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Tuesday, September 22, 2015

The importance of Fall Events

Fall Test Prep Marketing Strategy I:   Events!



The Fall is an excellent time for test prep & tutoring.   Schools are back in session and both college and graduate school admissions are in high gear.   For most companies, this is an excellent time for enrollments and revenue generation.  For folks with an eye towards the future, this is also an excellent opportunity to build important connections with future clients.  This relationship building can be accelerated through a well planned event strategy. 

Simply put.  Fall is an ideal time to fill one's lead funnel by creating brand awareness.   Brand awareness and a healthy lead funnel allow one to plan and execute upon mid and longer term business strategy.  Events allow for both.   Moreover, if one is able to calculate a conversion factor (the % of leads that eventually purchase) for said leads, one may be able to accurately forecast future business.  The more predictable things are in the future, the better it is for planning and resource allocation.  

To achieve all of these great things,  try to plan complementary events.   Normal events include:  Free Practice Tests, College Admissions Talks, Graduate School Admissions Talks, or some sort of SAT/ACT/GMAT/GRE/LSAT /MCAT  Information Workshop.  

The events themselves should be 45 minutes to and hour in length and should be designed to create value for the participants.  After all, these participants are giving up their time to attend.    If you need help figuring  out what to use when, click the link at the end of this article and we'll guide you.

When it comes to Event Outcomes one should look to:  1) capture the prospect (or lead) information and 2) represent one's brand in a positive way.   Also, avoid the misconception that events should  immediately generate sales.  While this is certainly an excellent and desirable outcome, the true goal is to expand the client base. To learn more about this perspective check out this link  on the  long tail approach to marketing. 

Events provide an opportunity for prospective clients to get to know your values as well as your services while also affording one the opportunity to build brand credibility.  In short, it is the beginning of a relationship which may span weeks, months, or even years if it is well managed (and if your product suite allows for it).  


Learn more about Test Prep & Tutoring Professionals Boiler Plate Events & Sales Management Training.

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Wednesday, September 2, 2015





    Are your Tutors Employees or Independent-Contractors?

I've worked in the for-profit education space for fifteen years.  The last five years have been devoted to helping small and mid-sized companies compete with the industry heavy-weights.  One of the best ways to compete is through superior human resource strategy.   Put simply,  have better people on staff than your competitors.   Generally, this is easier said than done;  larger companies have deeper pockets, career-pathing protocols, and benefit packages to attract talent.   These are some of the benefits of an employer-employee relationship.


When someone is an employee it tends to cost a company more at the front end of the relationship (about 20% more for each payroll dollar).  However, in the long term, the relationship may hedge against a greater expense.   Things like extended employee tenure,  reduced churn (the rate at which folks turn-over), and non-competition relationships are positive benefits of an employer-employee relationships.  


On the other hand, the idea of hiring a tutor-as-contractor  has created a new segment in the gig-economy;  we'll call this segment the tutor-broker segment.  These brokers are pass-through entities which essentially match tutors with students but have less of an ability to control the quality of the  process beyond the match.  That is not to say that these companies disregard or somehow feel quality is unimportant.  The lack of quality control in the tutor-broker space is essentially dictated by the nature of the employee relationship;  the tutor-as-contractor (vs. tutor-as-employee) designation to be precise. 

So why go this route?  Well, there are also many benefits to having a tutor-as-contractor relationship.   For example, there are no payroll taxes, FICA nor  benefit % added to each payroll dollar.  Tax filing & payroll are  easier and less complex, and training may not be required.  Taken together, one can see the appeal,   The trade-off is control--or lack of control to be more accurate.  

What I mean by "lack of control" is detailed in the following sections on IRS designations. In short, the way we read the below suggests that one cannot treat a tutor as a contractor and then hope to do things like:  schedule tutors centrally,  engage in training, or even expect the contracted tutor to attend meetings.   To know for certain what can and cannot be done, one should check with the current IRS requirements as well as one's state labor board.

 Ironically, many small tutoring companies  are caught in the middle.  They hire tutors as contractors yet they spend time and money training, developing, and reviewing their staff members.  The argument 'for' this approach is laudable:   to improve quality and consistency which helps maintain brand integrity.  But such activities may create a bit of a catch-22 for smaller firms;  how can one control quality yet contract with, rather than employ, a tutor?  The answer may be at the state level where the company does business.  At the federal level the requirements seem straight forward but there are exceptions.

Steps to determine if your tutors are employees or subcontractors


The IRS test often is termed the “right-to-control test” because each factor is designed to evaluate who controls how work is performed. Under IRS rules and common-law doctrine, independent contractors control the manner and means by which contracted services, products, or results are achieved. The more control a company exercises over how, when, where, and by whom work is performed, the more likely the workers are employees, not independent contractors.  

There are 20 criteria the IRS uses to make a determination.
A worker does not have to meet all 20 criteria to qualify as an employee or independent contractor, and no single factor is decisive in determining a worker's status. The individual circumstances of each case determine the weight IRS assigns different factors.
NOTE: Employers uncertain about how to classify a worker can request an IRS determination by filing Form SS-8, “Determination of Employee Work Status for Purposes of Federal Employment Taxes and Income Tax Withholding.” However, some tax specialists caution that IRS usually classifies workers as employees whenever their status is not clear-cut. In addition, employers that request an IRS determination lose certain protections against liability for misclassification.

The common law test 


The common law test: IRS examiners use the 20-factor common law test to measure how much control you have over the worker. These factors are reflected on IRS Form SS-8, (this form can be downloaded at www.irs.gov)“Determination of Employee Work Status for Purposes of Federal Employment Taxes and Income Tax Withholding.”
You can fill out the SS-8, including the facts of your relationship with the worker, and submit it to the IRS to get a determination of whether the worker is your employee or not.  The rumor seems to be that if one fills out this form, the unintentionally seal their fate by inviting scrutiny.

The reasonable basis test 

The reasonable basis test is considered a “safe harbor.” That is, if you can show you had a reasonable basis for treating a worker as an independent contractor, the IRS is prohibited from reclassifying the worker as your employee either prospectively or retroactively. You have a reasonable basis for treating a worker as an independent if one or more of the following conditions exist:
-A court ruling in favor of treating workers in similar circumstances as non-employees;
-A ruling by the IRS (usually a Revenue Ruling) stating that similar workers are not employees subject to employment taxes;
-An IRS Technical Advice Memorandum or Private Letter Ruling issued to your company, indicating that the particular worker isn't an employee;
-A past IRS payroll audit that didn't find workers in similar positions at your company to be employees; or
-A longstanding, widely recognized practice in your industry of treating similar workers as independent contractors.
NOTE: The Treasury Inspector General for Tax Administration has recommended that IRS pursue legislative proposals that would mandate withholding of income taxes on payments made to independent contractors and require monthly estimated tax payments. TIGTA made these recommendations in order to curtail estimated tax payment

Your State and the test

Although the IRS has specific rules about the treatment of workers, it seems that they generally defer to  State Labor Rules  when there is gray area. For that reason we recommend  researching how "tutoring, teaching, and instruction"  is designated within your respective state. 


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Friday, August 7, 2015

SAT business is booming but the tipping point for the test optional movement may be close


Business is good thanks to the New SAT and its impending release in March 2016.  Our surveying suggests demand from students prepping for the current SAT as well as the ACT (but mostly the current SAT) is driving revenue increases between 18%-35%.  The good news is that the demand is likely to persist for several months.   It will probably be a good idea to take a breath and plan strategically as growth slows.  Some earlier thoughts that may help with planning can be referenced through these blogs:  March 2014,  September 2014,  February 2015,  

Although business has been exceptionally good, the horizon is visible.   ACT and The College Board seem to be waging state-by-state battles for test supremacy yet many colleges are dropping the SAT and ACT  from their entrance requirements.  In fact, this past week The Washington Post reported that "since 2014, a slow and steady trend has developed where more schools are adopting a test optional policy" (the most recent being with George Washington University).  A complete list is available here.

We don't think the test optional movement is foregone or even a bad thing. The Khan/CB partnership has already begun to transform the business environment for test prep & tutoring companies.

The interesting thing about the evolution of the College Board's business model is the fact that more students are likely to join the prep community as a result of the free materials.  This will generate more user data.  That data, in turn, could become even more valuable to test providers than the tests themselves.  But that is probably not great news for test prep & tutoring--unless we can somehow adapt and thrive as a result of this change to the environment.

In evolutionary theory change is neither good nor bad it is simply change. The way in which a species deals with change often reflects its level of future success.  In the world of business, good companies anticipate change and spend time determining  how to benefit.

For this reason, we believe it is important to diversify products, align expenses to revenue drivers, and to draft  3, 6, and 12 months plans.  Or, to extend the evolution metaphor: generalize, conserve, and adapt.

Setting time aside to plan prior to Back to School or post the October SAT makes sense for a planning period. 


If you are a glutton for punishment, take a look at our SAT/ACT Business Positioning Presentation from the June 2015 Education Industry Association's EDVentures Summit.  

Here are some  tools which you may have seen before...but just in case:

SAT:

ACT: 

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Tuesday, July 7, 2015



    

Tutor recruitment is important. 

Tutor Retention is critical.



       

There is a unique and profound stress that comes from hearing one's tutor has missed an assignment (tutor no show). Worse still:   the assignment was missed and the tutor has become unresponsive.  What essentially follows is a conversation with the parents during which a tutoring company owner is placed in the unenviable position of trying to determine how much to explain, defend, or concede in order to  make it right for the client.                     xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx


Like most emergent situations in business, tutor no-shows should be anticipated and plans to avoid them crafted well in advance.  This is what I would qualify as a predictable crisis situation -- a crisis that will occur in some form each year due to the nature of the business.  Knowing of a predictable crisis should lead one to contingency planning and planning demonstrates a certain level of understanding that will separate one from the competition. 



And this leads us to another predictable and avoidable challenge:  Tutor Recruitment.   On a macro-level, tutoring and test prep companies are faced each year with a cyclical talent drain.  Basically, tutors leave; most leave around the same time and others leave unexpectedly.  Acknowledging this tutor life cycle is an important precursor for shifting the human resource paradigm from ad hoc to deliberate.  

Here are some things I learned as I grew more deliberate and informed about managing great tutors:

1.  Acknowledge that the tutor is not only more important than the owner/administrator, the tutor is the brand of the company and the most lasting impression to the client. 

2.  Have a robust retention plan to keep the best talent on board.  Think of this in terms of "years" not months. 

3. To that end, create a system of positive feedback based on observations given at regular intervals.  This means forms and employee files--basically a real process.  

4.  Embrace a merit based reward system, be principled, and stick to the system.  The system and its contribution to the overall mission should supersede individual achievement.   This means one should plan to lose iconic tutors after a certain period of time.    

5.  If your profit margin is larger than expected, consider investing the surplus in the direction of the following year's review process or incentive program.  Remember, the system is more important than the individual and planning is more important than random rewards.

6.  Keep the model transparent, regular and predictable, and avoid cancelling reviews & observations.  Nothing says "you are less important than X"  like rescheduling feedback to an employee. 

7.  Make an effort to understand the true needs of your tutors. Often this has to do with the little things:  protecting their off time, noting the number of miles they commute, or assuring they are not assigned to subjects in which they lack expertise.  

These steps are preliminary to a full cultural shift and yet even these steps are likely to have a discernible impact which may reduce the number of tutor no show occurrences.  Try #7 alone if nothing else.   

At any rate, the benefit of retaining and developing one's personnel cannot be overstated and is quantifiable (skype me and I'll show you the formula).  Understanding and planning for the tutor life cycle is certainly an important part of this mindset. Delivering the HR platform in a transparent way comes next. Timing,  leadership language, and consistency should round out the process.




Good luck and please contact me if you have any questions!

Kevin


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Thursday, May 14, 2015


   
Summer class options are key to ensuring summer cash flow.



       
Summer can be a difficult time for small tutoring companies.  In fact, even well run companies sometimes struggle with cash flow in July and August.   A primary reason for this is that small businesses often  use cash based accounting 

Since cash flow generally aligns with revenue which aligns with the business cycle,  once the business cycle dips, so to does the cash flow to the business.

However, since this pattern of demand is knowable, there are ways to cope.  One of the obvious ways is to reduce the expense baseline during low demand months.  Another way is to generate more revenue  per each expense dollar spent.  And still another way is to zero in consumer behavior and timing in order take advantage of what I will call micro-demand cycles.  It is the latter two that we'll focus on.

To be clear, coping with diminishing demand is not the same as generating record setting revenue.  But if the goal is to cover expenses until  the demand cycle regenerates in late August, here are some best practices.  
  1. identify summer programming that will generate cash flow without killing the margin
  2. schedule to maximize program efficacy.  This is code for scheduling classes or camps.  Larger groups disproportionately and positively impact revenue in comparison to expenses. 
  3. Here is a short list of things that I have used with good effect:
  • SAT/ACT Bootcamps
  • SAT or ACT Weekend Workshops
  • College Admissions Essay Workshops
  • Summer Reading Programs
  • STEM based camps
You needn't schedule more than one or two of each from the list above in order improve a revenue position.

A caveat:  people are making summer plans now and will therefore welcome information further in advance than during peak demand periods.   The time to get the word out for summer programming is essentially over the next few weeks.

Good luck and please contact me if you have any questions!
Kevin


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