the westwood review - lab to market class

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Page 2: The Westwood Review - Lab to Market Class

Value Proposition“The Westwood Review provides high school students with more focused tutoring guaranteed to get them into at least one major university; it does this by focusing primarily on subjects designated by University of California, as necessary to get into at least one campus.”

Eligibility in the Local Context• UC-calculated GPA of 3.0 or higher • Complete 11 UC-approved “a-g” courses• Rank in top 4 percent of the expected graduating class

Page 3: The Westwood Review - Lab to Market Class

No Child Left Behind Act of 2001• Creates a system for academic accountability• Responsibility on the states (California uses API

system)• Base API (800 in California) and Growth API (usually 5

API points)• Scores based on STAR and CAHSEE• Only 36% meet Base API; only 53% meet Growth API• 384 schools identified for improvement• Some of poorest performers are in the targeted region

(Coachella Valley Unified School District)

Page 4: The Westwood Review - Lab to Market Class

• Company Website is being developed

• Research continues on markets

• In process of developing survey to gauge consumer preferences

Page 5: The Westwood Review - Lab to Market Class

• Parents want children to succeed academically– Dissatisfaction with public schools– Dependence on private tutoring– Increased competition for college and jobs

• They will pay because of the long-term benefit– $30-$70 per session (in-home); $20-$80 (in-class)– Benefit of self-sufficiency > Cost of tutoring– High quality service increases prospect of attending

college, becoming self-sufficient– Willing to pay higher rate for higher quality– The Westwood Review has a concrete goal

Page 6: The Westwood Review - Lab to Market Class

• In-home tutoring for subjects according to “a-g” requirement of the University of California

• In-class tutoring for general reading/writing/science courses• These courses usually are those in the “a-g” requirement

anyway• Match competitor guarantees to ensure quality• Big company with small company feel (strong tutor-student

bond)• Advanced intranet and Internet site, for communication with

(and between) tutors and with customers

Page 7: The Westwood Review - Lab to Market Class

• Approximately $4 billion market in total• Fragmented market (test prep, subjects, in-home, in-class)• Market Size

– Overall Market Size: 5140 to 9388 students– Southern California Market: 2570 to 4700 students– In-Class (NCLB) Market Size: 79,000 students

• San Diego Unified: 10,000 students (83% < Base API)• Los Angeles Unified: 55,000 students (83% < Base API)• Long Beach Unified: 7000 students • Santa Ana Unified: 4500 students (52% < Base API)• Riverside Unified: 3400 students (2% < Base API)

• Only 20% of high schools in these counties meet Growth API (80% face penalties, which includes mandatory tutoring)

Page 8: The Westwood Review - Lab to Market Class

Fall applicants Fall admits Admit rateTotal 87,631 71,271 81.3

2.79 and Below 3,081 362 11.7

2.80 - 2.99 2,944 981 33.3

3.00 - 3.19 6,444 4,636 71.9

3.20 - 3.39 8,672 7,065 81.5

3.40 - 3.59 11,485 9,889 86.1

3.60 - 3.79 12,993 11,455 88.2

Fall applicants, fall admits, fall enrollees, admit rate and fall applicant yield rate: first-time freshmen, by high school GPA, universitywide and by campus: Fall 2007

Size of market (those between 2.8 and 3.2 GPA) is 9,388 students

Only 53% of ELC applicants were accepted to UC Berkeley or UCLA

42% of applicants who apply to UC Berkeley or UCLA might not be qualified at all

Applied to total number of applicants (ELC and non-ELC) gives market of 5140 students

Size of target market: 2570 to 4700 students

Revenue expected: $5.2 million (3635 students)

Page 9: The Westwood Review - Lab to Market Class

Size of target market: 79,000 studentsRevenue expected: $5.2 million (3635 students)

Name of CountyTotal # of schools

# Above Base API

# Below Base API

# Below API, Below Growth

%age Below Both

Los Angeles County 234 42 192 54 23%Orange County 74 35 39 14 19%Riverside County 54 1 53 10 19%San Diego County 108 18 90 23 21%

Approximately 15% of each school district’s students qualify for tutoring under NCLB

San Diego Unified: 10,000 students (83% < Base API)Los Angeles Unified: 55,000 students (83% < Base API)Long Beach Unified: 7000 students Santa Ana Unified: 4500 students (52% < Base API)Riverside Unified: 3400 students (2% < Base API)

Page 10: The Westwood Review - Lab to Market Class

• Can help achieve guaranteed admission to college• Can focus resources on training students in only a handful of

subjects (University of California a-g requirement)• No property investment required (savings reinvested in

company)• Target market attracted by:– Quality and experience of tutors– Prospect of guaranteed admission to college– Convenience of in-home tutoring– Ability to meet API growth requirements

Page 11: The Westwood Review - Lab to Market Class

• Direct: Private academic tutoring firms• Indirect: Schools and public-tutoring firms• Market split between national firms and smaller firms• National firms: Educate, Kaplan, The Princeton

Review, Club Z!• The Westwood Review targets market that is

underserved– In-home, academic subjects tutoring– More professional than largest competitor– Focused on short-term and long-term results (guaranteed

admission)• Will honor competitor guarantees

Page 12: The Westwood Review - Lab to Market Class

Kaplan: has two divisions which provide test prep and academic tutoring for students K-10. Tutoring is done at a learning center

The Princeton Review: provides test prep and academic tutoring for K-12 students; Tutoring is done in classrooms

Educate: provides tutoring for K-12 students at learning center and at home. Test prep primarily done at home, and academic tutoring done at a learning center

Club Z!: provides only in-home tutoring in many subjects; but appears rather too informal with no long-term goal.

Page 13: The Westwood Review - Lab to Market Class

• Target customers:– High school students between range of 2.8 and 3.2 GPA– School districts below state performance requirements

• Customers can enroll online• Customers learn through word-of-mouth, and traditional

channels (radio, television, print advertisements)• Price: $40 per session (in-home); $45 per session (in-class)• Marketing targets students, parents, and school districts

– Detailing: school districts receive materials that eventually go home– Incentives for referrals– Parents ultimately decide with in-home and in-class tutoring

Page 14: The Westwood Review - Lab to Market Class

Board of Directors

CEO

CFO

Accounting

COO

In-Home Director

Marketing

Sales

Operations

Personnel

Budgeting

In-Class Director

Marketing

Sales

Operations

Personnel

Each division will:-Have its own marketing budget-Be in charge of managing its own hiring and expansion-Have administrative staff responsible for building and maintaining relationships with the unique target audience

Page 15: The Westwood Review - Lab to Market Class

Headquarters

Los Angeles County

Riverside

County

San Diego

County

Orange County

55,000 students (5,500 tutors)

3400 students (340 tutors)

10,000 students (1000 tutors)

4500 students (450 tutors)

Most communication is done on company Internet website and intranet

Central location should be close to all districts, because of heavy involvement in each

Commuting required to hire tutors; training done at central headquarters

As company grows, it can setup satellite offices in each county (near University of California campuses)

Page 16: The Westwood Review - Lab to Market Class

Income Statement Year 1 Year 2 Year 3RevenuesIn-Home Revenue $5,234,400 $5,757,840 $6,909,408In-Class Revenue $123,225 $1,232,250 $1,393,127Total Revenue $5,357,625 $6,990,090 $8,302,535CostsMaterials Expense $136 $1,368 $1,505Insurance Expense $10,000 $10,000 $10,000Rent Expense $24,000 $24,000 $24,000Marketing Expense $290,000 $670,000 $670,000Tutor Expense $1,976,592 $2,296,107 $2,741,636Admin Expense $500,000 $800,000 $1,280,000Utilities Expense $6,000 $6,000 $6,000Website Expense $4,000 $4,000 $4,000Other* $5,000 $8,000 $12,800.0Total Costs $2,815,728 $3,819,475 $4,749,941Earnings Before Tax $2,541,897 $3,170,615 $3,552,594Income Tax Expense (25%) $635,474 $792,654 $888,148Net Income $1,906,423 $2,377,961 $2,664,445

Break-even expected in the third quarter of the first year

Bulk of costs: Tutoring and Administrative Expense

Administration necessary to install tutors in the field

Funding primarily used to pay tutors and support administration

Page 17: The Westwood Review - Lab to Market Class

Revenue Year 1 Year 2 Year 3Price of In-Home Tutoring $40 $40 $40(per session)Market penetration 100% 110% 120%# of students in target market -least 2570 2827 3392# of students in target market -most 4700 5170 6204Average # of students in target market 3635 3998.5 4798# of weeks tutoring per year 36 36 36# of sessions per week per student 1 1 1# of sessions per year per student 36 36 36# of total sessions per year all student 130860 143946 172735.2Annual Revenue $5,234,400 $5,757,840 $6,909,408Lowest boundary revenue - 2570 students initially

# of total sessions assumign 2570 students initially 92520 101772 122126.4Revenue assuming 2570 students initially $3,700,800 $4,070,880 $4,885,056

Highest boundary revenue - 4700 students initially# of total sessions assumign 4700 students initially 169200 186120 223344Revenue assuming 4700 students initially $6,768,000 $7,444,800 $8,933,760

Interest rate 0.1PV of Year 1, 2, and 3 $4,758,545 $4,758,545 $5,191,140Value of perpetual revenue flow $69,094,080.0PV of perpetual flow $51,911,405Total PV $66,619,636

Page 18: The Westwood Review - Lab to Market Class

Revenue Statement Year 1 Year 12 Year 2Price of In-Class Tutoring $45 $45 $45(per student)Market penetration 10% 100% 110%Average # of students in target market 7990 79900 87890Actual # who take advantage of tutoring $1,141 $11,410 $12,551Share of #, for The Westwood Review 38.0324 380 418Amount total paid per week for 1 session $1,711 $17,115 $18,826# sessions per week 2 2 2Amount total paid for 2 sessions $3,423 $34,229 $37,652# of weeks tutoring per year 36 36 37Annual Revenue $123,225 $1,232,250 $1,393,127

PV of Year 1, 2, and 3 112,023$ 1,018,388$ 1,046,677$ Value of perpetual revenue flow $5,572,507PV of perpetual flow $4,186,707Total PV 6,363,795$

Page 19: The Westwood Review - Lab to Market Class

Oshin Aivazian, MBA (‘09)Founder and President

• Platrasha (2008)Marketing – Strategy Intern

• Revolution Test Prep (2007-2008)Proctor and Subjects Tutor

• Educate Inc (2002-2005)SAT Mathematics and Subjects Tutor

• Private Tutor (2003-2004)• Aivazian Process Servers (2006-2007)

Founder and President

Page 20: The Westwood Review - Lab to Market Class

• Seeking $2 million Dollars (to cover mostly tutoring and administrative expenses)

• This is one-time amount, company will be self-supportive

• Used mainly to fund expenses while accounts are receivable

• Cash from operating activities will be positive, during the third year.

1% 2%

91%

5%

1% Cost

ComputerRent & UtilitiesWagesMarketingOther

Page 21: The Westwood Review - Lab to Market Class

Strengths• Differentiating Factors (Tangible long-term benefit,

experience/market knowledge)Takeaway Points• Opening in market for in-home academic tutoring, by a

national or regional brand• Increased competition, parents’ dissatisfaction, federal

government policies will expand market• The market for tutoring continues to grow significantly in a

poor economy• Most regional companies are eventually purchased by

national firms