Video Of The New Billing Feature On UniversityTutor.com

In: Business Ideas| Education| How To| Wealth By: Brian Armstrong

7 Apr 2009

This entry is part 13 of 18 in the series UniversityTutor.com

Hey Folks,

Here is the video as promised of the new billing features on UniversityTutor.com.

For those just joining us, this represented a big change in the business model. Previously I was charging tutors $10/month to keep their profiles on the site.

With the new business model, tutors can now have a free account, but the client pays a 15% fee on any money they earn. For tutors who use the site a lot and don’t want their clients to have the 15% fee, they can still pay $10/month (for a Pro Account) and then the markup is only 5%. This is similar to the Guru.com business model which I think balances nicely between the free and pro account.

There were a couple important points I wanted to reinforce to the tutors:

The *client* pays the 15% markup and not you. I stole this idea from odesk.com by the way, and it’s slightly different than how elance.com or guru.com does it, where they charge the tutor.
Clients can only leave you a positive review if you complete the transaction online.
Similarly, your number of hours of tutoring (aka your tutoring experience) will only get updated if you complete the transaction online.
You don’t have to pay up front for “contacts” from potential students anymore. Now, we only make money if you make money – which seems more fair.

Here it the video on Veoh (which has slightly better resolution). Click here if you don’t see it below.

Or if you are international here is the same video on YouTube.

As you can see, it ended up remarkably close to my drawings from a few weeks ago:

I launched the feature this weekend, and sent emails out to about 5,000 tutors explaining the change and how it would (hopefully) benefit them. A handful of the tutors wrote back and were pretty upset about the change (which was to be expected when sending to this many people). But I wrote them back right away thanking them for the feedback and telling them it was still a work in progress and that really using the invoicing was optional for right now. They could still get paid with cash/checks if they wanted – clients just wouldn’t be able to leave them a review after.

Here is an example of one of the emails I got:

Subject: Silly

While I feel that it is justifiable for the website to make money and operating costs, the website should find another way to make these costs. Advertising to both the potential tutees and tutors could be a much better option. It could include specially directed advertisements based on
-info given about potential tutees
-Area
-Major and area of tutoring (of college students)

Additionally, I am concerned about the method of payment. Would it be through pay pall? That would be bad for me. My students have been very reliable with their checks.

Sincerely,
A disgruntled student

And my response:

Hi[NAME REMOVED],

Thanks for the feedback you make some very valid points! It is still a work in progress and nothing is set in stone yet so we’re definitely taking everyones feedback seriously.

To answer your question, the student can pay via credit card which is more common online, so no, Paypal is not required. In addition, you are not required to use our online payment method at all. If you prefer to keep using checks or cash that is ok with us, and you wouldn’t pay us any markup in that case.

For your current clients it may be easier to just continue doing this. Just keep in mind that to build a reputation on the site (reviews and hours) it might be better long term to transition over, but it is still totally optional, and to be honest right now it won’t make much of a difference since nobody has any hours recorded yet anyway.

But hope this helps and we’ll continue working on it. Thanks again!

Thank you,
Brian Armstrong
–
www.UniversityTutor.com

Her mood changed instantly when she wrote back:

Thank you for answering my questions.
I am actually quite excited about using the online system now!

Success! I’m really excited about it and hopefully it helps make the site much more profitable over the new few months as people start using it.

What do you think? Feel free to send me your feedback in the comments…

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

14 Responses

College Town Menus (CTM)

April 7th, 2009 at 11:59 am

Excellent work! It’s kind of fun in a way seeing how you tweak your business model and the results of it. I think all of your tweaks have been very good and appropriate. Great method – find a model that works on another site, copy the concept, and apply it to your site! I’ve been taking notes myself and trying to figure out a model to choose for my site. Still something I need to nail down.

Keep up the great work! I’d love to see some metrics (numbers or a pretty graph) that show the revenue and how it changes (increases) as you tweak the model. Kind of like a timeline. How is your traffic doing? It’d be neat to overlay your traffic to your revenue on the same graph to see how things correlate, etc.

Keep up the great work! You’re helping all of us!

Brian Armstrong

April 7th, 2009 at 11:22 pm

Hey there, definitely got some metrics coming! I’ll probably give it at least a few weeks to run first though. The first payment just came through today already though…when it gets to about $2k per month passively I’ll uncork the champagne :)

Nick

April 7th, 2009 at 1:18 pm

I really like what you’ve done Brian. I agree that using an existing (proven) model is just plain smart. You don’t need to re-invent the wheel all the time. Yet, you put in plenty of your own ideas, to make it ‘yours’.

I think your ace card is the way you make it in their interests to do everything ‘by the book’, when it would be sooooo easy for the tutors to get a student and then just pocket the money without giving you your %. Feedback gives them a powerful incentive to keep you in the loop.

I think your cut is very fair.

To be honest, at first, I thought there were too many ways your idea could be compromised. Seems I was wrong :) Well done, and thank you for teaching me to be more open minded. I WILL learn from it.

Brian Armstrong

April 7th, 2009 at 11:23 pm

We’ll see if it works, thanks Nick! It’s all just testing till you find something that works. I feel pretty confident about this one though.

Aylwin

April 7th, 2009 at 10:35 pm

Hi Brian,

I have been following your post on these topic since you started. So, which payment method you end up using? Why did you choose that?

Actually, I am looking at the possibility to integrate payment method on the website that I am developing, but the merchant fee for some service is quite significant (especially for small amount of money). Take example, PayPal charging 2.4% for each transaction.

These series of posts have really motivated me a lot, I learnt a lot from it. Excellent jobs, Brian.

Brian Armstrong

April 7th, 2009 at 11:27 pm

Hi Aylwin,

I ended up going with ACHDirect.com because there were VERY few which would also allow me to do direct deposit (sending funds to people’s bank accounts). They ended up being very inexpensive (no setup fee, 2.09% + 30 cents for credit card and only flat 24 cents to sent an electronic funds transfer into someone’s bank account). However, I’m not sure if I’d recommend them yet. I haven’t used them for very long – and their documentation was not really done very well.

If you only need credit card processing there are way more options. One I stumbled across in my searching was paysimple.com – never used them because they didn’t offer the direct deposit but otherwise they seemed good. No setup fee, fairly simple.

Let us know how it goes. Thanks!

CollegeTownMenus (CTM)

April 7th, 2009 at 11:28 pm

I second the above comments. This is a slick interface you have made. The process/flow of everything is very easy and well laid out. I also want to know what company/service you used for your payment processing. How hard was it to integrate, cost associated, etc.

I like your single sign on page. So clients and tutors both sign into the same page? Then the back-end system determines if a user is client or tutor? Nice.

How long did it take you to do all of this last feature? From idea, to sketches, research, and final live product?

Brian Armstrong

April 9th, 2009 at 12:29 am

Yep I ended up using ACHDirect.com for the payment processing. It was definitely not easy to integrate, their documentation sucked, but I finally got it working. I will most likely contribute the code to the Rails plugin Active Merchant so other people can use it, but haven’t done this yet with everything else going on.

Yep, clients and tutors sign in to one page. It was probably a good 3 weeks from idea to finally launching it. People are slowing starting to use it. I will continue to tweak little things as it goes forward. I’m impatient and just wanted to get it out there though! :)

Dave Beer

April 9th, 2009 at 6:47 am

Something you could do (for the tutors with free accounts) is allow them to build reputation and let a student review them – but they do have to pay a fee for each one.

That said, they might as well migrate to a paid account in that case.

I’ve really been enjoying following your journey with this!

Brian Armstrong

April 9th, 2009 at 3:33 pm

Hi Dave, not sure what you mean exactly. Charge for each contact they get? Or charge when a student rates them?

Right now the free account has no cost associated with this, the client pays the markup and the tutors gets all the rest for free. Let me know…

aylwin

April 9th, 2009 at 7:48 pm

Speaking of paying for contact, well, actually, there always a way around it. I just mention it here, so that you are aware that this is possible (hopefully none of your tutor read my comment).

They can put phone number, email address, or any contact o the experience session. Or, one of the trick that I used for my LinkedIn, is putting my email address in the Surname (ex. surname = Smith(john-smith@mail.com), and that will open the possibility of other user contact me directly.

With free account, everybody will play fair. But once you ask them to pay, it will make them think how to cheat a system.

Hope this help…

Brian Armstrong

April 12th, 2009 at 2:35 pm

Yep, that’s a big reason why I avoided it. I want to make contacts between tutors/students as easy as possible so I don’t mind if they put their phone number or email or whatever else they’d like on their profile. There is no requirement to do all messaging through my system.

David W

April 14th, 2009 at 1:22 pm

Hi Brian,

This is really fun. I applaud the way you are putting this out there. It is fantastic to learn by watching.

Having said that, I’d like to play devil’s advocate. Frankly I don’t mind at all being proved wrong (that is what is great about you blogging this – we get to follow along).

I tend to be a little cynical on three fronts. 1) I think the tutors will view this as coming out of their pocket – they know the student is willing to pay $6 more bucks – $6 bucks not going to them. 2) I’m not sure how meaningful the ratings will be to the tutors. I tend to think a local personal service like this is purchased differently than an outsourced service provider from India on eLance. 3) I’m not sure the teacher’s are going to want to separate the timing of the payment from the timing of the service.

Your style seems to be a nice combination of well thought out, instinct, and testing. What was your approach here? How, or was it even possible, to test any assumptions? It is easy for me to be wrong – I am just commenting. How do you minimize the risk of being wrong?

David

Brian Armstrong

April 23rd, 2009 at 1:07 am

Hi David, very well thought out points. To be honest I am really not sure, I keep going back and forth in my own mind as to whether it will work. People have started using the billing feature, but some are hesitant, especially those that were used to the old system. I have a feeling that as new tutors sign up and see it for the first time they will be more likely to use the new system since they haven’t seen it the old way (there is no perception of loss).

My approach was just to ask what would help it grow and cause the least resistance to those using it (people hate monthly fees so this was a good to get rid of, then again there is a temptation to take cash at the end of the session too, to it’s a trade off).

Luckily, I have nothing to lose (other than my time) for testing it out :)

I’ll be posting up the results after it’s run for two months. I’m as curious to find out as you are :)

Thanks for the well thought out comments! I can tell you are approaching it in a similar way to my own.
Brian

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Video Of The New Billing Feature On UniversityTutor.com

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