Here's my business venture ... discuss

[spex x]

[ QUOTE ]

Market research indicates that we can charge roughly $200 per 8 weeks per student. The cirriculum is 5, 8-week sessions. So really each kid is worth $1000 assuming they go all year (retention rate through each 8-week sesssion is roughly 92%). The beauty is that this business model does not have much in the way of fixed cost - almost all of the revenue generated from tuition is pure profit.


[/ QUOTE ]

The more I think about this, the less comfortable I am with it. I don't doubt that you can get the kids in the classes for the first 8 week session. But a retention rate of 92% feels wrong to me for some reason. Partly I think that at $200 per 8 week session, more parents will end up dropping out after the first round. But also, it just seems so outrageously high for some reason. Can you provide any further information about how they arrived at this figure - like is 8% the mean drop-out rate for all geographical areas, or is that the best case scenario. You might consider doing an analysis of drop-out rate in areas the are demographically similar to yours to get a better handle on it.

Also, if there is an 8% drop-out rate for every session, and there are 5 sessions, then each student isn't worth $1000. Each student is worth only $854 b/c you lose 8% after each session. Only 72 of every 100 will complete all 5 sessions.

The overall drop-out rate is kind of irrelevant. What is much more interesting is the rate of attrition b/t each session. I'd bet that the highest attrition rate is b/t sessions 1 and 2, then 2 to 3. I bet that if you can get students to sign up for 3 sessions, they'll be in for the duration. I'd put money on that the attrition rate between sessions 3 and 4, and 4 and 5 are very very low - probably <3%. I'd also bet that the attrition rate b/t sessions 1 & 2 is quite high - maybe up to 15% or more.

So what does this all mean to you? Well, probably a lot, but I'll have to think it over some. right now though, i think that your marketing budget will obv be focused on getting kids into the first session. But you also need to sell the later sessions hard. You know that if the kid's parent is going to spend $600 on three sessions, they'll spend $1000 on five. So if you can get the kid into 3 sessions, you're in great shape.

[Sniper]

How big is the target market?

Is there competition?

[fizzledizzle]

The 92% attrition rate is across all current licensees...some have better rates, some have worse. Agree that some people will drop after one session. Due to the small class size (5 max) we will definitely have to work hard to keep our students enrolled; in talking with other owners their experience is that they often have waiting lists for classes simply due to size. Some classes they don't; it really depends. Morning and afterschool classes are in high demand; afternoon, say 1 and 2 pm classes aren't in as much demand.

The $200 per 8 weeks is a number we have been targeting however nothing set in stone so far. I haven't really explained many of the bells and whistles that add value to the product, but one is they have access to our online portal where they get to practice the skills they learned in class at home with their parents for reinforcement. The clases are not linear, meaning a child can enroll at any time and we can pro-rate their tuition. We would of course offer sibling discounts, special programs, etc. A lot of it will be trial and error and leaning on the experience of other owners to share what has worked for them and what has not.

The $200 per week probably sounds high but it is relative to your target market and demographics. $200 for a class like this probably sounds like a lot to a rust belt type citizen but doesn't really seem like a lot to people in our target market where the avg household income is (many times) over 100k. For comparison, we pay $50 per month for our kid to go to a 20-min tumble bus session with 15 other kids once per week. And $100/mo for a 45-min phonics class once per week that she attends with as many as 6 other kids. So with our business, basically you are paying $100 month for 1 hour sessions that the kid has their own laptop and will only be in class with a max of 4 other kids. I think our program compares very favorably to those types of offerings. Many places back east charge far more than $200 for 8 weeks and can't keep up with the demand. All situations are different and quite honestly we want to target the households where there are large disposable incomes.

Our initial target market is a 4 suburb area with a combined population of roughly 500,000ish. Again, we are mobile so we truthfully can go anywhere in the metro area (2.5 million) but that is our initial market. The household median incomes in the 4 kids range from 68k to 108k. Competition exists but is very fragmented. Most computer class offerings begin with kids around age 8 and involve an office building. Ours is mobile and deals more with K and pre-K type kids. PC Kidz is about the only thing out there that is comparable and they have no current presence in the state we are operating in, not to mention their software is based on off the shelf offerings, they are not mobile and their target market is a little bit older kids (starting age 6 or 7, unlike ours which is ages 3 through 7).

I do have our business plan at home - I'll have to brush it up a little as I don't have the graphs of revenue and expense projections 100% completed as of now, but I do like the idea of some season vets here critiquing it. My wife has her MBA and did several of these in college, but of course real world vs. college are two different things.

[The4Aces]

i think this could possibly be profitable, but one thing I thought was kind of funny was the birthday party thing. I do not think this would be something great to do at a b-day party... + what kind of b-day partys for 3-7 yr olds only have 5 kids at them?

[spex x]

What is the software called?

[fizzledizzle]

Heh you are correct - having gone through many its like herding cats. Birthday parties are speical event where the 5 kids max/everyone has to have their own laptop license restriction does not come into effect. The birthday party can contain as many kids as they want, although most parties I've been to for that age group have usually 10 kids or so, give or take a few on either side. As far as something fun to do, the package really is pretty fun. The kids become computer detectives on a mission to solve a mystery...they are totally immersed in 2 minutes. I didn't really believe it until I saw my 4 year old do it. I didn't think a birthday party would be fun with a clown making balloons for an hour but the kids love it - not to mention the parents love it as it is a learning exercise bundled in the guise of an adventure for children. Kids run around for 30 minutes, computer adventure for 50-60 mins, eat cake/presents 30 mins...rinse repeat

[fizzledizzle]

BTW I really do appreciate all the feedback good and bad you are all giving. Sometimes enthusiasm can be like blinders and you don't see some of the bad things along with the good. There are definitely some cons to this particular business as well....some include:

1. We do have to 'sell' the idea to the daycares, rec centers, etc. It really would help them differentiate themselves to offer an onsite enrichment program such as this and it doesn't cost them anything to allow us to come in and offer the program, but we still have to market this idea.
2. As one reply pointed out, there will be attrition in number of students from time to time. It will be our responsibility to continually showcase and market our program as much as possible to grow the business to sustainability.
3. Right now health bennies are all taken care of through my job, but if/when I quit my job to handle projected growth, healthcare obviously is our dime.
4. You are talking classes that theoretically are offered during the week and sometimes weekends, as well as special events (mostly weekends) - could be a pretty big workload. Most owners have roughly 5 classes per weekday and have events and maybe 2 weekend classes. Again a lot of work, although my wife works her ass off right now to make someone else a lot of money. The tradeoff there wouldn't be huge at least in terms of effort.

[spex x]

[ QUOTE ]

1. We do have to 'sell' the idea to the daycares, rec centers, etc. It really would help them differentiate themselves to offer an onsite enrichment program such as this and it doesn't cost them anything to allow us to come in and offer the program, but we still have to market this idea.

[/ QUOTE ]

In any business you have to sell something to someone. This should be an easy sell.

[ QUOTE ]

3. Right now health bennies are all taken care of through my job, but if/when I quit my job to handle projected growth, healthcare obviously is our dime.

[/ QUOTE ]

Yeah, but this is true any time you're in business for yourself. This business doesn't make it any more true.

[ QUOTE ]

4. You are talking classes that theoretically are offered during the week and sometimes weekends, as well as special events (mostly weekends) - could be a pretty big workload. Most owners have roughly 5 classes per weekday and have events and maybe 2 weekend classes. Again a lot of work, although my wife works her ass off right now to make someone else a lot of money. The tradeoff there wouldn't be huge at least in terms of effort.

[/ QUOTE ]

But on the other hand, you've got what sounds like a reasonable plan for growth and eventually you'll be hiring out the actual teaching. Work hard for a short time and move into management.

What is the name of the software?

[obi_wang]

at the ymca's, daycare centers, etc., who will be paying you - the parents for each kid, or the YMCAs themselves on a contract basis? I'm assuming it is an additional cost for the parents, right?

Well, you may be able to find some contracts with schools, non-profits, etc. - that would be stable income that would not fluctuate with # of students able to recruit. In a sense, those agencies would be responsible for getting the students, and you would just provide the service. I think it would be nice to have a mix of both - some contracted not based on # of students, and then some gigs where it is solely based on # of students. hope that makes sense.

[fizzledizzle]

Most of the time it would be the individual parents that would pay us for the classes although there isn't anything preventing us from contracting with, say a school to provide the classes. In fact there are several owners that do exactly that - I don't know the details of how the contracts are worked out, but you are right, the revenue flow would be stable which is always desireable, if not ideal. Basically you can work any business model you want, since you are not a franchisee but a licensee...I've even heard of people that refurbish an old bus, make it kid-friendly and give their mobile classes in one of those.