Nathan Allen always looks forward to September and the back-to-school season. That”™s because high schoolers will be taking their SAT tests, and Allen is in the process of building a national ”“ and international ”“ business that prepares students for the college entrance exams and other standardized tests.
Right now, his four-year-old Andover College Prep in Westport is mostly concentrated in four upscale Fairfield County communities ”“ Westport, New Canaan, Greenwich and Ridgefield ”“ along with offices in Wallingford and California and two in South Korea. One reason for the success is that Allen was able to build a business model that exploits the holes he sees in the operations of the two largest national companies that do essentially the same thing ”“ The Princeton Review and Kaplan Test Prep. “Parents and kids know them,” Allen said of those two test preparation companies. “They have strong brand recognition.”
He should know, at least about The Princeton Review. When he was a freshman at Dartmouth studying for his bachelor”™s degree in literature ”“ he graduated in 1994 ”“ he began working for The Princeton Review. “My resident director worked for them and asked if I wanted a job writing and reviewing materials for them,” Allen said.
When he graduated, he was recruited by Princeton Review to run its Tampa and Miami offices in Florida, living part time in Tampa and part time in Miami. “I worked through the end of 1995, and thought I was doing poorly,” he said. Business at the two locations was growing, “but not spectacularly.” The home office, however, was really happy with his performance because “1995 was a bad year for them and they had declining revenues in several sectors, in many cases for the first time.”
His performance was enough to earn him a major promotion. At the end of 1995 he was promoted to executive director at Princeton Review”™s New York City headquarters to run the national operation. “I was 24 and working with a bunch of people much older than me with MBAs from Stanford and Harvard,” he said. “In some ways it was kind of ridiculous.”
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A better mousetrap
Allen stayed at Princeton Review for three years “and then got bored,” he said. “There was nowhere else to go in the company. We had a spectacular year in 1997, and going into 1998 I decided I wanted to go do something else.” The reason was simple enough. “For the last two years there, I couldn”™t tell I was working for an educational company,” he said. “I sat behind a desk looking at spread sheets. I could have been working for any company.”
He joined Morganroth L.L.C. in Westport ”“ it has since been sold and the operations moved to Atlanta ”“ as president in 1999, and that got him out of the office. The firm”™s new consulting division would make proposals to colleges and universities that sought help in, say, marketing themselves or boosting their student population. “We”™d suggest all kinds of things and, depending on what they wanted to do, we”™d implement the plan.”
Allen “would go out to initial meetings, especially with new or larger universities, so I was in the field a decent amount, which is what I was interested in doing.”
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By then Allen and his wife, Sally ”“ they married in 1995 ”“ had moved to Westport. He stayed at the company until 2002, when it was sold and “I sat around a little bit, thinking about what to do.”
What he thought about were the strengths and weaknesses of student test preparation companies “and how to exploit that,” he said. “I set out to build a better mousetrap, so I started a company to compete with Princeton Review and Kaplan, and build it so the competitive advantage was structural, meaning the competitive advantage was built into the way the company was built so competition could not easily address it.”
If, for example, the competition budgeted 12 percent of its revenues on marketing, “they can”™t go beyond that without blowing the numbers or taking on debt,” Allen said. “If you build a company that is capable of spending 20 percent of its revenues on marketing, the competition cant”™ follow you there. Either they”™ve got to give up room on margins, spend money that would have been the bottom line, or take on debt.”
Allen said he decided to structure the company “to spend the maximum amount of money on teachers and materials and spend even more if we needed to, spending more than anyone else and make it virtually impossible for them to compete in those areas.” He also decided to “spend money to pay teachers more, hiring better people and paying them more so we wouldn”™t have to hire and train multiple times a year.”
“This isn”™t a $15-an-hour spare job they do once in a while,” he said. “It”™s their job. We are very expense-heavy on teachers and light on management.”
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International growth
In 2003, he started Andover College Prep (www.andovercollegeprep.com), taking six months to come up with the name. “You think there”™s an Andover College somewhere, but there isn”™t,” he said. “We did a lot of working picking the name that sounded like it had great credibility. That”™s why the name works.”
Allen rented a small space in Westport to begin SAT prep classes, developing his own materials. “Then we added on college admissions and classes for other standardized tests and started opening more locations.”
Andover College Prep offers an eight-week preparation for SAT tests for about $1,150. “We guarantee a 250-point increase,” he said. “If they don”™t get that, they come back for free and we keep working with them until they do.”
Andover”™s most expensive service ”“ at $21,000 ”“ is something he calls Total Management. “A student that”™s not doing very well or who has learning disabilities can come to our office once or twice a week or every day, and we”™ll guide them through the school in terms of academic tutoring, test preparation and college admission,” he said.
In the four years since Andover opened its first classroom, Allen has been able to jump outside Fairfield County and out of the country. Within five years Andover should have around 40 locations concentrated in the Northeast and California, and locations in India and China “because the interest is there.” Allen has visited both counties twice to develop the market, and expects to open operations sometime next year.
“Right now, we have no debt and no investors,” Allen said. “I”™m not particularly keen to take on investors or to franchise, but I”™m open to all possibilities. We”™ll keep on growing fairly slowly, continuing to grow the way we have been because we”™ve been successful.”
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