Scoring big with SAT-preparation company
By Alana Semuels
Los Angeles Times
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LOS ANGELES — Like many business school graduates, Jake Neuberg and Ramit Varna had big plans.
Theirs didn't involve corporate offices with city views or big signing bonuses. Instead, they focused on the standardized test that is the bane of many high school students' existence.
When they graduated from Anderson School of Management at the University of California, Los Angeles, in 2002, the two wanted to create the country's largest SAT-preparation company, even larger than long-established companies Kaplan and Princeton Review.
"We were full of that unrealistic optimism that you need to have to be an entrepreneur," said Neuberg, 31.
Not that Revolution Prep, the company they founded in 2002 out of the back of Varna's apartment, is remotely close to failing the aspiration exam.
Revolution Prep is the leading SAT test-prep company in California in sheer numbers with 10,000 students, its owners say. (Princeton Review contends that it is larger but acknowledges that Revolution will have the most students next year.) It also reaches customers in New England, New York and the Washington, D.C., area. Neuberg and Varna employ 40 full-time and 300 part-time workers and expect revenues of more than $6 million this year, up from $14,000 in 2002.
Test preparation has become a hot business as the crop of college-bound students grows and as entry into top schools becomes more competitive. Business is so good that Kaplan Test Prep and Admissions has helped its parent, Washington Post Co., weather the newspaper advertising and circulation slump.
But the industry has come under criticism from those who say that it gives some students an unfair advantage. Basic classes from companies such as Kaplan and Princeton Review cost around $1,000, and prices climb if students hire individual tutors, who can charge hundreds of dollars an hour.
"Kids are deluged, correctly or not, into believing that they are involved in an arms race in which their competitors are getting the best coaching money can buy," said Bob Schaeffer, public education director of Fair Test, a nonprofit that advocates far less emphasis on standardized tests. Schaeffer thinks that the test preparation companies leave less-affluent students "further behind the eight ball."
Neuberg and Varna offered a solution to such complaints by undercutting their competitors' price by half and telling parents, teachers and students that they wouldn't turn away those who couldn't pay.
The price wasn't the only thing that was different about their new test-preparation company. They offered courses in schools, so students wouldn't have to travel far. They tried to alleviate students' anxiety about test-taking and changed typical preparation curriculum to make students more interested in the SAT. Familiar with technology, they established online components that allowed students to check up on their practice test scores and progress online.
They tried to emphasize that they were more approachable than the big companies and that they cared more for individual students. They kept true to their promise never to turn anyone away — at one school, 36 of the 37 students they tutored were on scholarships.
"Word-of-mouth marketing among parents is an awesome thing," said Palma Odano, a past president of the Culver City PTA, whose two children took courses from Revolution Prep and who started recommending the company to friends.
When their marketing efforts started to pay off in the summer of 2003, Neuberg and Varna were still working off Varna's couch. In May 2004, they moved into a small office without air conditioning in Santa Monica. By the end of the summer, they had paid off their debt. In a few short years, they were growing astronomically.
A student of SAT vocabulary might even call it a coup.
Their bigger competitors aren't quite sure what to think.
Paul Kanarek, president of the Princeton Review franchise in Southern California, calls his product a "high-end service," comparing Princeton Review to a Lexus, and Revolution Prep to a Toyota. "I offered scholarships for 25 years, I just never perceived it to be a marketing opportunity," Kanarek said.
Even five years after graduating from business school, neither seems in danger of becoming a corporate stiff. And they still believe in the power of karma.
"If you do the right thing," Neuberg says, " people find out."