Why Your Education Business Isn’t Sellable | Ep 877
In this episode of The Game, Alex Hormozi examines why many education businesses struggle to maintain long-term value and become sellable assets. Using Harvard as a case study, he explores how successful educational institutions create value through selective admissions, rigorous standards, and the cultivation of valuable peer networks—rather than simply guaranteeing outcomes to anyone who can pay.
Hormozi addresses the inherent challenge of customer churn in education businesses, where students typically move on after completing their programs. He outlines potential solutions for building sustainable education businesses, including the implementation of recurring revenue models and the development of ongoing services that provide value beyond initial educational content. The discussion covers practical approaches to structuring educational offerings for long-term business viability.
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1-Page Summary
Unique Features of Successful Education Businesses
Alex Hormozi analyzes the distinguishing characteristics of successful education businesses, using Harvard as a prime example. He emphasizes that prestigious institutions maintain rigorous standards for both admission and completion, creating an aura of exclusivity rather than accepting anyone who can pay. Unlike many education providers, these institutions don't guarantee outcomes but instead focus on delivering value through selective programs and curated experiences.
Hormozi notes that the in-person educational experience, combined with access to a high-caliber peer network, adds immeasurable value beyond just the academic content. This approach distinguishes traditional institutions from online alternatives and creates lasting benefits that extend well beyond the classroom.
Addressing Churn and Continuity in Education Businesses
According to Hormozi, education businesses face a natural challenge with customer churn because students typically "graduate" and move on after gaining their desired skills. He points out that while many business owners mistake long-term payment plans for continuity, the relationship typically ends once the educational service is delivered.
To combat this issue, Hormozi advises that education businesses need recurring offerings that provide ongoing value. These might include regular resource updates, community access, or other consumable services that encourage customers to maintain their relationship with the business beyond the initial educational period.
Building Sellable Business & Recurring Revenue in Education
Hormozi discusses how continued education can create business continuity, citing how institutions like Harvard offer progressive levels of education from bachelor's to doctoral degrees. However, he notes that retention typically decreases with each subsequent certification level.
In Hormozi's view, ongoing services can potentially become more valuable than the educational content itself. He suggests that businesses should structure their services to meet recurring needs, ensuring customers will continue to pay for them. This might include placement services or fractionalized services that provide perpetual value beyond the initial education.
1-Page Summary
Additional Materials
Clarifications
- Customer churn in education businesses refers to the rate at which students discontinue their engagement with a particular educational service after completing their desired learning objectives. It is a natural challenge for education businesses as students typically move on once they have acquired the skills they sought. To address churn, businesses need to offer ongoing value through recurring services that encourage students to maintain their relationship beyond the initial educational period. This can include continuous updates, community access, or other services that provide ongoing benefits to students even after they have completed their primary education.
- Building a sellable business and recurring revenue in education involves creating services or products that provide ongoing value to customers beyond the initial educational period. This can include offering continuous resources, community access, or other consumable services that encourage customers to stay engaged with the business. By structuring services to meet recurring needs and ensuring customers see value in continuing to pay for them, education businesses can establish a sustainable revenue stream and potentially increase the long-term value of their offerings.
Counterarguments
- While prestigious institutions maintain rigorous standards, this approach may not be scalable or accessible to the broader population, potentially exacerbating educational inequality.
- The focus on delivering value through selective programs may overlook the importance of inclusivity and diversity in education.
- In-person experiences are valuable, but online education can also offer unique advantages such as flexibility, accessibility, and the ability to scale.
- The emphasis on high-caliber peer networks may undervalue the contributions and potential of students from less prestigious backgrounds.
- The idea that traditional institutions create lasting benefits beyond academic content may not account for the changing landscape of education where lifelong learning and online credentials are becoming more recognized.
- The challenge of customer churn in education businesses may also reflect a healthy completion of the educational cycle rather than a problem to be solved.
- Recurring offerings to combat churn might not align with the mission of education, which is to empower individuals to become independent learners and thinkers.
- The notion that retention decreases with each subsequent certification level may not consider the individual goals and circumstances of learners, who may find what they need in initial programs.
- The suggestion that ongoing services can become more valuable than educational content could undermine the core educational mission of providing transformative knowledge and skills.
- Structuring services to meet recurring needs may lead to a commodification of education, where the focus shifts from learning outcomes to financial incentives.
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Unique Features of Successful Education Businesses
Alex Hormozi analyzes the elements that distinguish successful education businesses like Harvard, focusing on admission standards, completion policies, and the in-person educational experience.
Education Businesses Thrive On Strict Admission and Completion Standards
A crucial element for the success and prestige of education businesses such as Harvard is the rigorous standards they set for both admission and completion of their programs.
Exclusive Acceptance vs. Education Businesses Open to All With a Credit Card
Hormozi asserts that for education institutions to be successful, they should not merely accept every applicant who can pay but rather maintain high standards for admission. By following this practice, schools can create an aura of exclusivity similar to that of Harvard, which receives numerous applications but only admits a select few.
No Guaranteed Outcomes For Students, Unlike Many Businesses
Harvard, as an example highlighted by Hormozi, does not guarantee any future success for its students in terms of earnings or job placements after graduation, distinguishing it from some education providers that offer such promises to entice students.
Selective Program Completion vs. Universal Passing In Education Businesses
In elite institutions like Harvard, paying tuition and being admitted doesn't ensure that a student will pass and complete their program. This selective approach to program completion stands in stark contrast to many education businesses where passing and completion are almost guaranteed.
Successful Education Businesses Provide a Curated, In-person Experience
In addition to selecting and evaluating students based on strict standards, successful education businesses provide an invaluabl ...
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Unique Features of Successful Education Businesses
Additional Materials
Clarifications
- "Education businesses" typically refer to educational institutions that operate with a profit motive, treating education as a commodity. They often incorporate business strategies and marketing techniques to attract students and generate revenue. In contrast, traditional educational institutions like public schools or non-profit universities prioritize education as a service and focus on academic excellence and student development rather than profit.
- In elite institutions like Harvard, selective program completion means that simply being admitted and paying tuition does not guarantee a student's successful completion of their academic program. Students are expected to meet rigorous academic standards and demonstrate their ability to succeed in their chosen field, with no assurance of automatic graduation. This approach ensures that only those who meet the institution's high academic expectations and requirements are able to successfully complete their education.
- The emphasis on in-person educational experiences over online or remote options is highlighted due to the unique value that physical presence offers in fostering a rich learning environment. In-person interactions facilitate immediate feedback, real-time discussions, and networking opportunities that are often more challenging to replicate in virtual settings. This approach is particularly significant in elite educational institutions like Harvard, where the quality of peer interactions and the immersive learning environment play a crucial role in shaping the overall educational experience. The in-person aspect not only enhances academic learning but also contributes to personal growth, networking, and the development of soft skills that are vit ...
Counterarguments
- Strict admission and completion standards may perpetuate inequality by favoring applicants with more resources and support.
- Exclusivity can be seen as elitist and may not necessarily correlate with the quality of education provided.
- The lack of guaranteed outcomes can be problematic for students who invest heavily in their education expecting tangible returns.
- Selective program completion may contribute to high levels of stress and competition among students, which can be detrimental to learning and well-being.
- In-person learning experiences are valuable, but they may not be accessible or practical for all students, especially those with financial constraints or geographical limitations.
- Online education programs ca ...
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Addressing Churn and Continuity in Education Businesses
Alex Hormozi digs into the issues surrounding churn in education businesses, explaining that inherent customer "graduation" after gaining skills poses a challenge for revenue continuity.
Education Doesn't Inherently Lead To Continuity or Revenue
Hormozi emphasizes that in education businesses, customer churn is natural unless the business offers continued education. After students "graduate" and complete their education, they move on instead of continuing to pay.
Customers "Graduate" After Gaining Skills, Rather Than Continuing to Pay
He further explains that education businesses often see customers leave once they've gained the desired skills, impacting the business's ability to maintain ongoing revenue. This leads to a need for businesses to constantly sell to new customers to maintain revenue.
Payment Plans Are Often Mistaken For Continuity by Education Business Owners
Hormozi clarifies that a long-term payment plan should not be conflated with customer retention or ongoing engagement. He points out that once the educational service has been delivered, the relationship typically ends, challenging the notion that payment plans equate to business continuity.
For Continuity, Education Businesses Need Recurring Offerings
To achieve low churn and maintain continuity, Hormozi advises that education businesses should offer additional value through recurring services or problems that customers face frequently, which can lead to service businesses that are potentially more valuable than the education itself because they encourage customers to return repeatedly.
Offerings: Hot Product Lists, Property Lead Lists, Community Access
Hormozi does not discuss specific recurring offerings or consumable pricing strategies in the provided information. However, he implies the im ...
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Addressing Churn and Continuity in Education Businesses
Additional Materials
Counterarguments
- Education businesses can mitigate churn by integrating alumni networks and ongoing support, which can provide value and encourage graduates to maintain a relationship with the institution.
- Some education models, like lifelong learning or continuous professional development, inherently encourage continuity as individuals need to update their skills regularly.
- Long-term payment plans might contribute to a sense of commitment from customers, which could potentially lead to other forms of engagement or upselling opportunities.
- The assumption that customers will not stay engaged after their initial education is complete may not account for the value of brand loyalty and the potential for word-of-mouth referrals from satisfied graduates.
- Offering recurring services or products may not be feasible or aligned with the mission of all education businesses, especially those focused on niche or highly specialized areas of stu ...
Actionables
- You can create a personal learning subscription box tailored to your ongoing interests, such as a monthly delivery of books, tools, or resources that align with your evolving educational goals. For instance, after completing a photography course, subscribe to a service that sends you different types of camera lenses, photography magazines, or access to exclusive online galleries each month to continue honing your skills.
- Develop a habit of peer-to-peer skill sharing where you and a group of friends or colleagues exchange knowledge on a regular basis. Set up a monthly "skill swap" meet-up where each person teaches something new they've learned, ensuring that everyone continues to learn and engage with new content even after formal education ends.
- Engage in a "skill extensi ...
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Building Sellable Business & Recurring Revenue in Education
In a discussion on business models in the education sector, Alex Hormozi highlights strategies for building a sellable business with recurring revenue by leveraging continued education and supplementary services.
Continued Education Creates Continuity
Hormozi discusses the value of a continuing education model, which compels professionals to stay up-to-date with evolving technology and practices. This model offers a series of certification levels that can potentially retain customers throughout their careers. However, the trade-off is a notable decline in retention with each subsequent certification level.
Prerequisite Skills Required For Continued Education Program
He references institutions like Harvard that sell a progression of education—bachelor’s, master's, doctoral degrees—as an example of continued education that requires prerequisite skills at each level. This educational structure can perpetuate customer engagement, underlining the importance of meeting the demands of the program with those holding the necessary skills.
Services Can Surpass Education In Value
Hormozi suggests that ongoing services can be more valuable than one-time educational content, as customers often prioritize continuous service. For businesses in the education sector, creating a model where the service offered results in repeat payments from customers is a significant advantage.
Ensure the Service Is Repeatably Payable by Customers
Hormozi points out that if a service meets a recurrent need, customers will continue to pay for it, indicating that a well-delivered service garners more value than just the educational aspect ...
Here’s what you’ll find in our full summary
Building Sellable Business & Recurring Revenue in Education
Additional Materials
Counterarguments
- The continued education model may not be suitable for all professions, as some fields may not evolve rapidly enough to require frequent updates or certifications.
- High costs and time commitments associated with continued education can be a barrier for many professionals, potentially reducing the customer base.
- The assumption that retention declines with each subsequent certification level may not hold true for all industries or educational programs.
- The progression of education model, exemplified by institutions like Harvard, may not be replicable by all education providers due to differences in reputation, resources, and student demographics.
- The value of services over educational content can vary depending on the industry and the specific needs of the customer; in some cases, the educational content may be more valuable than supplementary services.
- The focus on repeat payments may lead to a business model that prioritizes revenue over the quality or relevance of the services provided.
- There is a risk that the emphasis on selling services could dilute the core educational mission of an institution, potentially compromising academic integrity.
- The strategy of employing people and charging a premium may not be sustainable or ethical in all contexts, and could lead to e ...
Actionables
- You can enhance your professional value by enrolling in a tiered skill development program that offers advanced certifications as you progress. By doing this, you're not just learning; you're also creating a roadmap for your career advancement. For example, start with a basic course in a field you're interested in, such as digital marketing, and plan to take the next level of certification after six months, ensuring you have a structured path of growth and learning.
- Consider subscribing to a mentorship service that offers continuous professional guidance instead of attending a one-off seminar. This way, you're investing in a relationship that can provide tailored advice and evolve with your career. For instance, find a mentorship platform where you can have monthly check-ins with a mentor in your chosen field, which can help you navigate career decisions and stay updated with industry trends.
- Opt for educational progra ...
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