The Power Of Preparation

A Business of Better Scores

Kaplan International Pathways, “The Story of Stanley Kaplan” 

As Stanley Kaplan, the founder of Kaplan, Inc., so clearly demonstrated, sometimes the best businesses are not the flashiest or the most capital-intensive, but the ones that solve a simple, repeatable problem at scale.

A recent book provided to me turned out to be a pleasant surprise I was not expecting. It was called "Test Pilot" written by Stanley Kaplan in 2001. The book chronicled Kaplan's life and how he built Kaplan into one of the most recognizable education brands in the world.

Reading this book rekindled very fond memories I have as a young student but also made me appreciate the incredible and yet simple business Kaplan built. A business built of intellectual IP if you will - and with strong profit margins, little capital expenditure and also little to no debt. This is a business any investor would dream of.

Kaplan’s story is, in many ways, both straightforward and extraordinary. Rejected from medical school despite strong academic performance, he began tutoring students out of his parents’ basement in Brooklyn during the 1930s.

What he recognized—well before the broader market did—was that standardized tests were not purely measures of intelligence, but systems that could be learned, practiced and ultimately mastered.

That insight became the foundation of Kaplan, Inc., which today serves over 1 million students annually across more than 30 countries and operates as a subsidiary of Graham Holdings[1].

To me, what stands out most is not just the impact Kaplan had on students, but the elegance of the business model itself. Tutoring, at its core, is a relatively low-overhead, high-margin business.

You do not need massive infrastructure, heavy capital spending or complex supply chains. What you need is expertise, structure and a trusted brand. Once those are established, the model becomes highly scalable, particularly with the addition of digital delivery.

Companies like Kaplan and The Princeton Review have proven this over decades. They have built strong brand equity around high-stakes testing—SAT, ACT, LSAT, GMAT—and once that trust is earned, it tends to compound. Families refer other families, students return for additional services and the lifecycle of the customer extends far beyond a single engagement.

It is, in many ways, a recurring revenue model disguised as a service business.

On a more personal level, I have great memories of being in both Kaplan and Princeton Review classrooms as a young student. The experience was not just about learning content - it was about learning how to think, how to approach problems and how to compete.

There was a sense of structure and discipline that stayed with me long after those courses ended. Those experiences alone reinforce the intangible value that these companies deliver.

The research largely supports what many of us experienced firsthand. The U.S. Department of Education has found that targeted tutoring interventions can significantly improve student outcomes, particularly when delivered consistently[2].

A study from Brown University’s Annenberg Institute suggests that high-dosage tutoring can accelerate learning by the equivalent of three to fifteen months[3].

In a world where marginal gains can determine college admissions outcomes, those improvements are not trivial—they are decisive.

Experts in the field see this impact every day. Jonathan Wolf, owner of Jonathan Wolf Tutoring, explained it quite directly: “ I can tell you that students who work with my company generally improve their SAT scores by anywhere between 200 to 400 points, while our median student improvement on the ACT is about 6 points.”

That kind of movement—particularly on standardized tests—can completely change a student’s trajectory.

Wolf goes even further, noting that a student with a 1200 SAT score can often reach the 1400s or even 1500s, while ACT scores can climb from the high 20s into the low to mid 30s. These are not incremental improvements; these are step-function changes that open doors to the most selective universities in the country.

But what I find most interesting is that Wolf emphasizes outcomes beyond test scores - better critical thinking, stronger communication and increased confidence. Those are long term advantages that extend well beyond admissions.

This is where the tutoring model becomes even more compelling. As Wolf describes, many families work with tutoring firms over multiple years - starting with academic support, then moving into standardized test preparation, followed by college admissions counseling and sometimes even graduate school and early career guidance.

That creates a multi-year relationship with high retention and strong referral dynamics. Wolf highlights that many families refer friends and extended networks, creating a community effect that is both powerful and difficult to replicate.

From a business perspective, that combination - low fixed costs, strong pricing power, recurring relationships and organic customer acquisition—is extremely attractive. It is no surprise that the global private tutoring market is expected to exceed $200 billion by 2030, driven by increasing academic competition and the growing importance of standardized testing worldwide[4].

What also stands out to me is the durability of the Kaplan brand itself. Decades after its founding, it remains synonymous with test preparation. That kind of brand equity is rare. It suggests not only a strong initial value proposition, but also an ability to adapt and remain relevant as the education landscape evolves.

Which naturally leads to a broader question: what is the next chapter for a company like Kaplan?

In today’s market environment - where investors are increasingly focused on scalable, high-margin platforms - it is not hard to imagine Kaplan being repositioned as a modern, tech-enabled education company. With the right strategy around digital expansion and global reach, the business could be even more valuable than it was in its earlier iterations.

Speaking candidly, it is the kind of business I would seriously consider investing in. The fundamentals are there: a proven model, strong brand, recurring demand and meaningful impact. Given the opportunity, I would not rule out reaching out to leadership or the board to explore that possibility further.

In many ways, Kaplan represents the type of business that aligns with long-term value creation - steady, durable and quietly compounding over time.

Wolf’s perspective reinforces that idea. While the measurable gains in test scores are compelling, the broader developmental impact on students may be even more important.

Tutoring, when done well, is not just about improving performance—it is about building capability. And businesses that deliver that kind of value tend to endure.

Ultimately, Kaplan’s legacy is not just that he built a successful company. It is that he identified a structural inefficiency in education and created a scalable solution that continues to deliver results decades later.

In a world increasingly focused on innovation and disruption, there is something to be said for a business model that is simple, effective and, above all, enduring.

Citations:

[1] Kaplan, Inc. company overview and global operations (Graham Holdings Company reports)

[2] U.S. Department of Education, Evidence-Based Practices for Student Achievement, 2019

[3] Annenberg Institute at Brown University, The Effects of High-Dosage Tutoring, 2020

[4] Global Market Insights, Private Tutoring Market Size Report, 2024