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 but instead the standardized test that is the bane of many high school students' existence.
When they graduated from UCLA's Anderson School of Management in 2002, the two wanted to create the largest SAT preparation company in the country, 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.
For The Record
Los Angeles Times Tuesday, November 27, 2007 Home Edition Main News Part A Page 2 National Desk 1 inches; 26 words Type of Material: Correction
Test preparation company: A story in Business on Nov. 22 about SAT preparation company Revolution Prep misspelled the last name of co-founder Ramit Varma as Varna.
Revolution Prep is the leading SAT 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, 32, employ 40 full-time and 300 part-time workers and expect revenue 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 about $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 for less emphasis on standardized tests. Schaeffer thinks that the test preparation companies leave less affluent students "further behind the eight ball."
Varna and Neuberg responded to such complaints by charging half their competitors' price 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 that 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. They established online components that allowed students to check up on their practice test scores and progress online.
The pair say that Revolution Prep was successful because they looked at education as businessmen. Neuberg spent most of his career until business school as a banker, although he had tutored for Kaplan; Varna's background was in management consulting, and he had worked for Princeton Review. They say their experiences with Princeton Review and Kaplan enabled them to see the flaws of both companies.
Their methods of finding financing probably won't be held up as a case study in any business school class. Both left UCLA's Anderson School of Management tens of thousands of dollars in debt. To start their business, they applied for dozens of credit cards and paid for everything they needed, including practice tests and promotional materials, with plastic. They received turnoff notices for their phones. Varna sold his car to get more cash.
"For the first 12 months, we'd sit down and ask ourselves how much money we needed to make to keep the doors open. We'd say $30,000, and then we'd make $15,000," Neuberg said. They visited high schools and tried to educate guidance counselors and students about their new company, in what Neuberg calls "straight hustling" and Varna calls "straight desperation."
Nancy Leonard, an independent college counselor who was at the time a guidance counselor at Mira Costa High School in Manhattan Beach, says she remembers when "these two young, fresh-faced boys" showed up at her office pitching their company. She was accustomed to young college graduates offering their services as SAT coaches, but in a year or two, they would be gone, on to graduate school or a different job.
"I looked at them as I did everyone not named Kaplan, Princeton Review and Ivy Prep, and I told them, 'This is going right in the trash,' " she said about the material Neuberg and Varna had prepared. Leonard challenged Revolution Prep to tutor five of her students and improve their scores. When the students' scores climbed, she agreed to mention Revolution Prep in the same breath as the big three.
Earning that kind of respect from nervous parents was not as easy.