Scaling a tutoring business for significant profit

From: alexhormozi

Tutoring, particularly test prep, is presented as a highly profitable business model that can be started with minimal capital and operated flexibly, even by students, with the potential to earn over $1,100 per day in profit within four hours of work [00:00:03]. This business was considered as one of three before deciding to start a gym [00:00:18]. It can even be scaled to generate a million dollars annually [00:00:17].

The “Outcome, Not Service” Approach

The key to successful test prep and tutoring is to sell the outcome, not just the tutoring hours [00:00:28]. This outcome is typically entry into a better job or the ability to pass a test, ideally a standardized test [00:00:30]. Getting into a better college or business school through improved test scores can significantly impact a person’s network, job recruitment opportunities, and average salary/earning capacity [00:00:41]. College itself was historically seen as a business opportunity where attendees would earn more money [00:00:53]. Pricing should reflect the potential for students to earn $100,000 more per year by attending better schools [00:03:31].

Operational Model: Semi-Private Tutoring

The most profitable service model, especially for those with time constraints, is semi-private, 1-to-many tutoring, rather than 1-on-1 [00:01:00].

Why 1-to-Many?

Semi-private groups allow charging two-thirds of the 1-on-1 rate but serving eight times as many people [00:01:13]. A group of eight students still allows for a small group setting and personalized attention [00:01:20].

Earning Potential

Consider the following comparison:

• 1-on-1 Model: At $60/hour,fourhoursofworkyields$240 [00:01:27].
• 1-on-8 Model: Charging $35perpersonforagroupofeightmeans$280 per hour ($35\ast 8)<aclass="yt-timestamp"data-t="00:01:36">[00:01:36]</a>.Overfourhours,thistotals$1,120 in profit [00:01:39]. This represents four and a half times more money per unit of time [00:01:41].

This earning potential can surpass that of a doctor, without requiring medical school or student loans, and still allow for a full day of freedom, working perhaps from 6 PM to 10 PM [00:02:02]. Tutoring sessions can be conducted at free libraries, reducing overhead [00:02:15].

Packaging Sessions

It is preferable to have clients prepay for sessions to avoid transactional one-off engagements [00:02:37]. The number of problems a student solves statistically correlates with score improvement (e.g., 1,000 problems for an extra 20 points) [00:02:52]. The sales pitch should focus on the desired score increase [00:03:03].

Curriculum and Repeatability

Test prep is extremely repeatable [00:03:24]. Research indicates that standardized test scores (like SATs and GMATs) are directly proportional to the number of problems solved before the test, making it a clear input-output equation [00:03:27].

A suggested curriculum structure involves:

1. A three-day curriculum taught to Class A and Class B separately [00:03:07].
2. A makeup day for students who fell behind, where they still pay the same rate [00:03:12].

Students should be given homework, with a billing incentive if they don’t complete it, to motivate them to do the work and achieve better scores [00:05:07]. The speaker personally improved their GMAT score above Harvard’s threshold by solving every available problem book over four months, working four hours a day, and taking weekly practice tests [00:03:40].

Getting Started: Initial Client Acquisition

This business can achieve top one percent earnings with no upfront capital, rental space, or build-out [00:04:13].

Initial Outreach

1. Network: Contact your personal network, dM high school students and parents you know [00:04:17].
2. Personal Story: Share your own test score improvement (e.g., “moved my score from X to Y”) and how it led to a better college [00:04:27]. Present your method and the outcome [00:04:38].
3. Free Session/Assessment: Offer a free session to demonstrate your method. This acts as a half-assessment and sales pitch [00:04:49]. Show an easy win for the student early on [00:04:57].
4. The “Big Three” Ask: After the free session, ask for:
   • Feedback on improvements [00:05:18].
   • A testimonial [00:05:20].
   • A referral [00:05:21].
5. Leverage Testimonials: Post testimonials online and invite engagement [00:05:29]. DM those who engage with offers (e.g., “my next 10 clients get half off”) [00:05:36].
6. Broader Outreach: Reach out to people you don’t know and consider running ads later [00:05:48].
7. Sports Teams: Approach sports teams whose members may need to meet academic thresholds for scholarships [00:05:56]. This can lead to quick word-of-mouth spread [00:06:07].

Building a student base to earn $1,000-$1,100 per day could take around six months [00:06:16].

”Super Saiyan” Scaling for Significant Profit

To achieve “Super Saiyan” level scaling, delegate the core tutoring work [00:06:39]. This is part of scaling the unscalable by building a system.

Leveraging Other Teachers

The goal is to become proficient at signing up students, then templatize the problem-solving process that predictably increases scores [00:06:42].

• Delegation: Hire teachers for $50/hour [00:06:51]. Many teachers would be happy with this rate, as it can be more than their regular job [00:07:12].
• Profit Margins: Aim for 80% or higher service-based margins, meaning costs per unit (e.g., teacher’s pay) are below 56% of revenue [00:07:01]. If you charge $280/hourpergroupandpayateacher$50/hour, you make the spread of $230/hour [00:06:53].
• Reinvest Time: The four hours previously spent tutoring can now be dedicated to promotion, marketing, selling, and finding more teachers [00:07:21]. This demonstrates leverage and scaling in business growth.

Building Pipelines and Achieving Million-Dollar Income

Establish pipelines for student acquisition and teacher recruitment [00:07:27]. Ask existing teachers for referrals (“Do you have any other teacher friends who would be good at this?“) [00:07:30].

To achieve “God mode” scaling:

• Employ four teachers, each earning $50/hour [00:07:44].
• You still make your $280/hour per group, but now across four groups simultaneously [00:07:48].
• This results in approximately $1,100 per hour in gross income [00:07:50].
• For a four-hour day, this is $4,400 in gross income [00:07:54].
• After paying each of the four teachers $200(4hours\ast$50), total teacher cost is $800 [00:07:58].
• Net profit: $4,400-$800 = $3,600 per day [00:08:02].

With $3,600profitperday,youexceedthe$3,300 per day needed to make a million dollars a year in income [00:08:05]. This puts you above the top one percent of earners, operating with just four part-time employees [00:08:14]. This strategy exemplifies scaling business operations and managing growth.