someone prepare for."

The speaker advises focusing on the outcomes of tutoring rather than the tutoring itself, emphasizing the value of preparing for standardized tests due to their impact on future opportunities.

Semiprivate Tutoring Model

  • Semiprivate tutoring is more profitable than one-on-one.
  • A small group setting allows for personalized attention without inefficiencies.
  • Charging a lower rate per person in a group can lead to higher hourly earnings.

"Number one is that you don't do one on one. You do one to many, but you don't do unlimited because you're probably not good enough to do that yet. But you can do semipivate."

This quote introduces the semiprivate tutoring model as a more profitable alternative to one-on-one tutoring and explains the benefits of starting with a smaller, manageable group size.

Financials of the Tutoring Model

  • Charging $35 per session in a semiprivate setting can lead to $280 per hour.
  • Working four hours a day can yield $1,120 daily.
  • The model allows for flexibility and can be conducted outside of traditional working hours.

"So eight people means you're making $280 an hour. You do four of those hours a day, you're making one $100 a day for 4 hours of work."

This quote breaks down the financial potential of the semiprivate tutoring model, illustrating how charging a group can significantly increase hourly earnings.

Location and Logistics

  • Tutoring can take place in free public spaces like libraries.
  • A tutor needs to attract a manageable number of students to maintain the business model.
  • Sessions can be scheduled to fit the tutor's availability.

"Now, what's cool about this is that in terms of where you do it, you could do it at free libraries."

The speaker suggests using free public spaces for tutoring sessions, which reduces overhead costs and makes the business model more accessible.

Simple Math of Tutoring Business

  • The math behind the business model is straightforward and scalable.
  • Tutors can maintain a full-time job or other activities during the day.
  • The model demonstrates the feasibility of earning a significant income through part-time tutoring.

"If you have eight people times 35, that's 284 hours in a row. You go back to back to back. You don't even move. They come to you."

This quote provides a simple calculation to show the potential earnings from back-to-back tutoring sessions in a semiprivate setting, emphasizing the efficiency and profitability of the model.

Business Model for Test Prep Tutoring

  • Discusses a weekly tutoring structure with a makeup session on the seventh day.
  • Emphasizes the importance of solving problems to improve test scores.
  • Highlights the potential for high earnings with minimal initial capital or overhead.
  • Suggests marketing strategies for acquiring students on college and high school campuses.

"And then the last day, you do as the makeup for those people, but they would still have to pay the same rate, but that way, they don't fall behind."

This quote explains the operational strategy of offering a makeup day for students who may have missed a session, ensuring they stay on track without falling behind in the curriculum.

"So, they did a research study, which is why I wanted to get into this business, was that the test scores that people have on SATs and GMATS is directly proportional to the number of problems they solve before taking the test."

The speaker cites a research study that found a direct correlation between practice and test scores, which inspired their business venture in test prep tutoring.

"So if you are somebody who was pretty good at school, was pretty good at standardized tests, this is a really great opportunity that you could make top 1% earning with no capital, out of pocket, no rental space, no build out, no nothing."

This quote highlights the low barrier to entry for starting a tutoring business and the potential for high earnings for those who are skilled in standardized testing.

Personal Experience and Business Expansion

  • Shares personal experience of improving GMAT scores through extensive practice.
  • Discusses pattern recognition in test questions similar to chess.
  • Advises on scaling the business by hiring other teachers and maintaining high service margins.

"And I did every single problem in all of the books. And that's how I scored above Harvard's GMAT mid score."

The speaker provides personal testimony on the effectiveness of practice by detailing their own rigorous study routine that led to a high GMAT score.

"And if you really want to scale. So this is the 201 level of this is that you can have other people do those things for you, because then you just get really good at getting the students to sign up and say yes."

This quote introduces the concept of scaling the business by delegating teaching to other instructors, focusing on student acquisition and retention.

"And if you really wanted to run really crazy margins, which I prefer to, I like to have my service based margins at 80% or higher, which means that my cost per unit would have to be below 56."

The speaker discusses their preference for high-profit margins in the service industry and how to achieve them by managing costs effectively.

Comparison of Tutoring Models

  • Compares one-on-one tutoring with group sessions.
  • Illustrates the financial advantages of group tutoring over one-on-one.
  • Explains how group tutoring allows for scalability and higher profit margins.

"That's how crazy this is. $240 versus doing one on eight and charging $35 with eight people there, you make 100 for the same 4 hours."

The speaker compares the revenue potential of one-on-one tutoring versus group tutoring to demonstrate the financial benefits of the latter.

"This is when we talk about opportunity vehicles. So this is four and a half times more money per unit of time."

This quote emphasizes the increased earning potential per unit of time when opting for group tutoring sessions over individual ones.

"And because you have this model and not the one on one model, you also can scale this one because you can have enough margin to pay someone else to do it and still have the margins to run the business market, it, sell, grow, et cetera."

The speaker explains how the group tutoring model not only increases income but also allows for business growth and scalability by hiring additional teachers.

Tutoring Business Model and Pricing Strategy

  • Discusses the potential of starting a tutoring business, focusing on the financial aspects and strategy.
  • Highlights the importance of maintaining a high gross margin while setting competitive wages for tutors.
  • Suggests that teachers could be attracted to tutor for a higher hourly rate than their regular job.
  • Emphasizes the potential for tutors to communicate the financial benefits to their peers, creating a word-of-mouth effect.
  • Points out the disparity between earning potential in tutoring versus traditional teaching roles.
  • Advocates for a package pricing model to avoid transactional one-off sessions.
  • Suggests offering discounts for prepaid packages to incentivize commitment and upfront payment.

"There's no scale in the game because if you needed to pay somebody else, the most you would pay if you wanted to keep an 80% gross margin would be $12." "Tutoring for $50 an hour, $200. They're probably going to make more tutoring at your thing than they do from their main job." "So I would prefer to get people to prepay because I don't like transactional one off things because it ties it too close to the time I'm spending."

These quotes outline the financial framework of a tutoring business, emphasizing the importance of margins, competitive tutor pay, and the preference for prepaid package pricing to dissociate from hourly rates.

Sales and Marketing Strategy

  • Discusses strategies for selling tutoring services, including goal-oriented selling and leveraging statistical data to set expectations.
  • Uses a specific example of improving test scores to illustrate how to package and price the tutoring service.
  • Stresses the importance of defining clear goals and outcomes for clients to understand the value proposition.
  • Suggests offering discounts for prepaid services as an incentive.

"I would sell the goal, which is how much do you want to increase your test score?" "So I could probably estimate, okay, in order for us to increase your child's or student or your own score, every thousand problems statistically gives you an extra 20 points." "And if they want to prepay, I would knock $5 off a session and that's it."

These quotes highlight the importance of goal-oriented selling and how to use statistical data to inform pricing strategies, as well as incentives for prepayment.

Networking and Direct Marketing

  • Emphasizes the importance of tapping into personal networks to market tutoring services.
  • Suggests using direct messaging as a low-barrier method to reach potential clients.
  • Recommends asking for referrals rather than direct solicitation to appear less sales-driven.
  • Highlights the effectiveness of direct marketing strategies including handing out flyers and utilizing social media connections.

"So if you're a kid who's really good at school or has pretty good test scores, the first thing to do is hit up your network, right?" "But also dming people that are in your high school, because many of them probably follow you or you follow them, you know who each other are." "So I would probably use a DM strategy because it's super easy."

These quotes discuss the importance of leveraging personal networks and direct messaging strategies to effectively market tutoring services without appearing overly sales-focused.

Promotion and Initial Client Acquisition

  • Suggests providing initial sessions for free to attract clients and demonstrate value.
  • Proposes a unique incentive where clients would be billed for not doing their homework, ensuring commitment.
  • Recommends asking for referrals, testimonials, or reviews after providing free sessions to build credibility and attract more clients.

"Get your first five or first ten for free." "And if you want to, because this is something that they have to do work too. You say you have to do your homework and every day you don't do your homework, I will bill you."

These quotes recommend strategies for initial client acquisition and promotion, including offering free sessions and creating incentives for clients to engage with the tutoring process.

Initial Client Acquisition Strategy

  • The strategy involves offering services for free to the first ten clients.
  • Free work is exchanged for feedback, reviews or testimonials, and referrals.
  • The offer is positioned as an opportunity for clients to receive high-quality results, creating an incentive for them to participate.
  • The speaker emphasizes the importance of delivering amazing results to build the business.

going to ask for feedback on things that could be better. You're going to ask them for a review or testimonial, and you're going to ask them for a referral.

The quote outlines the three key things the business owner should seek from clients in exchange for free services: feedback, reviews or testimonials, and referrals. This exchange is crucial for building credibility and attracting future paying clients.

Leveraging Results and Testimonials

  • Once initial results are achieved, they should be shared to attract more clients.
  • Testimonials should detail the client's initial state, the methodology applied, the results achieved, and the benefits experienced.
  • These testimonials are then used in marketing materials to entice future clients.

You post the testimonials, which is, here's the score of what it was. This is the method we did. Here's the result afterwards. This is the benefit they experienced.

The quote explains how to effectively use testimonials in marketing. It emphasizes the importance of showing potential clients the transformation achieved through the service, which serves as social proof and encourages them to sign up.

Pricing and Promotion Tactics

  • After the first ten clients, the price for services can be increased.
  • Promotions such as discounts or additional sessions can be offered to incentivize early sign-ups.
  • The speaker suggests using direct messaging to secure the first ten clients and then using social media posts to attract additional ones.
  • The approach includes a mix of content sharing and direct call-to-actions to drive engagement and sales.

My next ten I'm doing for half off, right? Which again, only you know what your price is, so you can double your price and cut it in half.

This quote discusses a pricing strategy that creates a sense of urgency and value. It suggests offering a discount to the next set of clients, which can be a strategic move after initially offering services for free.

Outreach and Expansion Methods

  • The speaker advises reaching out beyond one's immediate network to unknown potential clients and considering running ads.
  • Partnering with relevant groups, such as sports teams, can provide access to a concentrated group of potential clients.
  • Word of mouth is emphasized as a powerful tool for growth if the service provided is of high quality.

You can go to the teams, it spreads really quickly. And then all the lacrosse dudes or all the hockey dudes could come at the same time after practice.

The quote recommends targeting specific groups where the service can be highly relevant and where word of mouth can spread quickly, leveraging the natural networks and schedules of those groups.

Scaling the Business

  • The speaker outlines a scaling strategy involving hiring additional teachers to deliver the service.
  • By increasing the number of employees and maintaining a high hourly rate, the business can significantly increase its earnings.
  • The speaker provides a calculation to demonstrate how this scaling can lead to a million-dollar annual income.
  • The importance of comparing the potential earnings of the business against the cost and opportunity loss of attending college is highlighted.

You're making 4400 a day. And you paid each of them $200 each. So $800 off 4400. So you're looking at 3600 a day. Does anybody know what it takes to make a million dollars a year in income? Survey says 3300 a day.

This quote details the financials of scaling the business model by hiring more teachers and provides a clear example of how a business can reach a high income level by thinking through the math and scaling operations effectively.

What others are sharing

Go To Library

Want to Deciphr in private?
- It's completely free

Deciphr Now
Footer background
Crossed lines icon
Crossed lines icon
Crossed lines icon
Crossed lines icon
Crossed lines icon
Crossed lines icon
Crossed lines icon

© 2024 Deciphr

Terms and ConditionsPrivacy Policy