Test Prep in Austin - Redo

Delivered January 29th, 2018. Contributors: Sunali, Shannon, Jesus, Monica, Jessica and

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Student Test Prep Market - GMAT

The market for GMAT test prep services in Austin is estimated to be worth $483,363 based on the most recent data available. The methodology and assumptions for this estimation and other findings are detailed below.
methodologyDespite extensive searching, I was not able to find pre-existing sources on the market size of the GMAT test prep market that is freely available. However, I was able to triangulate an estimated market size based on the available information. This estimation is based on the number of GMAT candidates in Texas and the population statistics of Austin.
industry backgroundAccording to IBISWorld, the US test prep industry was worth $328 million in 2016. A study conducted Research and Markets predicts that the market will grow at a CAGR of 5.51% during 2017-2021. One of the primary drivers for the test prep market is the increase in enrollment of graduates in the US. This is in direct proportion to the increase in the number of standardized test takers. In addition, "the growing importance of standardized test scores has compelled many students to opt for test preparation services in the US."
gmat test prep market in austin1. The age breakdown of students that take the GMAT exam is as follows: (the latest data available was from 2015)
-Younger than 25: 38.2% 
-25–30: 39.9% 
-31–39: 15.8% 
-40 and older: 6.2% 
For the purposes of the triangulation, it is assumed that GMAT test prep would not be pursued by anyone younger than 19, as they have not graduated from university, or older than 65 as it is not the norm. Hence, the age range considered will be 19-65.

2. The population aged 19-64 in Texas is 16,554,900 (2,756,000+ 3,680,000+6,988,400+3,130,500)
The population aged 18-64 in Austin is 1,358,650 (200,956+675,054 +482,640)

3. In 2017, 9.467 total Texas residents sat for the GMAT. Based on the 18-64 population data (point 2), an estimate for the number of GMAT students in Austin can be made as follows.

The % GMAT students in Texas aged 18-64 =9467/16,554,900*100
=0.057%

By applying the percentage calculated above, the number of GMAT students in Austin aged 19-64 will be
= 1,358,650*0.057%
=774

4. There was no recent information available (that are not behind paywalls) which shows the percentage of GMAT students that take test prep services. However, it was found from an older source (2010) that approximately 50% of GMAT students opt for test prep courses. (online or in person)

4. The course fee for GMAT test prep offered by Kaplan in Austin (searched by zip code) ranges from $1,049-$1,449. Based on this information, the average course fee for GMAT test prep in Austin is calculated as $1,249 ($1,049+$1,449/2)

Based on the above findings, the market size of GMAT test prep services in Austin can be estimated as follows:

Market size=Number of GMAT students in Austin*average GMAT prep course fee* % of students that take GMAT prep
=774*$1,249*50%
=$483,363
other findingsAccording to GMAC, there has been a declining trend in the graduate management applications in the US. According to the report, this decline in domestic demand is due to the tightened US labor market with unemployment levels at pre-recessionary levels. It further states that the recent political events in the country may have played a role in the drop in international candidates applying to US programs. This may explain the discrepancy between the initial estimate of 11,000 GMAT candidates in Texas (client comment), and the actual findings of only 9467 in 2017.
ConclusionBased on the available information, the estimated market size of the GMAT test prep services in Austin is worth $483,363. Based on research conducted by GMAC, the governing body of GMAT exams, there has been a decline in the industry during the recent years as a result of tightening labor market and possibly also the political situation in the country.

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Student Test Prep Market - LSAT

Although there is no information on how many people take the LSAT test or the number of people who use test prepping services to prepare for the LSAT test in Austin Texas, we can estimate that the total addressable market (TAM) size for LSAT test prepping services in Austin, Texas is between 175 and 350 people, while the serviceable addressable market (SAM) is between 55 and 109 people. My findings and calculations are below.
MethodologyIn researching the market size for LSAT test prepping services in Austin, Texas, I found that there are two different estimates I could provide. First, I offer the total addressable market (TAM), which is the total number of people taking the LSAT exam in Austin who could be in the market for test prep services. Second, I provide the serviceable addressable market (SAM), which is the percentage of LSAT test takers who have traditionally used commercial test prepping services in the past, and are therefore, more likely to use such services in the future.
FindingsThe Law School Admission Council (LSAC) keeps and publishes statistics on the number of people who take the Law School Admissions Test (LSAT) each year and breaks the data down by country and state. Unfortunately, the LSAC does not provide city-by-city numbers, which means we cannot get an actual count of how many people in Austin take the LSAT each year. However, the LSAC indicated that 5,828 people with permanent residences in Texas took the LSAT between June 2016 and February 2017, the last full year for which data is available. Using this number, we can calculate how many of those 5,828 test takers were in Austin.
The low end Total Addressable marketAccording to the United States Cenusu Bureau, the population of Texas is 28,304,596 and the World Population Review puts Austin's population at 947,890. By dividing Austin's population by Texas' population, we can calculate that Austin represents 3% of the total number of people living in Texas (947,890 / 28,304,596 = 0.033, rounded to 0.03 or 3%). Then, we can calculate a low end TAM size by multiplying the number of total test takers in Texas (5,828) by 3% to get 174.84, rounded to 175. This means that the lowest estimate of the number of people living in Austin who take the LSAT each year is 175. This would represent the low end TAM for LSAT prepping services in Austin.
The High end total addressable marketHowever, if we examine the education levels in Austin compared to the education levels in all of Texas, we can assume that the number of LSAT takers in Austin is higher than 175. TownCharts, a website that provides city demographic information, shows that 48% of people living in Austin have at least a bachelor's degree compared to just 28% of Texas residents as a whole. Since LSAT test takers must at least have a bachelor's degree, we can exclude those people living in Austin and Texas who have not attained this level of education to give us an estimated high end TAM size for LSAT prepping services. 

To find the number of people in Texas who have a bachelor's degree or higher, we can multiply the total population of Texas (28,304,596) by 0.28 to get 7,925,286.88, rounded to 7,925, 287. 

To find the number of people in Austin who have a bachelor's degree or higher, we can multiple the total population of Austin (947,890) by 0.48 to get 454,987.2 rounded to 454,987. 

We can calculate that Austin represents 6% of the people living in Texas with bachelor's degrees or higher (454,987 / 7,925,287 = 0.057, rounded to 0.06).

Finally, we can calculate the high end of the LSAT prepping services TAM in Austin to be 6% of the total number of Texas LSAT takers (5,828), which is 349.68 rounded to 350. Therefore, we can say that the highest estimate of the number of people living in Austin who take the LSAT test each year is 350. This would represent the high end of the TAM for LSAT prepping services in Austin.
Serviceable Addressable Market (SAM)In addition to publishing the number of LSAT test takers each year, the LSAC also published "self-reported methods of test preparation" percentages. Unfortunately, the most recent report available for this metric is for the test year 2013-2014, so the information is a little old. However, the report indicates that the percentage of student who used a commercial test preparation school to prepare for the LSAT varied just 1.15% (32.34 in 2011-12 minus 31.19 in2013-14) over three years. Therefore, we can assume the percentage has not changed significantly since this report was published.

In 2013-2014, 31.19% of test takers indicated they had used a commercial test preparation school to prepare for the LSAT exam. This means that if we take the low end TAM of 175, just 55 people (175 x 0.3119 = 54.58, rounded to 55) living in Austin are looking to use a test prepping service for the LSAT. If we take the high end TAM of 350, 109 people (109.16, rounded to 109) living in Austin are likely to use a test prepping service for the LSAT. This gives us a SAM range of between 55 and 109 people living in Austin who would use a commercial test prepping service for the LSAT.
LimitationsOf course, both the low end and the high end TAMs and SAMs are rough estimates, and the actual numbers likely lie somewhere between 175 and 350 (TAM) and between 55 and 109 (SAM). Since not all 48% of the higher degree holders in Austin have bachelor's degrees (many likely already have master's degrees, doctorates, or law degrees) the 350 and 109 numbers are probably too high. However, since Austin residents generally have more education than Texas residents overall, the 175 and 55 numbers are most likely too low. Unfortunately, without solid data from the LSAC on a city-by-city level, these are the best estimates available.
Other available data pointsAlthough the focus for this request is Austin, Texas, the following data points might be helpful for LSAT market sizing purposes.

In 2016-17:

— 109,354 LSAT examinations were administered worldwide.

— 75,139 LSAT examinations were administered in the United States

— Texas represents 5% of LSAT test takers worldwide (5,828 / 109,354 = 0.053, rounded to 0.05), and 8% of LSAT test takers in the United States (5,828 / 75,139 = 0.077, rounded to 0.08).

— The number of LSAT test takers worldwide has increased every year since 2015, when the number was at its lowest point in more than 11 years.

— The number of LSAT test takers worldwide increased 3.3% from 2015-16.

— The number of projected test takers for 2017-18 is expected to rise to 125,000 from the 109,354 in 2016-17, an increase of 14.31% (calculated using a growth rate calculator).

— Using the projected increase in LSAT test takers worldwide, we can estimate that in 2017-18, the total addressable market range for Austin, Texas would be between 200 (175 x 1.1431 = 200.04, rounded to 200) and 400 (350 x 1.1431 = 400.08, rounded to 400).

— Using the projected increase in LSAT test takers worldwide, we can estimate that in 2017-18, the serviceable addressable market range for LSAT prepping services in Austin, Texas would be between 63 (55 x 1.1431 = 62.87, rounded to 63) and 125 (109 x 1.1431 = 124.59, rounded to 125).

— Using the projected increase of 14.31% in LSAT test takers worldwide, we can estimate that in 2017-18, there will be about 6,662 LSAT test takers in Texas (5,828 x 1.1431 = 6,661.98, rounded to 6,662).
ConclusionCurrently, the total addressable market size for LSAT test prepping services in Austin, TX is estimated to be between 175 and 350. However, the serviceable addressable market size is between 55 and 109 based on the percentage of test takers that use a test prepping service to prepare for the LSAT. The number of LSAT test takers worldwide is expected to increase by 14.31% for 2017-18, meaning the total addressable market for LSAT prepping services in Austin could increase to between 200 and 400, while the serviceable addressable market could increase to between 63 and 125.

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Student Test Prep Market - ACT

Using student enrollment statistics and ACT participation rates, we estimate the market size for the ACT test prepping services in Austin, Texas to be 18,385 students. For the academic year 2016-2017, out of the total 387,891 students enrolled in the Austin school district, only 13% (6.8%+6.2%) or 50,426 (387,891*13%) students are juniors and seniors. Out of this 50,426, a total of 18,385 students participate in the ACT examination accounting for 36.46% of the total junior and senior students. Despite the high number of actual examinees, only 19% utilize commercial prepping services or a total of 3,493 (18,385*19%). Below, you will have deep dive of our findings explaining the calculations and assumptions used. 
FINDINGS
The market size of the ACT test prepping services in Austin, Texas, is not readily available in the public domain. This information proves difficult to look for because the ACT test prepping services niche is a specific segment of the education services sector. Furthermore, the geographical scope of this research makes it even harder to locate the information. To find relevant data points from which an estimate of the market size based on the number of consumers of ACT test prepping services in Austin, Texas can be calculated, we have searched through statistics databases, industry reports, and trusted media sites. The calculations and assumptions are explained below. 

•     For the academic year 2016-2017, there were 387,891 students enrolled in Austin school district. In Texas, out of the 5,359,127 total students enrolled for the academic year 2016-2017, 6.8% and 6.2% accounts for the junior and senior students, respectively. Applying these rates to Austin, we can assume that there are 50,426 [387,891*(6.8%+6.2%)] juniors and seniors in Austin.  

•     In the Austin school district, the participation rates in the ACT at various high schools range from as low as 9.1% for Trinity Charter School to as high as 100% for both Eanes ISD and Kipp Austin Public Schools Inc. Using the participation rates obtained from this excel file published by the Texas Education Agency, we have computed the average participation rate of Austin in the ACT which is 36.46% based on the sorted "Austin" and "All students" participation rates data points. 

•     Using the above data points, we can then compute the number of students from the 50,426 juniors and seniors enrolled in Austin who will participate in the ACT examination. Thus, it is estimated that a total of 18,385 juniors and seniors will take the ACT examination at least once in Austin, Texas, computed as follows 50,426 (no. of juniors and seniors in Austin)*36.46% (average participation rate in the ACT in Austin, Texas). 

•     After an extensive search, we were unable to find the percentage of students who will use commercial test prepping services for the ACT examination. The ACT does not publish data on the number of students utilizing the services of an ACT test prepping company. Currently, "there aren’t any exit poll results available that illuminate how, exactly, students prepare for the test". Despite this, ultimately, we know that students have varying strategies on how they prepare for the ACT exam. 

•    According to a report published by the CollegeBoard Organization, 19% of those who took the SAT exam used commercial test prepping services. While this data focuses on the SAT, we believe that it is a safe assumption to make that the same percentage of students would use a commercial test prep company to prepare for the ACT. Thus, out of the estimated 18,385 students who actually took the ACT exam, it is estimated that 3,493(18,385*19%)  junior and senior students utilized commercial test prepping services for the ACT. 

•     To portray an unofficial picture of how many students a new entrant in the ACT test prepping services market in Austin will capture, we identified there are already 10 businesses offering ACT prepping services in the area. Thus, 3,493*1/11 = 317 students.
 
•     Since the focus of this research is in Austin, Texas, notice that we used the average participation rate of Austin which is lower than the national average of 64% in 2016. If we calculate using the national average, which may happen as the average income in Austin rises, we will get a higher number of students which will then equate to a potential for market growth. 
CONCLUSION
In conclusion, for the academic year 2016-2017, a total of 50,426 juniors and seniors were enrolled in the Austin school district. The current actual market is barely addressed as recent estimates suggest that only 19% or a total of 3,493 students of the total market of 18,385 actual juniors and seniors ACT participants utilize the service of commercial test prep services. However, the ACT test prepping services market in Austin has a potential for growth because currently the average participation rate of 36.46% is lower than the national average of 64%. Holding other factors constant, should the average household income in Austin, Texas rise, so should the actual number of students who will utilize ACT test prepping services. 

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Student Test Prep Market - MCAT

The market size of the MCAT test prep market in Austin is estimated at 135-230 students a year. This estimation is based on the number of people who took the MCAT in Texas, the number of people with higher degrees, and the population sizes of Austin and the state of Texas. Detailed calculations and relevant findings are provided below.
METHODOLOGYAfter an extensive search, precompiled information on the MCAT market size in Austin or in Texas was not publicly available. However, an estimated approach was possible based on available data from the U.S. Census, the Association of American Medical Colleges and other relevant sources. 
FINDINGSAccording to the U.S. Census, as of July 2017, there are an estimated 28,304,596 people in Texas. The estimated population size of Austin, Texas is 947,890. 

In the 2016-17 testing period, there were 53,042 total MCAT examinees. This is a slight increase from the 52,550 reported in 2015-16. However, a drop occurred in the total number of examinees to 51,680 in 2017-18. From the latter figure, 4,515 were from Texas. 

In Texas, the educational attainment level for those with a higher degree aged 25 and older is 33.1% or 5.33 million. From these numbers, 247,000 have bachelors degrees and 27,700 have advanced degrees (MBA, Ph.D., or MD) in Austin. This city has an overall educational attainment level of 50.8% (or 275K) for those with a higher degree. In fact, Austin is ranked 5th for advanced degrees and 10th for bachelors degrees in the state of Texas. When considering the Austin metro area as a whole, the area is ranked #1 for bachelors degrees and #2 for advanced degrees. 

These figures highlight the overall higher level of education of the Austin population in comparison to Texas as a whole. This indicates that the MCAT test prep market in Austin is likely larger than that of Texas. The previously outlined statistics were used in order to reach an estimated market size of 135-230 students per year. Below you'll find a detailed outline of my calculations and assumptions. 
CALCULATIONSIf there are 947,890 people living in Austin, TX and there are 28,304,596 people total residing in Texas then Austin represents 3% of the total Texas population. 

Austin Population / Texas Population = Austin Percentage of the Total Texas Population

 947,890 / 28,304,596 = .033 

.033 x 100 = 3% (Percentage conversion)

Therefore, it can be assumed that 3% of MCAT test takers in Texas live in Austin. If 4,515 people took the MCAT exam in Texas, and Austin represents 3% of the Texas population, then that means an estimated 135 people who take the test reside in Austin.

Austin Percentage of the Texas Population of the Total Number of MCAT Test Takers in Texas = Number of MCAT Test Takers from Austin

3% of 4,515 = 135

Austin has a higher percentage of residents with higher degrees than the state of Texas. Austin's percentage is 50.8%, or 17.7% higher than that of the Texas average of 33.1%. 

Austin Rate of Higher Degrees — Texas Rate of Higher Degrees = Percent Difference of Higher Degrees

 50.8% - 33.1% = 17.7%

It's clear that Austin accounts for 5.1% of people with higher degrees in Texas.

Austin Population with Higher Degrees / Texas Population with Higher Degrees = Austin Percentage of the Total Texas Population with Higher Degrees

 275,000 / 5,330,000 = .051 

.051 x 100 = 5.1% (Percentage conversion)

With this figure in mind, if 5.1% of MCAT test takers are from Austin with a higher degree then an estimated 230 people will possibly take the MCAT.

Austin Percentage of the Texas Population with Higher Degrees of the Total Number of MCAT Test Takers in Texas = Number of MCAT Test Takers with Higher Degrees from Austin

5.1% of 4,515 = 230

This means that the Austin MCAT market ranges from an estimated 135-230. The 135 figure represents the low-end of the scale based on population and the 230 figure represents the high-end of the scale based on the higher education levels of those in Austin compared to the rest of Texas.
CONCLUSIONIn conclusion, during the testing period of 2016-17, there were 53,042 total MCAT test takers. From this figure, the number of test takers from Texas was 4,515. The current market size of MCAT test prep is estimated to be between 135-230 students a year. This estimate is based on the population sizes of Austin and the state of Texas along with the number of individuals with higher degrees in the area and the number of Texans who took the MCAT.

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Test Prep Services - Offline vs. Online

The test prep market was worth $328 million in 2016, of which 23% originated within the online test prep market. Below you will find the steps taken to determine our results.
methodologyAfter a thorough search of several databases, we could not locate data concerning online or offline test prep in Texas in the public domain except a verification that the test prep market is highly active in that state. It is worth noting that we did find one source that likely contains the information requested, but it is only accessible behind a paywall. Therefore, we decided to extend our search to include the market size for online and offline test prep for the entire United States.
FINDINGS Three articles, one from businesswire.com, the other sourced from PRWeb.com, allowed us to calculate the approximate online test prep market size for 2015 while the third article from FoxBusiness provided figures and percentages regarding the combined in person and online test prep market in 2016.
2015 MARKET SIZE
In 2015, the tutoring service industry reached $132,100,000. Test prep services accounted for 53.84% of the tutoring services industry. 
Based on that percentage, we can determine the online test prep industry in the United States as:

= 53.84% of $132,100,000 
= 0.5384 × $132,100,000 
= $71,122,640

We can therefore conclude that in 2015, the online test prep industry in the United States produced $71,122,640.
2016 MARKET SIZE PROJECTIONAnother article from businesswire provided the projected CAGR of 6.11% for the online test prep market from 2016 to 2021. Using the results from our calculation above and the CAGR we can then estimate the 2016 market size for online test prep using the Future Value formula provided by Investopedia i.e., (FV = I * ((1 + R) ^ T))

Therefore, we can determine the 2016 online test prep industry in the United States as:

= [$71,122,640 × (1+0.0611) ^1]
= [$71,122,640 × (1.0611) ^1]
= $75,468, 233
2016 IN PERSON MARKET SIZEAccording to an article in FoxBusiness, the combined in person and online test prep market in 2016 was $328,000,000. Using the combined in person and online test prep value, we calculate the percentage of that market which is online, then the remainder will be the market size for in person test prep.

= ($75,468,233/$328,000,000) × 100
= 0.2301 × 100
= 23.01%

23.01% represents the market size for online test prep. This means, the percentage of the in person test prep market size is equal to (100 – 23.01) = 76.99%

Therefore, the 2016 market size for in person test prep is: 

= (76.99/100) × $328,000,000
= 0.7699 × $328,000,000
= $252,531,767

Thus, we can conclude by noting that the 2016 revenue for the in person market size was $252,531,767, or 76.99% of the combined in person and online test prep market.