Online Learning

Ryan Neman

How Ryan Built a National Tutoring Agency, HeyTutor.com

Ryan Neman

Location: Zoom
Date: 5/5/2020
Profession: Founder and CPO

Q & A

Tell us about yourself. Who are you and what do you do for a living?

My name is Ryan Neman, and I’m the Founder and CPO of HeyTutor. HeyTutor is an online platform that connects tutors and students in over 250 subjects across the nation. 

We offer a variety of services from in-person tutoring to online, and now on-demand tutoring.  We’re now in our 5th year of running the business.

What's your backstory and what led you to starting HeyTutor? What drives you?

I grew up in LA and from a young age knew I had dreams of being independent and starting my own business. The journey of HeyTutor starts with my own academic struggles as a student.

After high school, I went to Santa Monica College with hopes of transferring to a 4 year university. I was faced with many difficult classes, and like all students looking to transfer from a community college; you are faced with the pressure of knowing it's your last shot to get into the school of your dreams.

This led me to look for additional resources like tutoring. I noticed there was a huge inefficiency in the industry, as I started spending more time looking for a tutor than actually working with one and studying. It seemed like a market I knew both sides of: students and tutors. I decided to take a risk and start out something which was initially just a hobby.

It seemed like a great opportunity because after high school I felt like I had a fresh start and wanted to push myself. Most of my friends were gone at universities, school wasn’t taking up much of my time, and I was looking for self purpose. 

Skyler, who was one of my close friends from high school, was at SMC with me and we had a couple of classes together. He was motivated; definitely more motivated than me. 

He didn’t grow up in the same bubble as me, and wasn’t as conservative or trying to mitigate risk.  He wanted to be aggressive because he knew he had nothing to lose. I was instantly drawn to this mentality which seemed like the missing “push” I needed to move forward. 

His motivation appealed to me on a lot of levels.  Little by little, we started doing different entrepreneurial things from buying and selling Coachella tickets or even buying and selling stuff off Ali Baba. 

The first venture we started together was tablets in restaurants where you can order your food.  We tried that out, and even partnered with a developer, but after a couple of months we realized we were in way over our heads. 

We had a live demo with one of our competitors and we were just blown away.  It hit us like a ton of bricks that we weren’t able to compete. Luckily, we didn’t really put any money into it, so it was just kind of a learning experience, which I’m all for.

We started off with just a cell phone and a website.  I actually made the website myself on Wix.  The first thing we did is print out a bunch of tutor flyers and put all of them around UCLA to find tutors. 

We went there at night and just put them everywhere.  We got a bunch of emails and calls from that, and we even had a friend of ours acting as an account manager over the phone. 

She would basically call every tutor and schedule in-person interviews.  Then we rented a cheap conference room for one day and we literally interviewed 50-100 tutors in one sitting, one by one.

We would bring in 3 people at a time and interview them. By the end of the day we had a list of vetted tutors in LA. 

Now that we had the tutors, we needed to get some students. Getting students was a bit more tricky because putting up flyers in residential areas wasn’t really successful; and would also get taken down.

We were able to put up a few free digital ads, but we were really just winging it at that point - seeing what worked and what didn’t. We got creative.  We were young and naive.

Eventually, we finally got a bite on one of the ads we posted on care.com. We didn’t really know the price of tutoring.  For us, $20 was a lot of money and that’s what we started off charging.

So, when we finally got our first client, we were billing by the hour, and we charged $20 / hour. We put in all of the work upfront, and we didn’t charge any money until after the services were rendered. 

We paid the tutor $19/hr and we made our first dollar.  Even though it was just one dollar it was kind of a huge break-through moment for us because we stayed determined and finally saw a bit of success.

We were honestly ecstatic. We knew we could make the margins better and slowly scale. 

We really had no expenses.  We didn’t have an office or anything.  All we had was a website and a cellphone. 

Little by little we grew it from there, but we wanted to get more clients faster.  We decided to get these huge 8 by 3 banners and in the middle of the night we would go to every school in the LA unified district and pin them up. 

We literally would go and stand on each other’s shoulders to put these banners up and tie them onto the gates at the schools. Looking back it sounds crazy but it was the only way we knew how to market.

The way we saw it was, yeah we might get a little bit of pushback, but the worst thing that will happen is they just take it down and maybe send us a warning. It was worth the risk.

It worked. We got demand the day after we put them up.  We were getting blown up on the phone and we were honestly the cheapest option because at the time we didn’t realize how much our other competitors were charging.

We were thinking about it from the perspective of a college student with a limited budget. We were charging like $25 / hour, no commitment, pay as you go and just full-flexibility.

If you wanted a refund or if you had an unsatisfactory session, we were there for you.  We were your team the whole process through.

We called in after every session. Called in to check on test results. Called in even just to let students know about a new tutor we hired.

We learned so much just from talking to our customer base that it enabled us to provide a better service every day that went by.

Little by little we started to scale and we got smarter.  

How did you go from idea to launching a business? What was it like?

 Honestly, we were young.  We weren’t formal with anything.  We winged everything that we could. For our agreements with contractors, we found a template online. 

We didn’t use a lawyer. We didn’t build a fancy website, we used Wix, which anyone can use. Our cell phone was $30/month and was a flip phone.

We did everything that we could at the lowest cost possible.  I think we started the company with $400 each and have since never put another dollar that wasn’t generated in cash flow from the business. We just kept it really lean until we saw that there was that potential.

I think the biggest challenges for us when it came to getting it up and running was just always being available for our tutors and students. 

We were both in school, and we had this cell phone on us that was supposed to be our office number with someone who’s always available to answer.  At first, Skyler and I took turns. 

He would have it for one week and then I would have it for one week.  Sometimes the phone would ring at 6 AM and you just had to get up and answer it because it’s a potential sale or a customer with an issue.

Besides that, the next challenge was marketing.  It was pretty easy to find tutors in the early stage, but marketing was hard. 

We entered the industry when digital marketing got very expensive.  If you talk to anyone that started a business 10-15 years ago, they’ll tell you that Price Per Click (PPC) marketing was just way cheaper. 

You could scale a business a lot easier through digital marketing, and today it’s not as easy.  Finding organic ways to reach clients was hard for us, but because we were good salesmen, and had a low-cost and easy platform, we got a lot of referrals.

We made our way into one city at a time starting with Beverly Hills, and branching out into other parts of LA, and now the entire nation. 

It started off slow. It was kind of just a side business for us that we never knew would turn into this huge business. 

We were just two motivated guys that wanted a business to generate a couple extra bucks on the side.  We wanted it to be something we were also passionate about.

Since starting, what has worked to attract and retain business?

Our marketing has adjusted a lot throughout the years. Initially, it was all gorilla marketing like putting up banners and flyers everywhere we could. 

We tried to replicate these tactics in other cities as well. We actually took a trip to San Francisco in 2016 and we took a bunch of banners with us and we even changed our name. 

Initially, we called ourselves Beverly Hills Academics.  Obviously that wouldn’t work in San Francisco. For a week straight, all we would do was walk door to door put up banners and slip flyers under doors in San Francisco. We probably went to 40 schools and dropped flyers off at 300 hours. 

To our disbelief The San Francisco expansion was a disaster. It couldn’t have gone worse. We were doing everything we did in LA, but for some reason it didn’t work there.

I don’t know what it was logistically about San Francisco, but we just did not get calls back.  That’s when we realized if we really wanted to scale we needed to change our marketing strategy. 

Marketing for us has been a lot of trial and error. We didn’t throw a lot of money into any initial campaigns, but if we saw it worked we would scale it. 

At this point, Skyler and I were living together.  We had an apartment that doubled as our office. We both dropped out of school and we were just answering calls and making tutor/student matches all day. 

I dropped out of school right when I got into UCLA.  My plan was to initially take night classes. Unfortunately, once I tried signing up for my first semester of classes I noticed that all UCLA classes end at 5PM latest. I had to pick one or the other - and I chose my business.

That was a pretty big deal especially, growing up in my community where you're expected to do the norm and play it safe. I got a lot of pushback from my family for that. 

Every time I was with my aunts, uncles, grandparents or cousins they were like, “What the hell are you doing? Why are you doing this? Do you really think that what you're doing is going to take off?” etc.

Looking back I feel like that was the best thing that ever happened to me. It created fuel inside of me.  It made me hungry to just prove everyone wrong. 

It was definitely a dark time in my life.  There were a lot of people that weren’t exactly supportive, and I didn’t have any of my high school friends around me. I was living with Skyler and we were just working all day 7 days a week. 

We had a good amount of consistent clients at this point so we were able to invest in a few different marketing channels.  That’s when we decided to try raising our prices and try digital marketing. 

We created an upfront package plan  to cover the sunk costs from digital ad spend because if we did pay by the hour, we would go broke before we could reap any of the revenue.  We found someone on Craigslist that was an expert in Google Ads.  He set up a few campaigns for us. 

I remember the first day we launched the campaign we sold 10 hours for $65 / hour.  The client paid us $650 upfront and before that we had never sold an upfront plan.

By changing our pricing structure we realized this could really work.  We realized that parents and students were willing to pay significantly more for a quality service. We were 21 at the time and $650 was a lot of money for the business.

We continued to slowly scale through ads, but it was still really expensive.  There were a lot of days where we were really just breaking even. 

For a service or product you have to look at the lifetime value, and it takes time to earn back your customer acquisition cost and then more.  

We couldn’t really afford that.  We weren’t a funded company, so we had to make sure that we were profitable every day or else we would sink.

Little by little we continued scaling into other cities, other subjects and other keywords.  Again, it was more just all digital at that point and even though it was more expensive, it was a lot more efficient and scalable because we didn’t have to go from city to city manually dropping off flyers and stuff like that. 

Additionally, when it comes to analytics, you can’t compete with the data you can get from digital marketing campaigns.  You know everything that’s going on with your ads and how they’re before, so everything is just easier to scale. 

Then we got into SEO. Now we’re at a point where SEO is bringing in 40% of our sales. Tutoring is a necessity in a lot of households, and people seek it on a daily basis through all search engines.

What’s the breakdown of your percentage of sales broken out by marketing channel?

40% SEO, 20% referrals, 40% digital marketing campaigns.  We also do a lot to optimize our digital campaigns like email marketing sequences, sms marketing etc. 

Top of the funnel comes from either organic search or ads. 

Through starting your business, have you learned anything particularly helpful or advantageous?

I’d say probably the most important thing is analytics.  You really have to have your key indicators really down before you scale.  If something doesn't work at a small scale, it wont work at a large scale.  

Most companies that have raised money are spending a ridiculous amount of cash on customer acquisition, and they’re just buying revenue.  Once that money runs out, they’re either going to raise more money or they’re going to tank. 

The next thing I’ve learned is the importance of automation.  We have invested a lot of capital and time in research and development. Automation was the key to our business. 

I think if we didn’t implement a lot of the stuff that we did on the development side, we would not be profitable today. 

There are a lot of tools available out there that can help you automate parts of your business.  That’s going to save you tons of time and money every year.

To what would you attribute your success as an entrepreneur?

I’d attribute my success to being scrappy and resourceful. That was probably the best thing at an early stage. Since we didn’t have the funds behind us, we had to bust our asses and put flyers on doors, flyers on trees, banners on schools and everything else we could at the lowest possible cost to get customers. 

Being scrappy, resourceful and bootstrapping the business was probably the only way that we could have gotten to we are today.  

There are so many tutoring companies out there, even ones that have raised millions with a similar model; and we’ve seen them go out of business. You can’t just throw money at a business and make it work.

So I think coming from that background as two young hustlers with no money, we’ve just learned how to really stretch a dollar.

What career accomplishments would you say you are most proud of and why?

One of the things that we did that really enabled us to scale was automating our matching process.  Looking back on it before that it seems like we were in the Flintstones era before automation.

Initially, we had all of our tutors on an excel sheet.  All of their information broken out by name, address, subjects etc.  Whenever we got a client we would have to scroll through this excel sheet and see who’s available to take the client and call them. 

There were so many back and forths trying to find a tutor and it was a really inefficient process.  Even the way we used to handle tutor hours was just ridiculous. 

Originally, everyone had to print off a physical sheet and it was a chart that they had to use to log their hours one by one. 

We had to deal with bad handwriting, low resolution pictures sent from their phones and it was just bad. Then I’d have to manually go through each of these one by one to add up all the hours, bill each client at the end of the month, and pay each tutor.  It took so much time.

I hired an engineer and we basically put together a custom CRM.  Tutoring is a unique industry, it wasn’t something we would just do with SalesForce. 

We’re a matching service, similar to Uber and Lyft, so we have to make our matching as efficient as possible.  Creating the custom CRM is what really led us to scale.

We have every tutor, with all of their subjects selected through a preset list on their custom account.  The CRM allowed every tutor to create their account, log their hours and get matched directly through the portal.  

In the beginning, it was a CRM that we could plug in the data from each potential student and it would populate the available tutors from our backend.

We had an algorithm that determined which tutors are within a local radius and met the criteria that the client is looking for. 

Our backend would then send off an email and SMS notification to every single tutor in the area outlining the work opportunity and ends with “Call if you’re interested”, and our phones would blow up. It was huge for us.

We didn’t have to call every tutor one by one to find out who’s available and interested.  Instead, the calls were all coming our way, matching became fully automated, and there was a login portal for clients and tutors, and billing went straight through the portal.

Keep in mind this was all four years ago.  A lot of this stuff seems pretty normal, but at the time stuff like SMS wasn’t something that was widely used back then. All of the data was put into one place organized automatically exactly the way we needed. 

If it wasn’t for this we would have needed something like 7 employees to handle all of that work. Creating that CRM was the only way we were able to scale. Now our CRM produces way more complex and detailed metrics and efficiencies.

It’s  the lifeblood of our business and we’ve probably invested $700,000 to date just on this one platform. 

At what point did you go raise money for the company?

We bootstrapped for a very long time. We got to a point where we were already doing a few million in revenue, but wanted to make bigger investments and marketing and technology and we needed more funds to do so.

We also didn’t just need money. We were really looking for a strategic partner to help get us more efficient as we scaled.

What's the biggest challenge you've had to overcome in business and how did you go about it?

We had a massive fulfillment issue. When you think of another hyper-local matching service like Uber, Wag or Lyft, there’s one rider and only a couple types of driver/walker. 

For us, that’s not the case because we basically have over 250 types of riders (subjects).  We offer everything from algebra, Spanish, guitar lessons, and even yoga.  So, the issue for us has always been fulfillment. 

Even though we have 50 algebra tutors in LA, a student may want only a female that’s available at 4 PM on Wednesdays etc. 

You can’t fully automate something like that.  In the early stages we sometimes had to just wing it to the point where we would sign up the client without even knowing for sure if we had a tutor. 

The second we’d make the sale it was crunch time to pick up the phone and go find this tutor.  We’d post jobs on craigslist, we’d post on Facebook and we’d just do anything we could to find this tutor that would match the client’s preferences.

It got too messy and we ran into quality control problems when trying to scale.

That’s why we got into online.  You just can’t fulfill every request hyperlocally otherwise. It’s just not possible for tutoring. There are so many companies that have come around trying to do in-person on-demand tutoring, but they’ve never worked. 

There are so many different subjects, there are so many different niches within those subjects, and finding the right personality, gender and age are huge variables as well. 

As we scaled nationwide we were getting clients literally in the outskirts of cities and towns we’ve never even heard of.  A lot of it has been educating the customer. 

We know students want the best of the best, but it’s just not possible to get that in person tutor in a small town especially with a challenging subject. For example, there are only so many LSAT, GRE, etc tutors in the nation.

The chances of one of them being in every zip code in the nation is just not possible. With online tutoring you’re able to work with the best tutors across the entire nation, which really allows students to get the most out of it.

Fulfillment is still one of our biggest challenges today, but it’s something that we solve with preparation.  We have a clear picture of the areas and subjects we’re targeting, so that we’re prepared on the backend to fulfill those orders. 

Now we have over 20,000 tutors nationwide, with around 5,000 active students at any given time. 

HeyTutor wasn’t always what it is now. Like I said, there were a lot of processes that we were doing manually for a long time.  We recognized the power of automation and since then have done what we can to remove ourselves from the workflow. 

When we started HeyTutor in 2016, it was initially supposed to be this fully automated tutoring software for in-person tutoring.

We thought hey, if we can automate some of it why not automate the whole thing? It was a platform where students can browse tutors, message them, schedule lessons directly, and the tutor would then bill them through the platform.

This was a vision we had for full automation.  When we finally launched it and tested it out for about 6 months it just didn’t convert. 

We were getting a lot of messages and interest, but then we were relying on the tutor reaching back out and scheduling a lesson, location and handling billing.  That hit us hard.

We had spent so much time and money building this out and we were so excited about it; but it just didn’t pan out.

As a result, we went back to our original business model and we only automated certain pieces.  We took a big step forward and a couple of baby step backs to find that sweet spot that works. 

Now we still build a relationship with every parent on the phone.  Every student has their own customer rep, but behind the scenes there’s a lot that’s been automated. 

If you were a student 4 years ago vs. today you wouldn’t really notice a difference, but all of the nitty gritty stuff on our end is what we automated.

How are you doing today and what does the future look like? What's your ultimate goal?

It’s a very interesting time with Coronavirus.  I see these headlines all the time saying the online tutoring space is projected to grow twice as fast as it was before the pandemic. 

We’re not seeing the demand really matching with this. We’re still growing year over year, but it’s really just been a shift where all of our students are trying online tutoring.  I think a lot of people are holding back on purchasing anything right now.

We were planning to raise our Series B this year, but I don’t know if we still will because we’re profitable.  We’re a small team right now which makes it easier to make decisions. 

I like the way that things are not and I’m not sure we want to spread the cap table by bringing in more investors if we don’t need to. 

Ultimately, we want to continue to scale and experiment in other fields of education.  At the end of the day we’re a network of educators and that can be used in various ways whether it be creating curriculum, content or tutoring. 

There’s a lot of stuff we can do and we’re committed to scaling it as best we can. 

Lastly, I’ll just say I want to continue being creative and exploring new industries.  I like the excitement of learning and starting new things.

Software & Tools:

What platform/tools do you use for your business?

Wix - we started using this initially to make our first site. It was very user friendly and easy to use.

Salesforce - our sales team currently uses this to manage all of our leads.

Talkdesk - Our team uses this to handle our nationwide calling

Zoho - This was initially our CRM to manage sales leads.

Upwork - We use Upwork all the time to find quality affordable freelancers all around the world.

ActiveCampaign - We use ActiveCampaign to manage our email marketing campaigns. 

AWS - We use AWS to host our website and all its traffic. 

Zapier - We use Zapier to connect several different pieces of software together. We’re put in many situations where we need to transfer data in real time and Zapier is the only solution.

Resources:

What have been the most influential books or courses you’ve learned from along your journey?

A classic, How to Win Friends and Influence People, is one of my favorite books. It gave me the confidence I needed to build relationships with clients as well as pitch to investors.

Recently, I signed up for MasterClass and listened to the class on negotiating. I learned a lot of subtle techniques you can use in any conversation to make a better business deal.

Final Question:

What advice would you like to share with people based off your experiences?

My advice would be to stay positive and stay moving forward; no matter what. If you have a goal and you keep moving at it, each failure just gets you one step closer and it’s just a matter of time before you get there.

Accept the bad times and embrace it, because it's inevitable and you’ve got to be prepared for it. Value small improvements and know that it’s part of the process - nothing will happen overnight.

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