By Jim Tolbert, Chief Executive Officer and Timothy Armstrong, VP for Information Technology & Training Services, Vista College
Vista College, based in Dallas, Texas, is a group of for-profit career colleges with campuses in New Mexico, Texas, and Arkansas. The company was founded in 2006 with an acquisition of a school in El Paso, Texas. Vista College provides diplomas and degrees in allied health, nursing, technology, the trades, and cosmetology. Vista College also has an online division that, in addition, confers bachelor’s degrees.
Like other for-profit schools, Vista College is subject to 90-10 regulations. Given the profile of our students, we have to manage this very closely. Over the years we have relied on cash collections, non-Title IV funding (e.g., military agency), and third-party loans. Recently, we have invested in providing non-Title IV training and education that meet the criteria for “Ten Money” (e.g., the program is licensed or accredited and/or leads to an industry recognized credential). We call this our short-term or non-Title IV training.
In addition to meeting our needs for “Ten Money,” we saw short-term programs as having two other benefits. One, they can provide incremental profitability and cash flow. Two, they can provide supplementary training for our students and the local communities wherein they reside thereby enhancing earning potential.
As we surveyed the short-term training market, we observed how large it was and how fragmented it was (i.e., many small players). The size of the market is a positive. With a variety of verticals to support near endless customers, the variability of the market has been seen as a tremendous landscape to further grow the non-Title IV business. The extreme fragmentation was potentially good news and bad news. The good news is there are limited barriers to entry. It did not seem that difficult to get into the training businesses (unlike, say, the auto manufacturing business). However, the high level of fragmentation also indicated it is a challenging business to scale. Not only are there limited economics of scale (e.g., unit costs do not decline with volume), there may even be diseconomies of scale. For example, small companies with personal relationships are one of the key success factors.
As we set about building our short-term training business, we laid out the key strategic decision points we faced.
- Whether to provide the training online versus on-ground
- If on-ground, at one of our campuses or an additional location
- If at an additional location, a permanent location or a temporary location (e.g., meeting space in a hotel)
- If online, should it be instructor facilitated or self-paced
- Should we start a program de novo or should we acquire another training company
- Should we provide training in areas that were closely related to current programs or go into new verticals
- Should we provide training that:
- Allowed someone to enter a new career field;
- Enhanced their skill set in a field they were currently in; or
- Allowed the students to meet on education requirement in their current field (i.e., CEUs).
The answer is, we tried some of everything. While that sounds like blasphemy to most business strategists, we didn’t know what the right answer was and therefore needed to experiment. Our goal was to follow the famous business dictum: Think big. Start small. Fail cheap. Scale fast.
How did we do? It has been a mixed bag.
We had some early success in securing curriculum in the more common verticals (e.g., Certified Nursing Assistant). There is a vast network of curriculum providers, writers, and resellers willing to assist us in developing our program offerings. The process is painstaking, as there are requirements for each state for specific areas; however, with a dedicated team, getting course materials was relatively simple. For the more specific topics, curriculum design became more difficult. These areas, such as securities, had very few curriculum providers and they were not very responsive. As we uncovered more verticals such as that, getting relevant curriculum became challenging. Fortunately, we did secure some partners that have been able to support our strategy.
Working toward finding viable programs and offerings to support our initiative, we began an aggressive plan of research, approvals, and replication. The initial thought was to replicate success in one state to the rest of the country. Unfortunately, we did not take into account the lengthy process of getting approvals. Once we secured curriculum, our goal was to obtain regulatory approvals. Local, state, and national regulators approved on a varied scheduled: some got back to us expeditiously, others less so. As much as we wanted to scale the business, getting access to new markets began to be a slow process.
After successfully meeting the regulatory requirements, we were faced with the next challenge: how to market these products. Following extensive market research, review of trends within verticals, and an analysis of the competition, we utilized direct mail, search engine optimization, website development, and pay per click marketing. These had always been successful mediums for us in our traditional business. However, short-term customers proved to be different. As we were offering a commodity service, customers were not “looking” for us except for key points in the year, usually around their licensing or certification renewal. The enhancements to our marketing campaign and website provided us a vast increase in site views; however, they were not converting to sales as quickly. They didn’t need us until they needed us.
In our efforts to locate a niche business for non-Title IV, we discovered an interesting opportunity.
Many of our brick and mortar schools are located in areas where Certified Nursing Assistants (CNAs) are in demand. Employers of CNAs were consistently asking if we could develop, train and prepare CNAs for immediate employment.
We began looking at the state and local regulations regarding the training of CNAs. The curriculum requirements and program length fit very nicely into our strategic goals for Non-Title IV. We were able to get the necessary approvals, curriculum, and facilities setup for the program in a relatively short period. We launched a targeted marketing campaign in our local markets.
As we marketed the program, we noticed we were not meeting the demand of employers in the areas we served as much as we would have liked. They still were experiencing a shortage of Certified Nursing Assistants. We began retooling our process. Instead of simply recruiting students to our program, we began to engage the potential employers in the process. We developed a process whereby employers would support the training of the potential CNAs, at varying levels. In return, students would agree to work for the employer for a set period. For example, an employer would pay the full price of training to Vista College. The student matriculates through our course and becomes certified. The student would then work for the selected company for a year post completion. This process allowed the students to have access to funding for the program, as many struggled with finding the necessary cash upfront for the program. In addition, employers would have a stream of new employees available on a set schedule and Vista College would grow student enrollments. It was a Win-Win-Win for Vista College, the employer, and the student.
There were a variety of employer contracts we used for the nursing assistant partnership model depending on the preferences of the employer. Some employers paid for the complete training upfront. Others made incremental payments, ensuring that the student successfully completed the program prior to paying in full. Also, a very popular contract provides for both parties (student and employer) to engage in the success of the partnership. Students would make some level of investment into the cost of their program. The employer would supplement the remainder of the cost. Post completion, many employers would then refund the amount the student invested in the program. This allowed both the student and employer a reason to be fully engaged in the academic process and ultimately, the success of the program. After great results in a couple of our campus locations, we began rolling this process out at other locations. Initial findings have proven that this is a viable business model. We continue to evaluate and revise. The goal is to find other community partner needs that can be facilitated through a similar process.
With respect to acquisitions, they are always tough to get done, and the availability is beyond your control. We did a few and still have the original platforms we acquired. However, they never grew as much as we’ve hoped. Buying companies from entrepreneurs and putting them into a larger organization is always tricky. We also found these entrepreneurs had personalized relationships and knowledge within their fields and that was difficult to scale. The other challenge we had was structuring a buyout or compensation. While these are non-Title IV businesses, we approached it very conservatively and never paid sales commissions. Most of the training companies we looked at relied heavily on commissions for their sales force.
Our de novo strategy has worked slightly better. While it takes more effort to get it going, it let us steer it in the direction we wanted it to go.
For example, we observed that the more unique a program was, the more we could charge for it. Conversely, the more common a program was, the more of a commodity it was and got commodity pricing (i.e., very narrow margins). We also saw that some programs started unique and enjoyed premium pricing and reverted to commodities over time. First movers won. Therefore, we tried to identify training areas that had the potential for uniqueness, at least initially. Our strategy was to identify training areas where some discontinuity created a new need for training. These included:
- Changes in regulations (e.g., new national duct and envelope licensing requirements)
- Changes in technology (e.g., new electronic health reporting requirements)
- Changes in industry standards (e.g., ICD-9 to ICD-10)
As we continue exploring new opportunities, expanding on existing verticals, and recognizing when we cannot support an initiative, we are learning along the way. It hasn’t been as easy as we thought it would be; however, we continue to be forward-thinking in our approaches, leveraging internal resources, technology, and people. We continue to be thoughtful on the approaches we use to expand and be realistic in expectations. The return is not always quick. However, being diligent in creating the processes and metrics to support the non-Title IV effort has created the foundation by which a sustainable, profitable division will emerge.
The conclusion? Too early to tell. Some things are working. Some things we walked away from. We won’t declare victory. We won’t admit defeat. It has been a very steep learning curve to be sure.
JIM TOLBERT is the Chief Executive Officer of Education Futures Group d/b/a Vista College www.vistacollege.edu, a company formed with Prospect Partners, a Chicago, IL based investment company in 2006. Vista College operates accredited, post-secondary institutions with program offerings in entry-level career training including: Allied Health, Business, Technology, Cosmetology, the Trades, and Nursing. Vista College is a degree-granting institution and operates campuses in El Paso, Lubbock, Amarillo, Beaumont, Longview, College Station, and Killeen, Texas and Las Cruces, New Mexico and most recently, Fort Smith, Arkansas. The school’s Online Division is based in Dallas, Texas. The corporate headquarters is in Dallas, Texas.
Prior to forming EFG, Mr. Tolbert was the Chief Financial Officer and a Shareholder of Virginia College, a Birmingham, AL based career college, until the sale of the company in December 2004. Prior to investing in and joining Virginia College, Mr. Tolbert was the Founder and CEO of Career College Loan Company, a specialty consumer finance company, providing tuition financing to the for-profit education sector. Mr. Tolbert has also worked for McKinsey & Company in the Financial Institutions Group and Morgan Stanley International in the Mergers & Acquisitions Department.
Mr. Tolbert is the former Chairman of the Board of Directors of the Career College Association, his company’s industry association, and served nine years on the Board Directors, four of which were as an officer.
Mr. Tolbert has a Bachelor of Science in Economics, summa cum laude, from the Wharton School of the University of Pennsylvania and a Masters of Business Administration from the University of Chicago.
TIMOTHY ARMSTRONG is the Vice President for Information Technology and Training Services at Education Futures Group, LLC d/b/a Vista College. He is responsible for the strategic management of all technology initiatives and Non-TIV programs. Employed with EFG since 2010, Mr. Armstrong has been in the education field for over 20 years. Having worked in varying facets of both public and private education, Mr. Armstrong has a strong passion for positively changing the lives of students via strategic technology application and continuing education opportunities. As such, his primary focus has been defining the cross section of educational attainment and technology availability.
Mr. Armstrong has served as a member of the Texas Association of Developing Colleges – Technology Leaders; United Negro College Fund (UNCF); and Education Leadership Foundations. During his term as Chief Information Officer for Jarvis Christian College, a private institution, he had opportunities to serve as the Information Technology implementation advisor to various boards within the public education sector.
Mr. Armstrong has a Master’s of Business Administration degree, with specializations in Information Technology and Management from Grambling State University. He also holds a Bachelor’s degree in Operational Management from the aforementioned.