Ever feel like you’re stuck on a hamster wheel, trying to grow your tutoring business but not seeing the results you want? You’re not alone. In a recent podcast, Lisa, a seasoned business coach with 16 years of experience, shared her journey of building and successfully selling her tutoring business, Lisa Study Guides. Her insights reveal the key metrics that matter most when it comes to increasing your business’s valuation and preparing for a profitable exit. Let’s dive into the strategies that could transform your tutoring business from a grind to a goldmine.
Profit Over Revenue: The Key to Sanity and Success
Lisa emphasizes that while revenue is important, profit is the true indicator of a business’s health. She advises aiming for at least a 20% net profit margin, especially in service-based businesses like tutoring. To achieve this, Lisa suggests two main strategies: raising prices and focusing on high-margin services. For example, instead of one-on-one sessions, consider group classes, which can significantly increase your profit margin. By implementing these changes, Lisa was able to boost her business’s profitability and attractiveness to potential buyers. If you’re looking to enhance your students’ Core Skills of Math, consider how these strategies can also benefit your tutoring services.
2. Customer Lifetime Value: Increase customer retention through extended packages and high satisfaction rates.
3. Delegate and Elevate: Remove yourself from day-to-day operations to focus on high-impact CEO tasks.
Boosting Customer Lifetime Value: The Golden Metric
Another crucial metric Lisa highlights is customer lifetime value. She explains that buyers value businesses where customers stay longer and spend more. To increase this metric, Lisa recommends offering extended packages, such as annual or semester billing, to lock in customers for longer periods. Additionally, she stresses the importance of customer satisfaction, suggesting that you identify and address the points where customers tend to drop off. In her tutoring business, Lisa found that the first lesson was critical, and by improving the quality of that initial experience, she significantly increased customer retention and lifetime value.
Conversion Rates: Turning Leads into Loyal Clients
Lisa also emphasizes the importance of conversion rates. She advises tracking your funnel to identify where leads are dropping off and suggests optimizing your processes to improve conversion. For example, if your email sequences are underperforming, consider picking up the phone to increase your conversion rate dramatically. By focusing on these areas, you can turn more leads into loyal clients, which is a valuable asset when selling your business. Additionally, improving your students’ Problem Solving Skills can lead to better engagement and retention, further boosting your conversion rates.
Revenue is vanity. Profit is sanity.
EBITA: The Metric That Makes or Breaks Your Exit
Lisa explains that your business’s EBITA (Earnings Before Interest, Taxes, and Amortization) is a critical factor in determining your exit valuation. Different industries have different multiples, but for tutoring businesses, the multiple is typically two to three times the average net profit over the past two years. To calculate your EBITA, subtract your monthly expenses from your sales, excluding one-time expenses like coaching fees. By focusing on increasing your net profit, you can significantly boost your EBITA and, consequently, your business’s valuation.
Your hourly hustle directly impacts the valuation of your business.
Extracting Yourself: The Final Piece of the Puzzle
The last metric Lisa discusses is the founder’s time spent in the business. She reveals that buyers view a founder who is bogged down in day-to-day tasks as a liability. To increase your business’s value, you must extract yourself from these low-value activities and focus on high-impact CEO tasks like strategy and partnerships. Lisa used tools like Toggle and Sunsama to track her time and delegate tasks to virtual assistants, allowing her to focus on what truly moves the needle. By shifting your mindset and becoming the CEO of your business, you can prepare for a successful exit.
As a tutor, your role extends beyond just teaching; you’re also an entrepreneur shaping the future of your students and your business. By focusing on these key metrics, you can not only grow your tutoring business but also prepare for a profitable exit. Remember, your students’ success is intertwined with your business’s success. By enhancing their skills and satisfaction, you’re not only improving their lives but also boosting your bottom line. Join the Learning Success affiliate program to enhance your tutoring services and boost your income while helping your students overcome learning challenges.
Author: Laura Lurns
Find me on X https://x.com/lauralurns