What’s an Online Education Business Worth?

Cauliflower is nothing but a cabbage with a college education – Mark Twain

Leave it to Twain to eloquently portray what a college degree is worth. Most of us don’t think of education as a business. But it is, and a great one. Schools and universities are the largest landowners, with the biggest buildings…

But there is one business that is even better than traditional education. Online education. Here the business owner is not limited to the number of faculty members or classroom seating capacities. They can scale their revenue just like a technology company while enjoying the consistent cash flow of student tuitions.

Let’s see what an online education business is worth…

There are over 7 million students enrolled in online learning courses, and this industry is projected to be $370 billion by 2026.

Professor of Economics and Dean of Extended Education at Sonoma State University, Dr. Robert Eyler, will show us the latest trends in online education. All you Professor…

Thanks, Bharat.

THREE TRENDS that are going on an online education right now,

1. One is breadth and depth, and the idea behind that is, is that we are seeing classes that 10 years ago, would have never been imagined would be online going online, including science classes, were trying to do relatively simple things.
   Lab experiments using stuff at home have allowed some more breadth and then on the depth size getting higher and higher in terms of the chain toward a degree, rather than just doing low division or low-level classes only. Those trends are starting to pick up where you can do a lot more in terms of full degrees online, and we are seeing a lot of private universities get into that space.
2. The second is interactivity. So, not only should it be somewhat lecture-based just to kind of get things kicked off, we are seeing a lot more modeling where it’s more conversational, more seminar-style online, and that’s getting closer and closer to having a full university experience in class.
   And a lot of entrepreneurship is happening in that space in terms of being able to use out breakout rooms and do them well. So, best practices are coming out of some of the major education divisions of universities in the United States and around the world and experimenting with good ways of doing interactive online sessions rather than just purely Socratic or didactic movements with one lecturer, sort of sage on the stage, is getting a lot more conversation. And this is especially true for graduate education, where it is the conversation where most of the learning takes place.
3. The third big trend is trying to connect it back to face to face. One of the biggest issues concerning COVID-19 is actually having a situation in which you can have some face-to-face. So, a lot of students do not want to have 100% online.

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They want to have at least some connection to the students in class and it just does not necessarily pay off and having off session hours asynchronous learning. Otherwise, there is some movement to try to get more and more hybrid. And COVID-19 while accelerating the pace at which we are going online has also accelerated the idea of the experience might be lost. Somewhat if you do not have some face-to-face interaction?

But those are three big trends that I am seeing from my angle.

So, back to you Bharat…

Thanks, Dr. Eyler….your thoughts are most interesting to hear…

 

RULE OF THUMB

• Education is a business where customers are willing to pay more for prestige while putting in the least effort. It gives recurring revenue and has a low service cost.
• Online education businesses can sell between 5-10x on EBITDA.

 

There are 3 things owners can do to maximize the value of their business –

1. 42% of online students have motivational problems. This is the biggest issue with online courses. Introduce more ways to allow routine interaction to promote feedback and improve productivity. Daily scrums or check-ins will keep the students and faculty stay accountable and motivated.
2. Partnerships – partner with people who have people. Local businesses, non-profits, charities, schools, and municipalities. They all have members, attendees, and customers. They are all prospective students. Word of mouth is the best way to market yourself. Ask yourself, how did you hear about this Youtube video. Was it in the suggested videos column on the right?
3. Online everything. Don’t think of online education as an extension of brick and mortar. Think of brick and mortar as an extension of online. Like Amazon has warehouses and fulfillment centers to support its online business. Not the other way around. I am not talking just about the instructions or the homework. I mean everything. From sourcing new students to managing faculty, to marketing, and grading. This will help you shave costs, and scale your business.

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Historically, education was not considered a business. It was carved out as a way for community leaders, or captains of industry to give back. Now education is one of the best businesses to be in. There is a reason why universities have the largest endowment funds.

But this business is only limited by its brick and mortar barriers which are self-inflicted. Once the barriers are lifted this business grows on recurring revenue. And with the endless supply of job seekers, the demand for learning is limitless. In my opinion, it is the holy grail of businesses to own.

Bharat Kanodia – Founder and Chief Appraiser