Table of Contents:

Education business models

We often forget that Education itself is not only a service, but it is a businss as well. Its a big business. From private schools for our children, to univerities for our MBAs, to lifelong continuing education through our employeers, we will all come in contact with the business of education many times in our life times. I suggest that instead of passivley walking through the experience, that we should stop and think about the business that lies behind the service that they are providing.

Go ahead and take a guess about how much revenue your school is pulling in just from your class (or your kids class, depending upon which stage of life you are in). Thats the easy part. To take it a step farther is to guess about the underlying costs that also come with managing the program....rent, electricty, salaries, and so on. Throw out your wildest guess, and let other people help you narrow your focus. With everyones input, Im sure we can get a pretty good feeling for what our administrators are making.

Im going to sort this area based both on location of the school, and on the level of eductation. If anyone sees any better way to organize this material, please feel free to make the necessary adjustments.

Preschool

Montessori School Toddler Class:

$8700 per year per child + $850 processing / reservation fee = $9,550 / year

6 kids *2 = 12 per class = $114,600 per class room x 2 classrooms of kids = $229,200 revenue for toddlers. then, they also have preK classes (yr 3-5), K, 1st, 2nd, 3rd grades. All sharing same facility, with same admin, same playground area (divided by age). Estimated annual reveune = $1 million / 12 months = $83,333 revenue per month. Its a large property in middle of Miami, so estimated cost of land + bldgs = $20,000 per month if they rent, or $10,000 if they own (for this model, i will assume that they own the property). Assume 12 employees @ $40,000 per year average = $480,000 per year = $40,000 per month in salaries. Gross profit margin = 80,000 - 40,000 - 10,000 = $30,000 per month. Then subtract insurance, taxes, and other expenses. They must be making at least $15,000 profit per month

MBA (Masters in Businss Administration)

GMBA for Latin American Managers - long distance education, executive MBA conducted with satellite link, and local facilitators.

• Revenue = 168 students * $40,000 per student (2 year program) = $6.72 million in revenue
• Costs = ??

Education Revolution:

see Kookyplan blog post here

(How Technology will shape the future of higher education)

The education marketplace may radically change over the next 5-10 years.  With falling costs of producing and delivering digital content, the education market could face radical disruption to the traditional business model.  Think about the following...

1. Falling cost to create content
   • any professor with a video camera can upload his / her lesson to Youtube (or similar sites).  With the drastic fall in cost to create content online, professors all over the globe are uploading lesson plans online for free viewing. (see my list of online distribution sites here)
   • economics of "scarcity" no longer applies to basic undergrad content in courses such as economics, marketing, finance, etc.
2. Falling Distribution cost
   • internet communication technology drives the cost of distribution of content to free
   • monopoly of "physical space" no longer applies since the number of "seats" at the lecture is now infinite.
3. Lessons from history:
   • every industry that faced both falling production & falling distribution costs....underwent fundamental radical change (disruptive).  In no industry that faced both of these factors did the landscape turn out the same as it began...
   • Parallels with other industries - newspaper, music, computer (Dell)
   • the education industry will soon face major disruption to their business model...much as other industries have in the face of falling costs of creation & distribution of content.  Think about the transformation we have witnessed in:
     • music industry:  record labels lost the monopoly of creation & distribution when costs fell and the internet grew
     • reporting / journalism industry: the newspaper lost its monopoly over creation & distribution when costs fell.
     • computer distribution: companies such as HP were challenged by Dell who dis intermediated the wholesaler, and went direct from manufacturer to customer...using the tools of communication to reach people directly.
4. Credit Crisis - driving force for innovations (as students save)
   • with student loan industry in free-fall, and with unemployment rising...parents of students may question spending $40,000+ for a four year degree.
   • the economic crisis may be just the factor that spurs potential students to seek cheaper alternatives
5. Potential "Dis-intermediation" of universities in the education supply chain
   • If content is free, and distribution is free, why congregate in physical space?
   • In the education of supply chain, we could see a radical transformation whereby the universities monopoly of physical space will give way to a direct model of education between teachers and students
   • Will this happen?  Maybe...because there has yet been no industry that has NOT radically changed in the face of dramatically falling costs of production & distribution of content.
6. Teacher to student
   • teachers role can not be disintermediated!
7. Examples of innovative education - Thunderbird's Global MBA by satellite
8. Opportunities in Emerging markets
   • if the cost of producing content is falling, and the cost of distributing content is falling, then the potential of selling education could also be set to fall substantially.  If this were to happen, then the cost of selling education to countries like Brazil could fall significantly.  This could lead to much higher demand, and much greater education.
9. Teacher as "destination": travel learning market
10. Book reader: falling cost of textbooks in digital format (Amazon Kindle)
11. Role of Universities as "gathering places" - research, equipment, presentations.

Education Industry

Education: Education is an elemental factor in a nation’s progress. It allows for more educated labor forces and consumers that attract and create higher paying industries. A private education system will probably improve the overall quality of schools, as schools compete for students (customers). However, there will be many left out who cannot afford to attend private school. Therefore, it is necessary for government to provide education in order for it to be accessible to everyone. This is a normative economic decision (one based on value judgments) that is typically determined at the ballot box. Currently, we have an educational system offering both public and private educations. We believe that the government should intervene to allow greater opportunities for underprivileged students who demonstrate great potential but are not challenged or motivated by poor performing schools. Allocation by political decision

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Education startups in the UK:

• Sums Online - Proving a range of flash based maths activities to a school and home audience - becoming the leader in classroom based PDA maths - marketplace: schools

• WildKnowledge - Providing Windows Mobile based survey software for use inside and outside the classroom on PDAs - marketplace: schools

• Notely.net - A range of tools for students to plan and manage their studies - marketplace: university students

• School Of Everything - A connecting tool to directly link people who want to study with teachers of that subject - marketplace: individual learners and teachers.

• uHavePassed - Online quizzes that can be taken off line focused on Handy Education(convenience) - marketplace: (currently) students for UK driving test

• Learnitlists - Widget based vocabulary training, making personalised learning ubiquitous across many websites - marketplace: language learners

• Fonefonics - Complete multi-media language courses delivered via mobile phone, focusing on teaching English to those without computer access - marketplace: employment agencies, language learners

• Many other language based sites offering elearning

College Textbooks:  innovative business models:

Textbooks have long made up an all-too-significant proportion of college students' annual costs, currently approaching an average of USD 1,000 per year in the US, according to Make Textbooks Affordable. General outcry has ensued, but a new experiment from publisher Flat World Knowledge just may provide a new—and ad-free—solution.

Beginning this month and continuing through the Fall 2008 semester, Flat World Knowledge is conducting a beta test in which it is offering four different textbooks online for free to hundreds of students at 15 colleges and universities across the United States. The texts are from the areas of business and economics, and will replace traditional textbooks in a single class or class section at each participating institution. Not only will students have free online access to the expert-written, peer-reviewed and professionally edited texts, but the texts will be open as well through a Creative Commons licensing scheme, giving faculty the ability to customize them as they wish for their classes.

Unlike other free text ventures out there—such as US-based Freeload Press and Danish Ventus Publishing, both of which have been covered by our sister site trendwatching.com—Flat World's business model doesn't depend on advertising. Instead, it offers affordable supplementary materials to students beyond the free online book, including printed, on demand textbooks for around USD 30; audio books for around USD 25; and downloadable and printable files by the chapter. Also available are low-priced study aids like podcast study guides, digital flash cards, interactive practice quizzes and more.

Eric Frank, Flat World's cofounder and chief marketing officer, explains: “The time has come for open textbooks. This new model of textbook publishing will result in increased choices and dramatically lower costs for students. It can enhance learning by giving instructors more control over content, and by leveraging the power of social learning networks around content. Between the oligopolistic practices of the big publishers on one end of the spectrum—and piracy on the other—lies a better solution: open textbooks." Flat World plans to collect feedback over the course of this semester-long test, and then commercially launch its concept worldwide in time for the Spring 2009 school period. The launch will feature an expanded product roster of eight textbooks, all focused initially on business and economics subjects. A total of 15 textbooks are currently under contract and in Flat World's pipeline.

Free and open software is already gaining ground in the world of technology, and now we have the possibility of a similar pattern in textbook publishing. There's no doubt cash-strapped college students love free love, as has already been shown with photocopies, notepaper and notebooks. Will this one take hold? You can bet there are countless students hoping so. One to watch! (Related: Textbook rental for college students.)

Website: www.flatworldknowledge.com

Contact: eric@flatworldknowledge.com

Wikipedia on Private Schools:

The Private Schools Private schools, or independent schools, are schools not administered by local, state, or national government, which retain the right to select their student body and are funded in whole or in part by charging their students tuition rather than with public (state) funds. In the United Kingdom and some other Commonwealth countries the use of the term is generally restricted to primary and secondary educational levels: it is almost never used of universities or other tertiary institutions.

Private education in North America covers the whole gamut of educational activity. Private schools range from pre-school to tertiary level institutions. Annual tuitions at K-12 schools range from nothing at tuition-free schools to more than $40,000 at several boarding schools.

The secondary level includes schools offering grades 7 through 12 and grade 13. This category includes preparatory schools or "prep schools", boarding schools and day schools. Tuition at private secondary schools varies from school to school and depends on many factors, including the location of the school, the willingness of parents to pay, peer tuitions, and the endowment. High tuition, schools claim, is used to pay higher salaries for the best teachers, and also used to provide enriched learning environments including a low student to teacher ratio, small class sizes and services such as libraries, science laboratories, and computers. Some private schools are boarding schools. Some military schools are privately owned or operated as well.

Trade or vocational schools are also usually private schools where students can learn skills in a trade which they intend to make their future occupation. Trade schools exist in a variety of occupations from cosmetology schools to schools for the performing arts.

Religiously affiliated or denominational schools form a distinct category of private schools. Some such schools teach religious lessons together with the usual academic subjects, to instill their particular faith's beliefs and traditions in the students who attend. Others use the denomination as more of a general label to describe on what the founders based their belief, while still maintaining a fine distinction between academics and religion. They include parochial schools, a term which is often used to denote Catholic Christian schoolsdubious — see talk page. Other religious groups represented in the K-12 private education sector include Protestants, Muslims, Jews and the Orthodox Christian sects such as the Russian, Greek and Byzantine.

Many educational alternatives, such as independent schools, are also privately financed. Private schools often avoid some state regulations.

Special assistance schools aim to improve the lives of their students by providing services tailored to very specific needs of individual students. Such schools include tutoring schools and schools to assist the learning of handicapped children.

Finally, although private education can be helpful and even necessary in some cases, as they are often costly they also carry with them many of the pitfalls of privatization, which is sometimes thought to widen the gap between rich and poor, creating an advantage for the former and thereby disadvantaging the disadvantaged even further

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