Benefits of starting a test prep business for students

From: alexhormozi

Starting a test prep and/or tutoring business is presented as an excellent business opportunity for students, offering significant profit potential [00:00:01]. It’s a venture that can generate $1,120 per day in profit, not just revenue [00:00:03], and can be managed while still in school [00:00:08]. For those not in school, it requires only about four hours of work per day [00:00:11]. This business model was considered as a venture before starting a gym [00:00:18].

Focus on Outcome, Not Just Tutoring

The key to success in test prep is not selling tutoring directly, but rather selling the outcome of tutoring [00:00:28]. This outcome can include:

Securing a job that pays more [00:00:32].
Passing a specific test [00:00:34].
Passing standardized tests (e.g., SAT, GMAT), which are considered the most valuable [00:00:37].

Improving scores on standardized tests can lead to admission into better colleges or business schools [00:00:43]. This materially impacts an individual’s network, the companies that recruit from those institutions, and their average salary and earning capacity [00:00:47]. College itself was an “original Biz op,” promising higher earnings as a result of the training [00:00:53].

The Semi-Private Tutoring Model

The most effective and profitable approach is the semi-private model, rather than one-on-one or unlimited “one-to-many” sessions [00:01:04].

Why Semi-Private is Profitable

Semi-private tutoring is one of the most profitable service models because you can charge two-thirds of the one-on-one rate [00:01:13], but work with eight times as many people [00:01:17]. A group of eight students is still considered a small group setting, allowing for personalized attention [00:01:20]. Students can take turns solving problems, making it more efficient than one-on-one teaching [00:01:24].

Financial Comparison

One-on-One Model: If charging $60 p er h o u r f oro n e - o n - o n e t u t or in g < a c l a ss = " y t - t im es t am p " d a t a - t = "00 : 01 : 27" > [00 : 01 : 27] < / a >, f o u r h o u rso f w or k w o u l d y i e l d$ 240 [00:01:31].
Semi-Private Model (1-on-8): Charging $35 p ers t u d e n t f or a g ro u p o f e i g h t < a c l a ss = " y t - t im es t am p " d a t a - t = "00 : 01 : 36" > [00 : 01 : 36] < / a >, yo u e a r n$ 280 per hour [00:01:56]. For the same four hours of work, this model generates $1,120 [00:01:39], which is four and a half times more money per unit of time [00:01:41].

This business can potentially allow someone to earn more than a doctor without accumulating student loans [00:02:06].

Operational Aspects

Location: This business can be conducted at free libraries, reducing overhead costs [00:02:15].
Customer Base: To reach $1, 120 p er d a y, yo u w o u l d n ee d a ro u n d 50 s t u d e n t s p a y in g$ 35 per session, three times a week [00:02:24]. The $35 p r i ce p o in t i s g e n er a ll y a ff or d ab l e an d j u s t i f i e d b y t h e p o t e n t ia l f ors t u d e n t s t oe a r n$ 100,000 more per year by attending better schools [00:02:30].
Pricing & Packaging: It’s preferable to get students to prepay to avoid transactional, one-off arrangements [00:02:37]. The selling pitch should focus on the goal (e.g., increasing test score) and the number of problems needed to achieve it [00:03:00].
Curriculum Structure: A three-day curriculum model is suggested: Class A, Class B, and a makeup day (students still pay for the makeup day to avoid falling behind) [00:03:07].
Flexibility: The business can be run for only four hours a day, allowing for a full-time job or other activities [00:03:19].

Predictable Results

Test prep is highly repeatable [00:03:24]. Research indicates that test scores on exams like the SAT and GMAT are directly proportional to the number of problems solved before taking the test [00:03:27]. This provides a clear input-output equation: more problems solved equals better scores [00:03:37].

Getting Started: Acquiring Customers

This business requires no capital, rental space, or build-out [00:04:14].

Initial Outreach

Leverage Your Network: Contact people you know and actively DM individuals in your high school network [00:04:18]. Share your own success story (e.g., score improvement from X to Y) and explain your method [00:04:27].
Contact Parents and Adults: Don’t be afraid to reach out to parents and adults [00:04:41]. Overcome shame and ask many people [00:04:44].
Offer Free Sessions: Provide a free session to demonstrate your method [00:04:49]. This acts as a half-assessment leading into a sales pitch [00:04:53]. Show an “easy win” early on to demonstrate improvement [00:04:57].
- For the first 5-10 free sessions, ensure students commit to homework. Implement a billing system if homework isn’t done, creating “skin in the game” for them and motivating them to achieve better scores [00:05:04].
The “Big Three” Post-Session: After free sessions, ask for:
- Feedback on improvements [00:05:18].
- A testimonial [00:05:20].
- A referral [00:05:21].
Leverage Testimonials: Post testimonials online and invite interest [00:05:29]. DM anyone who engages with special offers (e.g., half off for the next 10 clients) [00:05:34]. These “soft hooks” can drive DMs and allow for upsells [00:05:40].
Broader Outreach:
- Reach out to people you don’t know [00:05:49].
- Consider running ads [00:05:52].
- Go to sports teams; many athletes need to achieve a certain score for scholarships [00:05:56]. This can lead to quick word-of-mouth spread within teams [00:06:07].

Long-Term Outlook

It may take about six months to build up a student base to reach $1, 000 t o$ 1,100 per day [00:06:16]. This path allows individuals to achieve top one percent earnings with no capital risk, time loss, or debt, unlike traditional college pathways [00:06:21].

Scaling to “Super Saiyan” Mode

To achieve “Super Saiyan” levels of income, the business owner can outsource the tutoring itself [00:06:39].

Delegation and Profit

Focus on Acquisition: The owner focuses on getting students to sign up and systematizing the process for increasing scores [00:06:42].
Hire Teachers: Hire teachers at a rate like $50 p er h o u r < a c l a ss = " y t - t im es t am p " d a t a - t = "00 : 06 : 51" > [00 : 06 : 51] < / a > . T hi scre a t es a s i g ni f i c an t s p re a d b e tw ee n t h e$ 280/hour generated per group and the teacher’s pay [00:06:53]. Many teachers are willing to work for this rate, which can be more than their regular jobs [00:06:57]. Aim for service-based margins of 80% or higher [00:07:02].
Reinvest Time: The four hours previously spent tutoring can now be used for promotion, marketing, selling, and finding more teachers [00:07:21].

Building Pipelines

Student Pipeline: Develop a robust system for attracting and enrolling students [00:07:28].
Teacher Pipeline: Ask existing teachers for referrals of other qualified teachers [00:07:30]. This can create a waiting list of teachers eager to work [00:07:39].

Million-Dollar Earning Potential

By employing multiple teachers (e.g., four teachers), each paid $50 p er h o u r w hi l e g e n er a t in g$ 280 per hour, the owner can make approximately $1, 100 p er h o u r < a c l a ss = " y t - t im es t am p " d a t a - t = "00 : 07 : 44" > [00 : 07 : 44] < / a > . Wi t h f o u r t e a c h ers w or kin g f or f o u r h o u rs, t h e t o t a l re v e n u e i s$ 4,400 [00:07:54]. After paying each teacher $200 (4 h o u rs x$ 50/hour), total costs are $800, l e a v in g a p ro f i t o f$ 3,600 per day [00:07:59]. This daily profit exceeds the $3,300 needed to earn a million dollars a year [00:08:06], placing the owner above the top one percent of earners [00:08:12]. This is achievable with just four part-time employees [00:08:15].

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