Progress On UniversityTutor.com

In: Business Ideas By: Brian Armstrong

22 Mar 2009
This entry is part 12 of 18 in the series UniversityTutor.com

Ok so this week I’ve been working on the new business model for UniversityTutor.com that I discussed in the second half of this post. Basically, charging a percent of each transaction instead of a monthly fee for tutors.

I’m hoping this will be better in the long run as most people prefer to avoid monthly recurring fees, and it’s more fair to only pay for what you really use (instead of a month going by where you got no real jobs but still had to pay).

How it will work though I’m not really sure – so this is a test.

Designing The Process

Part of the challenge in designing something like this is to make it easy and convenient so people will actually use it. It has to help them more than it annoys them. A lot of this comes down to good user interface design and choosing the right words to explain things succinctly and clearly.

Here is the basic process I have in mind:

  • Tutor and student meet through website and do some tutoring
  • Afterwards, the tutor logs into their account and sends student an invoice
  • Student pays with credit card, tutor receive funds via direct deposit or paypal

Who Should Pay The Service Fee?

Let’s say you are going to do a markup of 10% just as an example. Should the tutor pay this fee or the student?

When trying to figure something out I like to see what other people are already doing that is working, and copy it (trying to reinvent the wheel when you first learning a topic is often a mistake – only innovate once you are an expert).

Sites like eLance.com and guru.com both have the service provider (tutor in my case) pay. If the service provider sets a price of $100, the tutor actually only receives $90.

Sites like odesk.com and crowdspring.com do the opposite and have the buyer (student in my case) pay the fee. If the service provider sets a price of $100, the website charges the client $110 and sends the provider their $100.

The difference is really one of semantics – if the service provider wanted to get $100 in the first example, he could just set his price to $110 – but perception can often make a big difference in how people use a service.

I guess it comes down to who has a bigger incentive to circumvent the system and pay offline (which means I’d get zero fee). For right now I think I’m going to try the second method used by odesk.com and crowdspring.com. Buyers will simply see the tutoring price as $110 and won’t be reminded of the breakdown. This information will be available on the website of course (probably in an FAQ) if they really wanted it, but there is no reason to advertise the fact you are taking 10% in every bill they get – I think this would just reinforce a negative in their mind.

Tutors on the other hand will be told that “the client pays the fee, not you” so hopefully this will minimize their incentive to get paid offline.

Some further incentives:

  • The only way for the tutor to get positive reviews from students is if the student completes the transaction online.
  • The number of hours that the tutor has worked will be publicly displayed on their profile as an indicator of how experienced they are. Only when completing the transaction online will their experience go up.

Processing Payments

Probably the toughest part of this so far has been figuring out how to setup direct deposit with my web app. For some reason the online payment processing industry hasn’t figured out how to make this easy yet. And in general the industry is overly complicated and full of shady companies.

It’s common to setup credit card processing on a website and there are tons of tools for this.

The less common part is also being able to SEND payments into people’s bank accounts.

This is known as a “marketplace” app in some circles – think the iPhone app store or ebay where you have buyers and sellers of some service. You need something called a payment gateway which your website can talk to and do everything (bill credit cards, send direct deposits, etc).

The terminology for this whole thing is just nuts and I’ve had a lot of conversations with people over the last few weeks who sounded very confused. Just as an example, there are about 4 different names just for direct deposit: ACH, EFT (electronic funds transfers), eCheck, and direct deposit itself. These all means slightly different things but are often used interchangeably and most people don’t know the difference.

There are also payroll processing companies who provide this service manually – but when I tell them I want my server to be able to connect to theirs (an API) to automate this process of sending out payments each night they don’t really get it (you mean like Quickbooks? no, not like Quickbooks).

It’s really surprising to me that this is actually this difficult – I’m sure I’m not the first one who has needed something like this?

Anyway, here are a few folks with the capability: BrainTree, Ach-Payments.com, and TrustCommerce. Can’t say for sure who (if any) of these I’d recommend, but I’m talking to all of them now.

Amazon.com also came out with a brilliant payment service designed for marketplace apps that you can read about here. The one downer? It requires both buyer and seller to have or create an Amazon account. This is a deal breaker for me since it won’t fully integrate with my website and will confuse people. I really hope they find a way to change this in the future though.

If all else fails I may get up and running with just Paypal. They have a decent API to send people money, but I would prefer to offer direct deposit as well if possible since it will be cheaper and more professional.

Designing The User Interface

So while waiting to hear back from these payment processors (they have a long application process and underwriting – believe it or not) I started sketching out and implementing the screens where tutors will get paid and students will make payments.

The best way to do it? Take out a pen and blank sheet of paper. To me this is still the best form of website design because it frees you up creatively. If you start trying to design it in photoshop, or heaven forbid, just starting to code it up – the technology gets in your way and really limits your creativity.

If you are having someone else do your web development – just send them the drawings.

For any larger block of text though (say a few sentences or paragraphs explaining how something works) I prefer to type in a text editor instead of writing it by hand. It’s important to get the wording right on these sort of things and that means lots of scratching out, moving words around, etc. It becomes a jumbled mess by hand.

Here are a few of my drawings for the new screens so you can get an idea:

screen1.jpg

screen2.jpg

screen3.jpg

I’ll keep you updated on progress – especially how it changes the revenue once I launch it! Right now I have about 50 subscribers so the site is making about $500/month in profit. With current traffic I’m hoping this percentage based model will push it over $2,000/month almost immediately. Of course it should grow pretty much on it’s own from there with little additional work. We’ll see how it goes!

This post is part of a series on: UniversityTutor.com

21 Responses

    Avatar

    Samuel McCrohan

    March 23rd, 2009 at 4:58 pm

    I’m impressed with the level of thought gone in to each element and as you say… You’ll only really know what works once you have it up and running, where you can receive real feedback.
    I definitely like the idea of not broadcasting the fee aspect… Subtlety is perfect in that situation.
    As for the payment services… Braintree is the only one I’ve heard of out of those… What I’ve heard has been largely positive too.
    Good luck,
    Sam

    Reply

      Avatar

      Brian Armstrong

      March 25th, 2009 at 2:47 pm

      Hi Sam…yep heard good things about them too. Unfortunately they have strict application requirements and denied my application in underwriting. They wanted to see history of using this business model before they took the risk on it. This sort of “aggregation model” is considered riskier apparently. Ach-Payments.com just approved my app though, so I will be trying it out with them. Their prices are much better than BrainTree as well.

      Reply

    Avatar

    College Town Menus (CTM)

    March 24th, 2009 at 9:23 am

    Good post Brian. I love how you are constantly thinking about evolving your business model. I’m having the same difficulties and/or motivation to make a solid process that restaurants must go through. To me, since I’m outsourcing all of my work, any feature I want is more money. I have a decent design and flow for the students currently, but I need a process that restaurants can flow through to seemlessly pay for features.

    Currently, everyone can view any restaurants menu, but only those with registered accounts can rate menus. But that’s it so far. I have a very small number of users, and to try and encourage more registrations; I’m thinking about making it so that anyone can see the restaurant listings and phone numbers, but in order to view the actual menu, require them to make an account/login. Thoughts?

    PS – you have a typo:
    The only way for the >>STUDENT(tutor)<< to get positive reviews from students is if the student completes the transaction online.

    Reply

      Avatar

      Brian Armstrong

      March 25th, 2009 at 2:53 pm

      Thanks for the correction! I’ve also thought a lot about where to make people create accounts. I think you should try to avoid it whenever possible because you will lose about 50% of people (just a guess) when asking them to make an account before doing something. When it comes to voting, there is no reliable way to prevent duplicate voting without an account creation. One way you can minimize it is to use some openID technology so people can signin with their Google or Yahoo account instead of having to create a new one. This is cool because you can tell them “You already have an account”. Checkout how sites like zoho.com are using in this article:
      http://www.techcrunch.com/2008/10/29/your-gmail-account-is-now-an-openid/

      Also checkout https://rpxnow.com/ for an easy way to integrate it. Sites like https://uservoice.com/session/new are using this successfully.

      Reply

        Avatar

        Darryl

        March 27th, 2009 at 8:34 pm

        If the account creation step is super lightweight, like just an email address and a password, the user might not mind. In the book Ajax Design Patterns it describes a function called Lazy Registration where a profile is automatically created for the user as she/he visits your site. While they browser, the server passively collects data (clicks, answers to quick surveys, etc) that fills out the profile. By the time they add their email address and password, the profile is essential done. Many CMS already have session tracking built into them and could be used for this purpose. Lastly, I heard that Amazon works this way. It anonymously builds a unique profile for a user that will remain waiting for a later time when a user makes a purchase.

        Reply

    Avatar

    Barb D.

    March 24th, 2009 at 1:47 pm

    If it were me, I would make students pay AHEAD of the tutoring session instead of sending an invoice and waiting for payment afterward. How do you know the student will actually pay if you tutor them first? I’m a private teacher who’s been shafted by students before, using the “pay later” method.

    Reply

      Avatar

      Brian Armstrong

      March 25th, 2009 at 2:56 pm

      Hi Barb, I think you’re right…I’ve done tutoring as well where clients have disappeared.

      There is also a trust factor for students who just found some random website and don’t know if it’s legit so I guess it’s a balance.

      Maybe ask students to register a credit card first but not charge it until after the session? This could be a compromise. I think tutoring sites like http://www.wyzant.com do this. I will have to see what happens and how frequent it is for people to try and cheat.

      Reply

        Avatar

        Barb D.

        March 25th, 2009 at 5:21 pm

        Yes, I agree–registering a credit card first might give the tutors peace of mind about payment. But me, I wouldn’t want to take a chance and I would charge first. I would also say that if a student weren’t satisfied after a trial period..maybe the first 3 lessons, they could ask for a refund or partial refund. That could also build some trust, I think.

        Reply

          Avatar

          David Weinhaus

          March 27th, 2009 at 12:58 am

          Hi Brian,

          We have corresponded in the past about a similar directory website I am considering and you were very encouraging.

          To piggyback Barb’s question, while a card can be registered ahead of time, I would still think the student would need to go in after the session and authorize the charges. Otherwise, you could have a rogue tutor racking up unauthorized charges and you could be in a mess of trouble. I am assuming it is actually universitytutor.com that is a party to the charge, not the tutor themself. However, if the student does have to go in afterwards to authorize, then it seems you are back to the original problem – the tutor wanting to get paid on the spot versus relying on a later transaction.

          Perhaps Wyzant has the student schedule through the site ahead of time, at which point the transaction is authorized?

          David

          Reply

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          Brian Armstrong

          April 6th, 2009 at 2:36 pm

          Hi David, yes I agree…the student is going to have to approve all charges first. I don’t want tutors auto charging customers cards.

          Reply

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    Créer un site

    March 25th, 2009 at 5:37 am

    I had the same issue with the marketplace stuff, we finally choose Paypal and Western Union, they both offer API, and we work internationally. But this is a real issue as well as the fact that you will pay people who are not professional and at least in France, should not be able to provide a valid invoice.

    A lot of people have fund on their paypal account (ebay….), it a nice way to offer them it for payment

    Reply

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    Flint

    March 26th, 2009 at 1:31 pm

    I am Flint who is an enthusiastic guy and have developed a site called http://money-making-system.synthasite.com which has information about sites where you could make money. I have written every single word on the site by his life experience.

    Reply

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