Summary of Build Your Business Like Harvard

Summary of "Build Your Business Like Harvard"

This video provides a deep analysis of how to build, scale, and create sellable education businesses by drawing lessons from Harvard’s model and contrasting it with common pitfalls in the education industry. The presenter emphasizes the difference between generating cash flow and building enterprise value, focusing on customer retention, pricing strategies, and product structuring.

Main Financial Strategies and Business Trends

• Building a Sellable Education Business:
  • High Standards: Like Harvard, limit access to maintain brand prestige and perceived value.
  • No Guaranteed Outcomes: Avoid promising specific results; instead, emphasize the value of education itself.
  • Not Everyone Passes: Maintaining rigor increases brand credibility and value.
  • Brand and Network Value: The brand and the quality of the network are often the most valuable assets.
  • Long-term Demand: A sellable business must demonstrate reliable future cash flow and ongoing demand.
• Understanding continuity vs. payment plans:
  • continuity means customers repeatedly consume and pay for ongoing value.
  • A payment plan for a one-time product is not continuity; customers graduate and churn once they gain the skill.
  • True continuity requires consumables or ongoing deliverables that customers use repeatedly.
• Two Columns of Deliverables:
  • Column A (One-time value): Educational content or skills that customers use once and then move on.
  • Column B (Consumables): Products or services that provide ongoing value and must be repurchased or renewed regularly (e.g., updated ads, monthly hot product lists, fresh property leads, community access).
• Pricing Strategy:
  • Price one-time educational products high, reflecting their transformative value.
  • Price consumables lower but consistently, so customers find ongoing value worth paying for.
  • Avoid pricing continuity at the same level as the upfront education, or customers will churn once the initial value is exhausted.
• Models That Drive Enterprise Value:
  • Stack of consumables that generate recurring revenue.
  • Continued education and certification models (e.g., bachelor’s → master’s → PhD) create long-term customer engagement.
  • Businesses that demonstrate high retention and predictable revenue streams command higher valuations.
• Avoid Half-Measures:
  • Combining education with software (SaaS) without focus rarely succeeds.
  • Software only adds value if it drives retention, high gross margins, and operational efficiency.
  • Focus on building a sticky business around the core value proposition.
• Customer Churn and Retention Benchmarks:
  • Average monthly churn for education communities is around 18%; 10% is good, 5% excellent.
  • Focus on achieving high retention after a milestone (e.g., 12 months) to maximize lifetime value.
  • Understand customer volatility based on target market (e.g., small business owners tend to churn more).
• Customer Lifetime Value (LTV) to Customer Acquisition Cost (CAC):
  • Key metric: ratio of permanent customers to acquisition cost.
  • Permanent customers who never leave are the foundation of enterprise value.
  • Improving conversion from initial buyer to permanent customer is critical.
• Feature Set Strategy:
  • Keep features minimal but highly valuable.
  • Each feature should justify multiple times its cost alone.
  • Avoid adding features that don’t reduce churn or increase retention.
• Upselling and Offer Timing:
  • Upsell based on evolving customer needs.
  • Timing of offers is as important as the offer itself.
  • Example: After teaching a skill, offer services that do the work for them.
• Mindset on Business Value:
  • There’s no shame in having a profitable business that isn’t sellable.
  • The choice between cash flow now versus enterprise value later depends on personal goals.
  • Delaying gratification is important but should be balanced with maximizing rewards.
• Examples of Successful Transitions:
  • Entrepreneurs like Sam Ovens and Alex Becker successfully transitioned from education businesses to service/software businesses by focusing fully on the new model.

Step-by-Step Guide to Building a Sellable Education Business

• Step 1: Define your brand with high standards and exclusivity.
• Step 2: Avoid promising guaranteed outcomes; focus on delivering valuable education.
• Step 3: Identify which parts of your offering are one-time value and which are consumables.
• Step 4: Price the one-time educational product high, reflecting its transformative impact.
• Step 5: Price consumables lower to encourage ongoing retention and recurring revenue.
• Step 6: Build or incorporate consumable elements such as updated content, community, or services.
• Step 7: Measure churn and retention closely; aim for high retention after key milestones.
• Step 8: Optimize customer acquisition to maximize the ratio of permanent customers.
• Step 9: Keep

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