Business plan for a start up english training service center

TRƯỜNG ĐẠI HỌC MỞ TP. HCM

UNIVERSITE LIBRE DE BRUXELLES

HO CHI MINH CITY OPEN UNIVERSITY

SOLVAY BRUSSELS SCHOOL

MBAVB3

NGÔ QUỐC PHONG

BUSINESS PLAN FOR A START-UP ENGLISH TRAINING
SERVICE CENTER

MASTER PROJECT
MASTER IN BUSINESS ADMINISTRATION
(PART-TIME)

Tutor’s name: Dr. Trinh Thuy Anh

Ho Chi Minh City
(2011)


i

CERTIFICATION
I hereby certify that I researched and wrote this thesis by myself. All reference knowledge and
information is fully indicated in the Reference chapter. I also haven’t used this plan for other
purposes than for the MBAVB3 thesis.

Ho Chi Minh City, 20 March, 2011

Ngo Quoc Phong


ii

ACKNOWLEDGEMENT
This thesis can never come into being but for the help of many wonderful people who have
made invaluable contribution.
First, I would like to thank my tutor, Dr. Trinh Thuy Anh, who has guided me through all
difficulties to complete this business plan.
My heartfelt thanks go to my mother and family, who have always stayed by my side to support
and motivate me.
My sincere gratitude also goes to professors at Solvay Brussels School for terrific lessons on
business, especially Professor Francois Faelli of Entrepreneurship and New Venture, who has
inspired me into being an entrepreneur.
I will also never forget Professors at Royal Business School, HCMC, for their highly practical
knowledge, lots of which is applied to this business plan.
Then I would like to show my gratitude to Ms. Minh from Vietnam Investment Group, who has
delivered a lot of market research information to save me plenty of valuable time, to Mr.
Tuyen, Marketing Manager, and Mr. Tu, Finance Manager, at Cleverlearn English Language
Center for providing useful documents which I used as benchmarks for my thesis.
This business plan is also, in no small part, due to my inspiring students and colleagues. I must
thank Ms. Huong and Ms. Ha, my friends and co-founders, who share my desire and belief, and
really motivate me to finish this project.
Saving the best for last, I highly appreciate Mr. Adam Khoo and his wonderful books, which
have totally changed my mindset, inspired, given me strong belief and set a clear direction for
my life and career.

iii

TUTOR’S COMMENTS
Mr. Ngo Quoc Phong is highly interested and makes a lot of efforts in doing with a start – up
English training service center, he also has strong expertise and experience in the field. His
research has got the requirement of the master project. I suggest the jury allow him to defend
this thesis.

Ho Chi Minh City, 20 March, 2011
Tutor’s Signature

Dr. TRINH THUY ANH


iv

Lodestar English Language School

Business Plan
March, 2011


v

Table of contents

Chapter 1:

Executive summary .............................................................................................1

Chapter 2:

Definition of the market ......................................................................................4

Chapter 3:

Business Description and Vision ......................................................................13

Chapter 4:

Description of Products and Services ...............................................................22

Chapter 5:

Organization and Management .........................................................................25

Chapter 6:

Marketing and Sales Strategy ...........................................................................30

Chapter 7:

Financial Management ......................................................................................36

Chapter 8:

Risk Management and Limitations ...................................................................43

REFERENCES..........................................................................................................................45
APPENDICES ..........................................................................................................................46


vi

List of Exhibits

Exhibit 1: Components of a business plan .................................................................................1
Exhibit 2: English Training Market ...........................................................................................4
Exhibit 3: BCG chart .................................................................................................................5
Exhibit 4: Porter’s Five Forces ..................................................................................................6
Exhibit 5: Comparison of some English schools .....................................................................10
Exhibit 6: The Learning Pyramid ............................................................................................12
Exhibit 7: Corporate Envisioning Process ...............................................................................13
Exhibit 8: Consumers use search, experience and credence properties to evaluate services...21
Exhibit 9: Organization chart ...................................................................................................25
Exhibit 10:Five dimensions of service quality..........................................................................31
Exhibit 11:The E-marketing mix ..............................................................................................34
Exhibit 12:Estimated revenue in the first year ..........................................................................42


1

Chapter 1: Executive Summary
The Business plan is at the cross-roads of the team, the
opportunity and the resources

Exhibit 1: Components of a business plan

I have been an English teacher and working at some of the biggest English schools like
VUS, Elite and Cleverlearn for 7 years. I have learned a lot but I am still not happy and
wondering what is the best way to teach English. At these schools, they just teach the language
and the same approach is applied to all students. As a result, good and motivated students turn
out good, and bad and de-motivated students end up being bad and de-motivated. There seems
to be no way out for these discouraged students.
I myself didn’t find an answer until 2 years ago when my brother gave me one of his
favorite books, “I am gifted, so are you” by Adam Khoo. This book really enlightens me and
changes my mindset about how to be happy and successful in life. I now believe that any
student can master English if they have a great desire, strong belief and right strategies to learn
English.

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2

Then I talked with several of my so-called bad students and confirmed my belief. Most of
the time, the root cause was either their lack of desire, diffidence (partly due to discouraging
comments by their teachers) and/or wrong strategies.
To help these students, I started to think of establishing my own school applying this new
approach together with other cutting edge knowledge, my own experience and observation. My
teachers will not be teachers but coaches who set goals, action plans and motivate the students
in a fun and competitive learning environment. The ultimate goal is that the students will like
English and be able to use the right tools (which other schools rarely care about) to teach
themselves. My mission is to help students build up their desire, belief and strategies in order to
teach themselves English in a fun, effective and efficient way.
Later on I met Ms. Ha, one of my teaching colleagues. Interestingly she also shares my
worry and interest. She is even one step ahead of me by conducting a successful study skills
program for students at her college. Therefore she would be an excellent R&D Manager and

make great contributions to the school.
The third and also last member of the management team is Ms. Huong, a Marketing expert
whom I met in a seminar at Royal Business School. Although I am taking an MBA program, I
still lack lots of realistic experience in marketing which is critical to success of a service
business. She would make a great Marketing Manager of the school.
The English training market is witnessing a great demand and growing very fast according
to the Department of Education of HCMC. However, students’ needs are not well satisfied, and
they tend to jump from school to school to find the right one for them. This is a great
opportunity for us to meet these unsatisfied needs. In this highly potential market, our school
will focus on teaching General English to high school and university students and white collar
workers in the middle class because this segment brings big profits and has the highest growth
rate.
Our core competences would be a comprehensive and innovative methodology, strong
marketing, culture and values, and a qualified team of 23 people. All of these are valuable
resources to create our competitive advantages.

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3

With a vision of becoming a household name in the field, our goals for the first year include
a ROI of 40% and profitability of 10%, which turn out to be realistic and attainable based on
our financial calculation. In fact, if the school just operates at 50% of its capacity with 10
students per class, ROI will be 43%, profitability 13%, sales $629,000, EBIT $93,800 and
profit $84,400.
In conclusion, the opportunity is great, the team is strong and the resources are available. So
we are confident that we can make a successful business and contribute great values to the
society.

Ngo Quoc Phong – MBAVB3


4

Chapter 2: Definition of the Market
I.

Industry and Outlook
1. Market size and growth
120%
high
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100%
80%
60%

Segment

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Low

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Medium

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Unattractive

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low
low

Price

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high

Exhibit 2: English training market
(Source: Vietnam Investment Group – VIG)
The English training market has been seeing substantial demand (750,000 enrolled
students in 2009 (HCMC Dept. of Education)), scattered supply and generally low entry
barriers due to low initial capital investment.
Each year there are around 35 – 40 new schools, about 5 – 10 of which are branches of big
schools. The others are mainly small centers.
Vietnam is one of the countries with the fastest GDP growth rate. English is a key to
success when Vietnam is becoming a global player. English is necessary to all people from
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high school and university students to office workers. Also, according to HCMC Dept. of
Education, this market is highly potential, especially during the period of 2012 – 2016 when
there are more favorable changes in educational policies.
In short, the market size is huge and the growth rate is high.

2. BCG

Exhibit 3: BCG chart
As mentioned above, a start-up English school will fall in the question mark quadrant
because the market is growing very fast and the new school has very little share. As a result, the
school has to spend quite a lot of money for branding and acquiring more market share to move
to the star quadrant.
The school should also follow differentiation and niche strategies (according to Professor
Michael Porter) to stand out in the crowd.

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6

3. Porter’s Five Forces

A Tool for Assessing Industry
Attractiveness: Porter’s Five Forces

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Exhibit 4: Porter’s Five Forces
a) Existing firms
There are around 500 English schools including branches of big centers in HCM
city. So the competition is very severe.

b) Threat of new entrants
An English school doesn’t require much capital or advanced technology. Thus the
entry barriers are quite low. The market is so huge that there is a lot of room for
newcomers.

c) Suppliers
The main suppliers are teachers. However, there are not enough good teachers for
all schools, especially foreign teachers. As a result, almost every school is in need of
Ngo Quoc Phong – MBAVB3


7

good teachers, which creates a high pressure of teachers’ remuneration and benefits on
schools, especially new and infamous ones.
Quality is very important in a service business, and it is highly dependent on
teachers who directly deliver the service because service is a people-intensive industry.
There are some schools who offer very good training for new teachers. However, the
well-trained teachers tend to shift to other schools with better benefits. Teacher
retention is a serious problem to most schools because teachers have quite a high
bargaining power.

d) Buyers

English learners have so many options/schools to choose from, so their bargaining
power is also very high.

e) Substitute products
If some students don’t want to go to an English school to learn English, they can
either employ a home tutor or teach themselves. There are a variety of English
resources for students to exert today, ranging from books, CDs to online free courses.
English is also a compulsory subject in high school and university. There are also a lot
of international high schools in which English is taught as a second language.
II.

Critical needs of the market
In general, students want to learn English in a fun, effective and efficient way.
Because there are so many options for students to choose from, they tend to jump from
school to school hopefully to find the “right school” for them. In other words, their loyalty is
not so high.
Although English is one subject, different people have different needs which lead to
different products. For example:
1. English for kids
2. English for teens
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3. Academic English
4. General English (4 skills)
5. Intensive Speaking and Listening
6. TOEIC
7. TOEFL iBT/ IELTS (for those who wish to study abroad)

8. Business English
9. Accelerated learning courses (for those who want to study at a faster pace)
…
III.

STP
1. Segmentation
According to VIG, the English school market in HCMC can be segmented into 3 tiers
based on price and quality (see Exhibit 1 above):
·

High class: These schools are well-invested with high quality teaching staff and

facilities. Each has its own outstanding competitive advantage. They use 100% foreign
teachers.
ü British Council: is a not-for-profit organization with very high reputation for high
quality teachers. However, the tuition fee is very expensive, so they just have few
students.
ü ILA: is an international corporation and famous for its children programs. (They
have about 8 branches in HCM City.) The headquarters in district 3 are very big and
nearly always crowded.
ü Apollo: has 3 branches in Ha Noi, Da Nang and HCM city. However, the HCMC
branch is not performing well with poor facilities and bad reputation.
ü Cleverlearn: has 2 branches in Phu Nhuan district and district 5. The headquarters
in district 3 are very big and crowded with more than 3,500 students and hundreds of
students on the waiting list. They currently have 3 franchisees in Binh Tan district, Can
Tho and Vung Tau cities who pay a monthly total royalty fee of about $5,000. They
plan to open 2 branches and 2 franchisees each year in the upcoming years. Besides,
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9

they also have a very successful program called FTDP (Foreign Teachers Deployment
Program) in nearly 40 primary and secondary schools in HCMC.

·

Middle class:
ü VUS: very crowded with lots of branches, big and prominent buildings located
around HCMC. However, the teaching quality is not as high as it used to be. The tuition
fee is lower than the above-mentioned schools, but they use only 30% foreign teachers
in their courses.
ü Outerspace: the tuition fee is quite high, especially when they mainly use
Vietnamese teachers. The facilities are poor but they have lots of branches with many
students. Their teaching approach (reflex) can bring quick results in a short time,
especially to beginners. However, it doesn’t seem to be very effective for higher level
learners.
ü Atalanta, EduWorld and some others: the fee is quite high, but there are few
students and they are making little or no profit.
ü Elite: same model as VUS because the founders were once VUS teachers, focusing
on General English courses. Different from VUS, their organizational structure is far
more simple, plus they don’t spend much money on advertising and branding, so the
tuition fee is much less. They currently have 7 branches, but quick expansion puts
pressure on their teaching quality.

·

Low class:
ü Pedagogy University: lots of branches, very low fee ($10 - $20/month), around

500,000 students.
ü Duong Minh, Dong Au, IWEP, My Uc, etc.: target mass market with very low fee
($10 - $25/month) but poor facilities and teaching quality; lots of branches and students
but students have low loyalty, churn rates are as high as 70%. Growth rates are
fluctuating and much different from school to school.

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School

Average fee/hour

British Council

Student body

Growth rate

$12.50

500

0%

ILA

$5.15

10,000

20%

Apollo

$5.05

3,000

0%

Cleverlearn

$5.00

4,000

50%

(+2,000 of franchisees)
VUS

$3.90

18,000

80%

Outerspace

$4.25

5,000

80%

Elite

$2.10

3,000

40%

Exhibit 5: Comparison of some English schools
2. Targeting
We choose the middle class segment for the following reasons:
-

This is the biggest segment in size with highest growth rate

-

The high class segment requires 100% foreign teachers, which requires big investment.

Besides, it is very difficult to find enough qualified foreign teachers, especially as a new
school in comparison with established ones; otherwise, we’d have to spend lots of time and
money to train them with methodology. Their turnover rate is also much higher than that of

Vietnamese teachers because they are mainly tourists who don’t want to stay long in one
country. In addition, two of the three founders who have teaching and management
experience at English schools believe that 30% foreign teachers would make a good ratio
for learning English.
-

The tuition fee in low class schools is quite low, which makes it very hard to find

qualified teachers to ensure quality which is a key to our success and expansion. We also
wouldn’t have enough capital for marketing and branding, which is critical to sustainable
development.

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11

In this segment, we will first launch only one product of General English aimed at
senior high school and university students plus white collar workers who want to study
all 4 skills, especially listening and speaking. They have tried different schools and
approaches but haven’t been able to find the right ones to help them improve English.

3. Positioning
In his best-seller book “I am gifted, so are you”, Adam Khoo suggests the following
formula: DESIRE + BELIEF + STRATEGIES = SUCCESS
If you don’t really want or see the need of learning English, no matter how good your
teachers are, you will never succeed because you have no motivation. In contrast, if being
good at English is a MUST, but not a WANT or WISH, you are willing to do whatever it
takes to succeed.
Belief is also very important. Our brain has unlimited power. The moment you think

you can’t, you will subconsciously tell your brain to stop trying. But if you believe you can,
you can tap all of your potential, and that desire and belief together will help you find the
right strategies for your success.
Most people who fail in learning English fail in these first 2 steps. Unfortunately most
schools and teachers don’t recognize that. They just use the same approach for all students
trying to push knowledge into their students’ brain. When they fail, they sometimes even
utter de-motivating exclamations like “How helpless you are!”, which makes their students
really think that they can’t and give up all hope and effort.
As for strategies, hardly anybody can realize that the most effective and efficient way is
to teach others and apply what you have learned immediately (see Exhibit 6 below).
Besides, “if you teach a man anything, he will never learn”, says Bernard Shaw. Therefore
at our school, teachers do not really teach. Instead, they will help students build up their
desire, belief and strategies that fit them the most. We will create a fun, competitive and
encouraging environment so that students can share and learn from each other. To some
extent, our teachers can be called motivators and coaches.

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12

As a result, we position ourselves as “

”. We

will need to make a more thorough market research to find a simple, clear and persuasive
message as our commitment to communicate to potential clients. At the moment, I think it
might be “Within 3 months you’ll like English more” or “Master your study within 3
months”.

The Learning Pyramid
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Exhibit 6: The Learning Pyramid
(Source: Prof. Mueller, National University, California)

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13

Chapter 3: Business Description and Vision

Corporate Envisioning Process
Mission/
Vision/Core values
SWOT
CC
Goals

CSF

KPI

Control

Strategies
Action Plans

Exhibit 7: Corporate Envisioning Process
(Source: Prof. Lee, Hofstra University)
Notes:

I.

·

CC: Core Competences

·

CSF: Critical Success Factors

·

KPI: Key Performance Indicators
Mission
To help people build up their desire, belief and strategies to be able to teach themselves

English in a fun, effective and efficient way.
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14

II.

Vision
Lodestar becomes a household name when it comes to English training.

III.

Core values
These values are so important that they should be clearly communicated to students and
employees of all levels to be consistently implemented. This will build a strong brand and
culture which are a competitive advantage for the company.
1. Responsible
“Your destiny is yours to create”, says Adam Khoo. Save yourself first, and others will
save you later.

Faced with a problem, if you think to yourself that nobody is going to help you but you,
you will tap all potential of your mind and body. Being passively dependent on external
help will reduce your likelihood of overcoming the problem.
In addition, if you know how to help yourself, you’ll be respected and others will prefer
helping you.
Finally, if you take responsibility for everything that happens to your life, you will feel
happier for sure.
For example, students will be shown how to use different tools to proactively teach
themselves English and no longer passively wait for their teachers. Gradually they will
establish a love for English and a habit of self-learning.

2. Righteous
Business is for profit, but if a company spares no means to chase money, how can you
expect your employees not to jump to other companies for better remuneration?
Being righteous also means you only promise what you can deliver. Lots of schools lie
to their clients by recruiting foreign tourists as teachers or even making fake teaching
certificates. The clients may not know, but your employees do. Being honest and righteous
will increase your employees’ loyalty.
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15

3. Open and honest communication
One – way communication is never allowed. Sometimes it’s the lowest level employees
who have the best ideas.
This value is especially necessary in education. As a Chinese proverb says, “He who
asks a question is a fool for five minutes; he who doesn’t remains a fool for ever”. Students
are encouraged to ask if they are confused. And so are employees.

4. Constant Improvement
There is always room for the best to be better. You will fall behind as soon as you feel
complacent. That’s why constant improvement is very important.
A healthily competitive environment through a variety of incentives will help
students and staff improve themselves quickly and effectively.

5. Flexible
“It is not the strongest of the species that survives, nor the most intelligent, but the one
most responsive to change” – Charles Darwin.
In this ever changing world, you cannot survive if you don’t know how to adapt
yourself to circumstances. You cannot use the same approach to different classes, let alone
different students.
The same rule applies to business. We have to keep our eyes open to changes and trends
in the market.

6. Fast
Quality is one of the most important things in a service business. Clients expect us to
respond as quickly as possible to their requests. We should be willing to help clients and
provide prompt service.

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16

7. Fun
You can hardly achieve great things if you don’t feel happy doing them. So whatever
activities we are involved in, we have to make them fun.

8. Sharing is learning

It is said that “we get what we measure”. Most schools offer prizes of “Best teachers of
the year”. As a result, most teachers strive so much for the prize that they are not willing to
help other teachers improve. They try to hide their “secrets” and feel hesitant when one
teacher asks for their advice or wants to observe their class.
If we also have a prize of “Contributor of the month/year”, we can change this attitude.
Once everybody realizes that sharing is learning, they will all be better off.
Through a variety of incentives, we will encourage all staff, teachers and students to
share their knowledge and learn from each other.
IV.

SWOT
1. Strengths (Core competences)
·

Two of the founders have strong expertise and experience in the training market as

English teachers and educational managers. We have worked for some of the biggest
English schools such as VUS, Cleverlearn, Elite… and understand their strengths and
weaknesses.
·

The other founder is a great marketer.

·

The founders have a strong relationship and are all committed to doing this business.

·

The methodology (e.g. Desire + Belief + Strategies and Exhibit 6) plus other modern

approaches have been widely applied successfully throughout Asia. Now they will be
applied in English training.
·

Strong corporate culture and values

·

Good relationship with a lot of companies in different industries.

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2. Weaknesses
·

As a start-up school, our brand is still unknown.

·

Need a pilot project to test and adapt the methodology when applied to English training.

·

Need a thorough market research to learn more about clients’ needs and wants.

·

Financial potential is not so strong. We may need to find other financing sources if we

want to expand quickly.
·

None of us has really run a whole school, so some management difficulties might occur

in the beginning.
·

It would take longer and cost more than other schools to train new teachers and staff in

the new methodology.

3. Opportunities
·

The market is growing very fast.

·

New segments (high class, low class)

·

New markets (other provinces in Vietnam)

·

New products and clients: English for kids, teens, TOEFL iBT, IELTS, corporate

training for businesses (in-house courses)…
·

Franchise opportunities to expand: According to James C. Cross and Bruce J. Walker,

franchising is a perfect match for Service Marketing (their article of “Service Marketing
and Franchising: A Practical Business Marriage” on Business Horizons magazine of
Indiana University Graduate School of Business).
·

Ally ourselves with or establish an international high school to apply the methodology

to all levels and subjects (not only English)

4. Threats
· Competitors may copy the methodology.
· Threat from international trainers with prestigious brand name, experience and financial
strength (ex: EMPGI is considering entering Vietnam after their success in China. Their
annual sales are about 2 billion dollars)
· Key people may leave.
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V.

Goals

1. Year 1
ROI = 40%
Profitability (Profit/Sales) = 10%
Market share of mind = 10%
Curriculum is standardized and optimized
Skilled staff (incl. teachers)
Re-enrolment rate = 50%
2. Year 2
Growth rate (number of students) = 30%
Profitability = 13%
Market share of mind = 20%
2 new products (English for children and Business English which focuses on in-house
courses at companies)
Turnover rate = 20% (in which turnover rate of teachers is 15%)
Re-enrolment rate = 65%
3. Year 3 and 4
Growth rate = 40 – 50%
Profitability = 16%
Market share of mind = 40%
2 new products/year
Turnover rate = 15% (in which turnover rate of teachers is 10%)
Re-enrolment rate = 70%
1 new branch
As of year 3, our strategy will aim at expansion through a franchise system and
corporate chain (company’s investment). Then we can take advantage of economies of
scale by saving Management and Marketing expenses, which will raise our profitability.
Furthermore, we will have more teachers, which will reduce their bargaining power as
we don’t have to depend on few teachers like in the early days.
4. Year 5
Growth rate = 80%

Profitability = 20%
Market share of mind = 60%
2 new products
Ngo Quoc Phong – MBAVB3