By Evan Flaxman, JD, MBA
The first session sold out all 200 seats.
There were still students waiting who had to be turned away.
That was the moment I realized we might have something.
The idea had started almost casually. Matt’s office was next to mine at the University of Florida. Because my actual office hours were held in another office, I often spent time in his. We became friends, talked about everything, and bonded over a shared love of poker. We played in a highly competitive PhD poker league, and somewhere in the middle of all those conversations, an idea began to take shape.
Matt had already been tutoring individual students and small groups. I was the Head Teaching Assistant for FIN 3408, one of the university’s large undergraduate finance courses, and I knew firsthand how many students needed additional help understanding the material.
One day, I asked Matt a simple question.
Why don’t you teach a course on FIN 3408?
He thought it was a great idea. He asked whether I would have a problem with it, since I was the Head TA for the course.
I told him I wouldn’t.
Then he asked how we would work it out.
We’ll figure it out, I told him.
We did.
The First 200 Seats Sold Out
I helped with the marketing. I told students that there were private tutoring groups with a strong grasp of the material and that, if they studied and did the work, they should be able to pass—and hopefully earn a B or better.
Then Matt held the first session.
Two hundred seats sold out. More students were waiting. Some had to be turned away.
And the demand didn’t disappear after that first night. It continued throughout the semester.
The business was largely cash-based, the expenses were limited, and the revenue was substantial. But what interested me most was the question the success raised.
Was this really a finance problem?
Or was it a much larger problem that existed throughout the university?
During that semester, I had become friends with PhD students in other disciplines. I began wondering whether students in their fields were experiencing exactly what I had seen in finance.
If students needed this kind of help in FIN 3408, why wouldn’t they need it in accounting? Marketing? Mathematics? Statistics?
I began to see the possibility that we hadn’t merely found a successful tutoring opportunity in one course. We might have identified a need that existed across the university.
We Went After the Low-Hanging Fruit
We started close to home.
We added other business courses, including accounting and marketing. Then I looked at mathematics and statistics, where the opportunity seemed obvious.
I didn’t want to expand into every subject simply because we could. There were areas, including some of the sciences and engineering, where I didn’t have the same network or familiarity with the people teaching those subjects. I was much more interested in going after what I considered the low-hanging fruit: courses where the need was clear and where we could put a qualified instructor in front of the students.
Matt was a genuine people person. He was in the PhD program and knew a tremendous number of people. As we expanded, his relationships helped us identify talented instructors across different departments.
My role was largely deciding what we should take on next. Which courses should we offer? Where was the demand? And could we staff the course with a PhD instructor we trusted to deliver the quality our students expected?
We didn’t need to become everything to everyone.
We needed to identify the right courses and teach them exceptionally well.
Then the Word of Mouth Became a Wildfire
After the first semester, we didn’t need to manufacture demand.
The students did it for us.
Students who had been struggling were passing. Students who did not normally consider themselves B students were earning Bs. They told their friends. Their friends told other students.
The word of mouth was incredible.
It spread like wildfire.
By our second semester, we had ramped up to at least ten courses. After that, we continued adding approximately two to four new courses each semester.
What had started with one finance class was becoming a company serving thousands of students at the University of Florida.
And it was exciting in the rawest sense of the word.
I wasn’t worried about overhead choking us. There weren’t enormous monthly expenses that had to be met just to keep the business alive. We had limited fixed expenses, substantial revenue streams, and numbers of students beyond anything we could have reasonably hoped for.
The business model was phenomenal.
Eventually, our biggest problem wasn’t finding students.
It was finding enough places for them to sit.
Success Began to Change the Economics
For years, we held large tutoring sessions in hotel ballrooms.
But as the number of courses and students continued growing, physical space became a real constraint. We began discussing the need for a much larger permanent location.
And that was when I started looking at the business differently.
The economics that had made the company so attractive were beginning to change.
A permanent facility large enough to meet the demand would require a substantial investment. There would be buildout costs, fixed overhead, additional employees, and monthly obligations that hadn’t existed in the same way before.
The original business had been remarkably lean. We could scale quickly without being strangled by fixed costs.
Now, to reach the next level, we would have to invest heavily in infrastructure.
The business model wasn’t becoming bad.
Far from it.
But it was becoming a different business.
And at the same time, I was seeing another opportunity.
Two Good Opportunities Began Competing With Each Other
The University of Florida had an enormous student population, and I saw an overwhelming need for housing.
I began looking at individual homes and realized that I could buy houses and rent them to college students for more than the mortgage and other expenses. I could generate cash flow while building equity in a tangible asset.
And I could do it with less capital than what we were discussing investing in the tutoring company’s next phase of growth.
Suddenly, I wasn’t choosing between a good business and a bad one.
I was choosing between two good opportunities.
On one side was a tutoring company I had helped build from the ground up, one that had grown from a single finance course into a multimillion-dollar business.
On the other was an opportunity to take capital out of that business and put it into student housing, where I saw enormous demand and attractive economics.
I understood how valuable the tutoring company was.
I also understood that the next stage would require a level of investment and fixed overhead that fundamentally changed what we had originally built.
So I decided to sell my half.
There Was No Drama in the Valuation
Matt had a PhD in finance and was one of the smartest human beings I had ever met.
When we discussed the value of my half of the company, there was no need for gamesmanship. We were both capable of understanding the economics, and we were honest about them.
We looked at cash flow.
We looked at multiples.
And we reached a valuation.
That was it.
I sold my 50% interest and moved my capital into real estate, ultimately investing in four apartment units and making approximately four times my money.
Matt stayed with the tutoring company for another eight years. He took the business through the expensive transition from rented hotel ballrooms into a permanent facility and absorbed the substantial costs associated with that growth.
Eventually, he sold his interest for approximately twice what I had received eight years earlier.
I have never looked at that outcome and thought I made the wrong decision.
Building Something Doesn’t Mean You Have to Own It Forever
It is easy to judge a business decision by looking at what happened afterward.
If an asset increases in value after you sell it, you sold too early.
If someone else eventually receives more money for the same business, you should have stayed.
But that ignores time, risk, capital, opportunity cost, and what else you could have done with the money.
I knew the tutoring business was exceptional when I sold my half.
That was never in doubt.
Matt and I had started with one finance class. From there, we expanded into other disciplines, built relationships with PhD instructors, and created something far larger than either of us had imagined.
I was proud of what we had built.
But I also understood that the next phase of the company’s growth would require transforming the economics of the business. More infrastructure. More overhead. More fixed expenses. More capital.
At precisely the same time, I saw another opportunity that I believed offered a better use for my money.
So I made a choice.
I didn’t sell because the tutoring business had failed.
I didn’t sell because I had stopped believing in it.
I sold because sometimes the same judgment that tells you when to build something also has to tell you when it is time to leave.
Related reading: From Cleaning Wheelchairs at 11 to Helping Build a Nine-Location Business
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