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In order to intelligently begin a tutoring or test preparation business, you first have to understand the market.  By knowing the competitive space, you’ll be able to better position your new company.  There are four primary models in tutoring and test prep: marketplace, broker, hybrid, and full service.

In my last article we looked at the marketplace model, which amounts to a website that allows tutors and students to find each other.  The marketplace advantage is price.  The weakness is quality and service.  It also takes a fair amount of capital and time for a company to establish a functional market.

In this article we are going to look at the broker model.

Broker

The broker and marketplace models are similar in that their goal is to connect students with tutors as efficiently as possible.  The marketplace does this by listing thousands of tutors with their profiles and allowing students and parents to search for a match using filters such as subject matter expertise, locations, and scheduling.

In the broker model, an intake specialist fields a call from a parent or student and does the work of matching a tutor with the student.  The company positions this as an added benefit to the student and parent.  However, the real reason for the administrator’s involvement is to ensure that the company can make a match, even when they don’t have a tutor currently available.

Typically, the company gathers information about the student’s needs and then either matches the student with an existing tutor or recruits a new tutor.  Like the marketplace model, the broker model relies on volume and low overhead.  Often the administrators making this match are not educational experts.  These services often will have lower rates and will have much less oversight of the ongoing tutoring.  Unlike the marketplace model, however, the administrator is available to help with scheduling issues and finding substitute tutors when the primary tutor is unavailable.  This is the primary added value for the parent.

However, I believe that the broker model is vulnerable to competition on both sides.  Students and parents looking for the cost savings that comes with a self-service approach will be attracted to marketplace solutions while students and parents looking for higher quality service and instruction will seek out hybrid and full service companies.  The Broker Model is more costly than the marketplace and provides lower quality service and instruction than hybrid and full service.

My belief is that the tutoring market will be migrating to the extremes of cost savings and service, cannibalizing the middle. What this mean to someone looking to start a tutoring business?  Unless you have deep pockets to compete with marketplace companies like Wyzant, Take Lessons, and Google, my suggestion is to position your new company as a hybrid or full service company.

I’ll address those two models next.