Learning Curve

Learning Curve

Joe Sterensis helped his own high-school-age children do better on test scores, then started a business to help others.

COMPANY by Dave Szymanski | Tampa Bay Editor

Joe Sterensis, chief executive officer of Advanced Learning Centers in St. Petersburg, faces a two-edged business task. Each year, he has a large customer base with a growing need for his service. But annually, that base changes, so resales are non-existent.

His is the world of professional tutoring.

Sterensis, 56, runs Advanced Learning from offices in St. Petersburg, Tampa, Altamonte Springs and Boynton Beach. It covers most of the Gulf Coast, from Sarasota to Gainesville, and it's in Central and South Florida. It is looking to expand to Fort Myers and more in South Florida and eventually the Panhandle. It is in 19 Florida counties.

It is a business competing against national giants such as Kaplan, Sylvan and Huntington, but with a more defined niche on its privately funded side: high school students preparing for SATs and college-entrance exams. On its publicly funded side, it focuses on elementary and middle-school students.

Tutoring follows a progression from reading help in elementary school, to math, to study skills, to test-taking skills in high school.

On the public side, Advanced can qualify for $1,000 to $1,200 per student in federal funds, on average. It provides 18 to 25 hours of tutoring per student and increases their performance by half a grade level.

The average cost for a public school system to educate a student and bring him from one grade level to another is $10,000 per student, per year.

"We're a bargain," Sterensis says. "It's an example of where private industry can do it better."

But there's a qualifier. The reason Sterensis can do it better is because he doesn't have to educate all of the students. It is actually the smart application of resources aimed at students who are poor and/or struggling in class, but generally willing to learn.

What Advanced tries to do to set itself apart from its competitors is finding and retaining good teachers. Parents tell Advanced that the national companies are organized, but the quality of tutors is inconsistent. So Advanced tries to be consistent, screening all of it tutor candidates and measuring their performance. If students' test scores or grade levels don't rise, those tutors not invited back.

It invites about 60% to 70% of its 800 tutors back every year. From that pool, 80 to 90% return. So Sterensis spends about a quarter of his time recruiting and screening.

"The nationals are only as good as their people on the ground, which is very variable," he says. "I'm like the PT boat fighting the destroyer. I need to be smarter, better and be more nimble than the nationals."

Boredom ended in 1999

Sterensis' parents were Holocaust survivors, who moved to the United States from Germany. Sterensis was born in Brooklyn and his father died when he was 16.

His mother lives in Florida, along with Sterensis and his wife, who live in Pinellas Park. His grown daughters are in Philadelphia.

Sterensis worked as a physician's assistant before joining the successful family medical products company, Preferred Diagnostic Services, that he sold in 1995.

He retired and got bored. Sterensis' children needed tutoring in high school. When he saw a need in the market, he jumped in. He founded Advanced in 1999 in St. Petersburg, bringing the CFO from Preferred with him.

"We're like the Rolling Stones on a reunion tour," Sterensis jokes.

The timing was right because the federal No Child Left Behind program had started in Florida. The federal law redirects Title I money for tutoring high-need children and measures school accountability.

That's part of Advanced's business, publicly funded tutoring for poorer students. The other half is for students whose families pay $60 to $75 an hour.

In the tutoring business, you are invited in by the schools after applying to the state to be a tutoring provider. Each county has a number of tutoring companies and parents pick a provider. For example, in Hillsborough County, there are 40 competitors.

Advanced uses different sets of tutors for its public and private sides. On the private side, the students come to an Advanced office, or Advanced goes to their home or school. On the public side, Advanced meets the students at school, at home or in a library or a public location.

Advanced takes students' SAT or ACT test results and brakes them down into different subject matter. It keys the results into a computer that analyzes where the student needs help from a tutor.

With the cost of tutoring at $1,000 or less for a high school student, if it means a Bright Futures Scholarship, that's worth $10,000 or more, Sterensis says.

In Florida, many students want to go to the same colleges. Some parents can't afford to send them there and there's more and more pressure for kids to get higher test scores.

"Test scores will not get you into college, but they will keep you out," Sterensis says. "What's always stumped me, is if you invest $1,000 to make $10,000, why wouldn't more do it?"

Advanced has been in business nine years. Revenues have climbed slowly with sales from the public side rising faster recently because of the availability of federal money, which has fueled more industry competition.

Sterensis, a self-described "operations guy at heart," doesn't get involved in sales, but he knows the success stories with students. "It literally turns things around," he says.

Profitability has been up and down at Advanced. It took three years to get the company profitable. Because the student population renews every year, there is no repeat business.

That's been the biggest management challenge for Sterensis, figuring out the company's infrastructure when you don't know what business will be the following year. If you spend too little, you don't have enough service. Spend too much, and you go bankrupt.

"It is somewhat of a guessing game," Sterensis says. "You need to react very quickly. The strongest skill to have is recruiting. It is a matter of always being ahead in recruiting."

The breakdown

Currently, about 70% percent of Advanced revenue is public and 30% private. It likes that ratio. Overall, the company hopes for 10% profit margin "if all goes perfectly," which it doesn't, Sterensis admits.

"This is not a free-for-all money maker," he says. "There are so many moving parts."

The moving parts are the students and teachers. For example, in January, one of the company's biggest months this year, it provided 8,000 hours of tutoring. That means 8,000 occurences where a tutor and student got together, 8,000 times, in one month, with minimal disruption or problems.

That's the most common complaint from customers: Missed appointments. The CEO takes those angry calls from parents.

Advanced looks to boost revenues year over year, but margins are not always in its control. For example, on the public side of the business, it has to pay to lease a classroom. Those fees vary from $50 to $125 a day to rent a classroom in Hillsborough County.

Then there is coordination. Some tutoring is one-on-one, or in small groups of up to five kids. "It's a complex business," Sterensis says.

Still, it is an industry with opportunities because of the number of students, the shrinking number of spots in good colleges and because it is an industry in infancy. There is no dominant trade organization. Companies operate largely at the mercy of the school systems.

The industry is segmented between big national companies like Sylvan, Huntington, Kaplan and Princeton and mom-and-pop tutoring firms, some of them retired teachers. Advanced considers itself a hybrid.

"We are a small regional player," Sterensis says. "Were not really in the middle. We lean more toward little."

Looking ahead

Sterensis counsels other entrepreneurs to keep a lid on overhead and avoid pridefulness. "Be humble, because you never have what you think you have," Sterensis warns.

For example, when he was in the medical supplies business, at first, the industry was relationship driven. Then, it was driven by HMO contracts. That drove down prices, affected quality and pulled choices out of the hands of doctors.

Sterensis is glad to be back in a relationship business, While both tutoring and medical supplies involve managing human capital, tutoring is more uplifting.

REVIEW SUMMARY

Company: Advanced Learning Centers

Industry: Tutoring

Key: Outdoing the competition by finding the best tutors, keeping appointments and making sure student performance improves across the board.