How to succeed as a Subcontractor

[c3a]

Hello!

I own a subcontracting business, but I lose clients when my contractors decide to do it on their own because of our markup. I lose contractors as well, as they are expensive to aquire and train

Let me introduce you to the business. It is a private school (one to one, or one to few), where we have our contractor teachers (choosen after selective process and trainment) that we may assign students for them in case there is a match student for him. The teacher focus only on teaching tasks, such as classes and classes preparation. The teacher may accept, or refuse a student, depending on his availability as he is a contractor. They sign a contract as well, with exit clauses forbidden them to take our students privately.

Students usually strives with the teacher we choose, because we evaluate the student's personality treats, interests, background (...) and match with the best teacher possible. The results are very good in terms of learning speed and having "fun" while studing.

The problem we are facing is when the teacher talks with the students asking how much we charge them. As we may have markups such as 1,5x to 2x, to cover our business costs and profits, the teacher gets demotivated. But we have all the acquisition costs (which is huge), risk costs (in case student does not pay us, we still pay the teacher), hiring costs, customer success, taxes, bank and business costs, that the teacher does not consider.

To make story short, when teacher asks student how much they pay us, he decides he wants to break contract with us, and then their students suddenly quits us, which likely the teacher offered a better deal. It is usually a batch loss, because teacher might have more than 10 students. We don't want to sue nobody in court, because of costs, and because it won't fix anything, and will make our business to look bad and profit-first.

We offer advantages to teachers, such as:
- Students management platform (calendar, class board, tools)
- Class materials
- We take care of students payments (which can be a pain for a teacher)
- If teacher doesn't want to teach a student anymore, we will handle it (usually teacher dont know how to say NO for a student)
- If a student stops, we likelly have another student for him, which is much faster than being on his own.
- We take care of aquisition (marketing, sales pitch, negotiation,.. can be a pain too)
- If student has any negative feedback for the teacher, he has somebody else to talk to other than the teacher.. and we will solve it

But we feel like we are on risk of loosing students in batch all the time, and we want to provide much more value for all the actors, such as students and teachers. Any tips on how to succeed in this kind of business?

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[Kevin88660]

1.5-2x is not a too high marked up.

Too problem is its to C and teachers are comfortable dealing with to C directly, and your materials offered are nothing too special. You are seen as a bridge to be dismantled after crossing.

If you deal with to B like taking school contracts then it is less likely the teachers will jump over you because schools usually take a long time to process the payment. You can justify the marked up by paying your teachers immediately.

Another way is to stop subcontracting and run a education centre directly, where you hire teachers as employee. Since the teachers are cutting you off so quickly it is a good sign of a thriving product market fit.

 

[c3a]

1.5-2x is not a too high marked up.

Too problem is its to C and teachers are comfortable dealing with to C directly, and your materials offered are nothing too special. You are seen as a bridge to be dismantled after crossing.

If you deal with to B like taking school contracts then it is less likely the teachers will jump over you because schools usually take a long time to process the payment. You can justify the marked up by paying your teachers immediately.

Another way is to stop subcontracting and run a education centre directly, where you hire teachers as employee. Since the teachers are cutting you off so quickly it is a good sign of a thriving product market fit.

Yeah, that's it

But running an education center is not on my plans right now, because of the employment rules and taxes, that doesn't suit us very well, specially for the scalability we aim. We would end up having too many employees relatively to low students number (in case we keep the private teaching model).

I was thinking, that we may have good results if we increase the teacher support (with more staff, tools, ...) to a level that they feel very well supported by us, and going on their own would feel like "jumping into the middle of ocean to swim alone".

 

[Kevin88660]

Yeah, that's it

But running an education center is not on my plans right now, because of the employment rules and taxes, that doesn't suit us very well, specially for the scalability we aim. We would end up having too many employees relatively to low students number (in case we keep the private teaching model).

I was thinking, that we may have good results if we increase the teacher support (with more staff, tools, ...) to a level that they feel very well supported by us, and going on their own would feel like "jumping into the middle of ocean to swim alone".

I have taught as a private teacher in the similar scenario before. The issue for the main contractor is that they never build any real relationship with the customer (school admin) and in fact it is the school teacher trying to cut the main contractors out.

It was a to B model, where the a private chess school bid for contracts to teach in government public schools. Then they will engage chess coaches on assignment basis and pay them separately.

The public school teacher once asked me to bid in the system (a centralized system to bid for projects handled by public schools) to cut off the private chess school. I told him no but thanks because I will not be teaching soon. The reason is that when he called the private school principal he was always on the move and not always contactable.

For you to have a strong value proposition you can really focus back on a few factors that private teachers generally do care.
1) Fast payment, where you up the risk of chasing for long term receivable.
2) irreplaceability due to scale. For large classes that need minimum 3-4 teachers to appear together, you need to bid as a school/center but not as an individual.
3) good customer support, that you always let your client knows in advance which teacher is coming tomorrow and reply calls and text promptly
A possible pivot is to focused on “to B” client, schools and offer them such services, get involve in bigger projects that you need 3-4 teachers to teach simultaneously in different classrooms.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[c3a]

I have taught as a private teacher in the similar scenario before. The issue for the main contractor is that they never build any real relationship with the customer (school admin) and in fact it is the school teacher trying to cut the main contractors out.

It was a to B model, where the a private chess school bid for contracts to teach in government public schools. Then they will engage chess coaches on assignment basis and pay them separately.

The public school teacher once asked me to bid in the system (a centralized system to bid for projects handled by public schools) to cut off the private chess school. I told him no but thanks because I will not be teaching soon. The reason is that when he called the private school principal he was always on the move and not always contactable.

For you to have a strong value proposition you can really focus back on a few factors that private teachers generally do care.
1) Fast payment, where you up the risk of chasing for long term receivable.
2) irreplaceability due to scale. For large classes that need minimum 3-4 teachers to appear together, you need to bid as a school/center but not as an individual.
3) good customer support, that you always let your client knows in advance which teacher is coming tomorrow and reply calls and text promptly
A possible pivot is to focused on “to B” client, schools and offer them such services, get involve in bigger projects that you need 3-4 teachers to teach simultaneously in different classrooms.

Thank you for the insights, it was very valuable for me that you have had this experience before! Good point of view