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Executive Summary

Online learning is still in its nascent stage and in the past few years the market demand for online tutoring services have increased tremendously. The very idea of getting online help from home at one’s convenience is appealing thought. The huge potential in this industry is slowly being recognized as demand for online tutors is increasing for assistance in math or science.

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My Friendly Tutor will provide online tutoring services to students in United States. A sound foundation in mathematics at a young age is crucial in this day and age for success in any career – be it business, science, medicine or law. Consequently there is a growing need for mathematics teachers in the US both within schools and as after school tutors. The interactive online sessions will enable one to one learning environment that will provide the students with individual tutor attention. This will ensure efficient learning with the help of various tools that simulate classroom environment.

Online tutoring – the market trends and benefits
Online learning is still in its nascent stage – there is huge scope in this venture (online tutoring), since it is mostly an untapped area. The very idea of getting online help from home at one’s convenience is appealing thought. The huge potential in this industry is slowly being recognized as demand for Indian tutors is increasing for online math or science help.

Many learners will be skeptical about learning from the computer. Why should a parent opt for this unconventional method of teaching to the ongoing one? How much can the parent rely on this system for fulfilling their child’s requirement? And, how effective is it going to be in the long run? These are few questions that we need to provide answers for.

First and foremost the flexibility of learning online is a great benefit for most students. Online tutoring is not only cost effective but also convenient. The student does not have to travel to a private tutor’s home to get help for his lessons, which generally cost $40 per hour. All he needs to do is log on to the net and get help online at just $16 per hour. The fact that all this is possible from the comforts of his home makes it even more attractive.

The right software and a good Internet connection, tutor and student can speak to each other in real time, and use a pen-based tablet to write equations on an electronic whiteboard. Apart from the absence of eye contact, the online session is little different from a face-to-face meeting.
Online tutoring is not face to face but offers compelling advantages over traditional tutoring:
• Cost advantage: Typical live one-on-one mathematics tutoring costs $40 per hour or more. My Friendly Tutor will offer a very compelling price at $15 an hour.
• Quality advantage: Skill levels of typical traditional tutors are not known. The business will offer a guarantee of quality as all the teachers are company employees who undergo a rigorous training and certification process before they begin teaching.
• Convenience: With conventional tutoring a parent may spend a substantial amount of time picking up and dropping off the student. Online tutoring completely eliminates that and offers on-demand tutoring.
• Replacement guarantee: With traditional tutoring, in case of problems with a tutor, finding a replacement is usually an arduous task. The company will employ a large pool of highly qualified tutors and in case of any problems the management will provide an immediate replacement. Parents and students also get to choose the most compatible tutors.
• Availability: There are areas in the US where any qualified teacher is simply not available within a convenient driving distance. Online tutoring will be practically available everywhere.

Business Model
The cost of a one on one mathematics tutor starts around $40 per hour which puts it beyond the reach of an average American household. Realizing this need we offer affordable “one-on-one” tutoring to students at $15 an hour by making effective use of Internet based technologies that brings the vast pool of highly qualified mathematics teachers to students in the US. Besides the cost benefit, we provide excellent quality as well. All the tutors will be company employees who undergo rigorous training before they start teaching. The students have the option to switch tutors if they wish. The company feels this combination of cost and quality makes this a very viable alternative to traditional face to face tutoring and opens up untapped markets. The business aims to attract 50,000 students in the next two years and generate revenues in the range of $100 million with a 40% profit margin.

Every student gets a dedicated teacher who ensures his or her continued development. Teachers and students communicate using Internet and multimedia technologies like whiteboard, text chat, telephone and video and all efforts will be made to make the experience as close to live tutoring as possible. The primary driver of the business will be superior quality and lower costs.

Market Size
The US has approximately 25 million students in the age group of 13-18 of which roughly 5 million students will probably consider online tutoring at some point in the future. When the market matures, the total market for online tutoring for middle and high schools will be potentially in excess of $10 billion a year; 5,000,000 students at $2,000 per year. It is estimated that nearly 10-20% may opt for online tutoring in the next two years. The segment of students who are home-schooled is an important one. This segment will have a higher tendency to opt for online programs. NCES estimates that almost a million students are home schooled in the US at the moment. It is safe to assume that our goal of achieving $100,000,000 per year is only a very small fraction of the market size.

The primary marketing goal of the business is to attract leads using the following tools:
• Internet keywords – Google/MSN/Overture
• Newspapers/magazines – Sustained advertising in local papers
• Website banners – MSN/Overture
• Direct – Schools, school teachers, home schooling organizations, No Child Left Behind provisions

The Student Acquisition Program – Sales
The primary sales goal will be to convert leads generated by the marketing efforts into students. This process will be accomplished by utilizing an inbound telemarketing team. The marketing team will be the core strength of the business.

The recruitment process starts when a prospect sends an email or calls one of the counselors. The counselor answers all queries, provides testimonials and references and helps in the signup process. Prospects also have the option to participate in demo sessions before they enroll. Prospects also have an option to enroll online without having to go through counselors. Once a student gets on board, they are provided 24×7 tech supports to help with any issues they may face during the setup process. It is estimated that the student acquisition to cost around $400 per student of which a third will be spent on advertising and the rest on the counselor and miscellaneous management.

The tutoring organization
A teacher will be responsible for 10-12 students. For every 25 tutors, there will be one principal. About 20 principals will report to a division head. There will be a fully automated management system that allows easy rating and evaluation of teacher performance. All efforts will be made to retain teachers who will be paid nearly two to three times the existing market rate of around $200 per month to ensure high quality and contain attrition. The teachers will be trained by US based program managers who have extensive experience in the American school systems. Further, the teachers will undergo extensive training and orientation programs to address any behavioral or attitude problems that may come up during tutorial sessions.

The tutoring process
• A typical student has broadband Internet access. The software requires minimal setup and a browser is all that will be necessary. The program can also be accessed from any computer so the tutoring can also be done if the student is not at his or her home PC.
• Students and teachers communicate using a whiteboard to allow sharing of handwritten text, telephone and text-chat.
• Tutors have the same text books as the students.
• The tutoring program is completely individualized. The student and the parent work with the tutor to set their expectations – and the tutor helps the student achieve it – be it SAT preparation or homework help or advanced topics or improving grades.
There is an online feedback system that can be used to rate the tutor. Additionally, one can get in touch with the student counselor. Parents also receive constant feedback on the student’s progress.
The teacher student ratio will be 1:10.

Technical details
The technology involves high end dedicated server to ensure excellent voice communication and exchange of instructions over the whiteboard and if required video conferencing option is also available.

The whiteboard technology is an efficient tool for exchanging written communication medium between the tutors and the students. The light pen is used for writing on the mouse pad that gets reflected on the computer screens. This along with voice and chat conferencing enables a live face-to-face scenario wherein the tutor and student communicate with each other.

An online messaging service to schedule and reschedule the sessions for the student and the tutor will take care of urgent communication between the tutor and the student. An online tracker of the sessions held will take care of session’s information and timings.

Management Systems
Management systems will be web based and accessible to authorized personnel at all times over the Internet. These will include

• Class scheduling system
• Student/Teacher performance history
• Teacher/counselor training system
• Feedback mechanism
• Student enrolment system
• Portal for parents, students and teachers
• Prospecting/sales management system
• Advertising campaign management system
• HR management
• Credit card payment system

Pricing/payment details
Payment of the fees will be ensured at the time of scheduling a session. Payment will be made online at the time of registering for the sessions. Online payment will be secure and all details and acknowledgement should immediately reach on the parent’s id.

Operational details
The tutoring model is decentralized where the remote end tutors from any part of the country having requisite skills will be tutoring students online. They will be paid on an hourly basis and also a fixed amount towards the expenses incurred on account of internet and computer hire charges. An administrator will be responsible for coordinating the sessions and keeping tabs on all the operational aspects. The role of this individual would be to keep an eye on all details of the sessions going on and provide feedback to the tutor. He also needs to make sure all the reports are filled up and sent to the respective ids and the scheduling of the sessions too. Incase the parents want to shuffle the tutor or make any changes to the schedule the supervisor comes into the picture.

A separate login id and password will be provided to parents who can access these sessions at their convenient time and keep tabs on their child’s progress. A summarized report filled in by the tutor at the end of each session and the evaluation sheet of the child on the subject matter covered would be available to the parents for their knowledge. A feedback sheet for the tutor – to be filled in by the parents – would further ensure the effectiveness of the system.

Growing Stars – According to management estimation, Growing Stars is one of the strongest competitor to the business. However, Growing Stars provides tutorial services for multiple subjects and this is an incompetent model since it does not ensure perfection in the business services. As a result, the management feels that they will have a difficult time scaling up. In contrast, My Friendly Tutor will be very strongly focused on mathematics which will allow the business to perfect its model and scale up rapidly. The management also feels that the team is much stronger and has a proven track record of success in both marketing and teaching. The pricing is also less than their $20 per hour.

eSylvan currently offers US based online tutors and have the advantage of an established brand. However their offerings are priced at $40 an hour and at $15 an hour My Friendly Tutor definite has an edge over them.

Estimated market share
The business aims to have 50,000 students by the end of the 2nd year. The following targets have been set by the company management to achieve this goal:

• Month 3: 50 students
• Month 6: 1100 students
• Month 12: 9000 students
• Month 16: 17000 students
• Month 18: 24000 students
• Month 24: 50000 students

Future expansion
Once the business dominate the market for mathematics tutoring and have perfected the model, it will be able to easily expand into other areas like Physics, Chemistry, Biology as well as standardized tests like GMAT, SAT, GRE, LSAT etc.

Identified Areas of Risk
The operational model to be a success needs to identify the risks that can impose an impediment in its way. The key area of concerns in the retaining and sustaining business profits is quality control.
Quality is one of the main drivers for this business. There will be a clear incentive system for the tutors; the hiring process will be very stringent; and under performing teachers will be quickly replaced. Utmost care will be taken to ensure system uptime and 24×7 tech support students and teachers. Counselors will be accessible to parents at all times. A backup site for the entire operation will be maintained to provide insurance against unforeseen events

The tutoring services extended by the business will cater to the US markets only in the initial 2 years of operations. Once the business is well established it will expand its services to other countries through effective use of collaboration tools and technologies. The company also proposes to outsource teachers from developing countries like India in the next 2 years to gain cost advantage and pool in talented personnel from these countries.

Management Team
The management team of the company will institute the following positions:
• CEO at the helm of operations who will be responsible for steering the company goals and long-term management strategies.
• A president who will be in charge of supervising the management functions, business development, legal issues, risk assessment and quality compliance.
• A Vice-President, Operations responsible for regular activities across the locations in the country
Additionally the company will employ a team of student counselors and academic supervisors to monitor the tutoring sessions and resolve queries and clarifications from the parents. The counselors will also be responsible for monitoring the teacher activities.

Business Ownership and Structure
The company would be a sole proprietorship establishment with me as the owner of the business. The company will seek 100 percent external financing to cover up its start-up expenses. The finance will be utilized towards the office setup costs, business development and other startup expenses.

The financial performance of the company depends on meeting the desired market share and ability to retain consumers. The company seeks a financing of $200,000 to meet startup expenses and cover the initial costs of establishment.

Funds required

Income Statement
Profit & Loss
Year 1 Year 2 Year 3 Year 4 Year 5
Sales 2,500,000 2,750,000 4,000,000 5,875,000 8,125,000
Direct Cost of Sales 381,000 381,050 451,103 451,158 541,216
Total cost of sales 381,000 381,050 451,103 451,158 541,216
Gross margin 2,119,000 2,368,950 3,548,898 5,423,842 7,583,784

Operating expenses
Salaries 380,000 380,000 450,000 450,000 540,000
Legal 5,000 5,250 5,513 5,788 6,078
Software Maintenance 3,000 3,150 3,308 3,473 3,647
Web hosting 10,000 10,500 11,025 11,576 12,155
Consultants – software development 50,000 52,500 55,125 57,881 60,775
Insurance 10,000 10,500 11,025 11,576 12,155
Rent 2,900 3,045 3,197 3,357 3,525
Research and Development 20,000 21,000 22,050 23,153 24,310
Equipment 30,000 31,500 33,075 34,729 36,465
Other 19,100 20,055 21,058 22,111 23,216

Total Operating Expense 530,000 537,500 615,375 623,644 722,326
Profit before interest and taxes 1,589,000 1,831,450 2,933,523 4,800,199 6,861,459
Interest expense 705100 705100 705100 705100 705100
Tax incurred 0 0 0 0 0
Net profit 883,900 1,126,350 2,228,423 4,095,099 6,156,359
Net profit/Sales 35.36% 40.96% 55.71% 69.70% 75.77%

Cash Flow
Net Cash Flow (Planned)
Year 1 Year 2 Year 3 Year 4 Year 5
Cash Sales 2,500,000 2,750,000 4,000,000 5,875,000 8,125,000
Cash From Debtors 0 0 0 0 0
Capital Injection 2,000,000 0 0 0 0

Total Receipts (a) 4,500,000 2,750,000 4,000,000 5,875,000 8,125,000

Salaries 380,000 380,000 450,000 450,000 540,000
Legal 5,000 5,250 5,513 5,788 6,078
Software Maintenance 3,000 3,150 3,308 3,473 3,647
Web hosting 10,000 10,500 11,025 11,576 12,155
Consultants – software development 50,000 52,500 55,125 57,881 60,775
Insurance 10,000 10,500 11,025 11,576 12,155
Rent 2,900 3,045 3,197 3,357 3,525
Research and Development 20,000 21,000 22,050 23,153 24,310
Equipment 30,000 31,500 33,075 34,729 36,465
Other 19,100 20,055 21,058 22,111 23,216
Loan Interest and Charges 705100 705100 705100 705100 705100

Total Payments (b) 1,235,100 1,242,600 1,320,475 1,328,744 1,427,426

Net Cash-Flow (a-b) 3,264,900 1,507,400 2,679,525 4,546,256 6,697,574

Opening Bank Balance 0 3,264,900 1,507,400 2,679,525 4,546,256

Closing Bank Balance 3,264,900 4,772,300 4,186,925 7,225,781 11,243,830

1. National Center for Education Statistics. 2004. 1.1 million home schooled children in the United States in 2003. Accessed on February 25th 2009 from – http://nces.ed.gov/pubs2004/2004115.pdf

2. Tim Berry, 1991, Business Plan Toolkit, Version 4

3. Current Population Survey. 2003. Accessed on February 25th 2009 from – http://pubdb3.census.gov/macro/032003/faminc/new03_010.htm

4. Growing Stars. 2008. Accessed on February 25th 2009 from – www.growingstars.com

5. E Sylvan. 2008. Accessed on February 25th 2009 from – www.esylvan.com

6. My own business. 2009. An entrepreneurial guide for both start-ups and operating businesses. Accessed on February 25th 2009 from – http://www.myownbusiness.org/s1/index.html

7. Aitken, Tony in The tutoring business. 2005. Starting a tutoring business: seven important lessons. Accessed on February 25th 2009 from – http://www.thetutoringbusiness.com/tutoringbusiness.html

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