When the going gets tough, go back to school. That's not test-prep giant Kaplan's motto, but it could be. No company is in a better position to profit from the economic slowdown.
Founded in 1938 by tutor Stanley Kaplan in his parents' Brooklyn, N.Y., basement and acquired in 1984 by the Washington Post Co., Kaplan is famous for whipping anxious standardized test-takers into shape. It dominates the $3 billion test-preparation market and tutored a whopping 60 percent of the 176,000 business-school wannabes who took the Graduate Management Admission Test, or GMAT, last year.
But under CEO Jonathan Grayer, a Post Co. veteran, Kaplan has broader ambitions. Since taking the helm in 1994 at age 29, Grayer has expanded Kaplan's stable of services, from tutoring for grade schoolers and online courses for nine-to-fivers to training for real estate agents, securities brokers and other professionals. "He's taken it from a sleepy subsidiary of the Post to its brightest star," says Peter Stokes of market research firm Eduventures.com.
Long grouped into the "other business" category at the Post Co., Kaplan now draws the second-highest revenue, behind the flagship daily but ahead of Newsweek (where Grayer was named marketing director at age 25) and the cable TV operations. Last year, Kaplan saw revenue leap almost 50 percent to $353 million, and Grayer expects to hit $500 million in 2001.
Thanks to a rush back to graduate school - for instance, Boston University last fall reported a 60 percent jump in business-school applications - revenue from business- and law-school test-preparation courses were up roughly 30 percent in the first quarter of 2001. Kaplan's business is looking more recession-proof with each bearish report, as people seek job security and résumé padding for the tight labor market, according to Stokes.
As much as Kaplan reigns in the test-prep business, it commands only a fraction of the $250 billion postsecondary education market. Grayer's biggest move so far to grab a larger share came last summer with the purchase of Quest, a 13-year-old chain of job-training colleges with a 450 percent increase in revenue since 1993.
Another important part of Grayer's plan is to grow online, with courses in law, nursing, high tech and other areas. Grayer says the adaptability of online education is crucial: "It lets us accommodate all learning styles."
With 400 Kaplan-owned centers and 3,600 satellite locations, Kaplan had no problem growing during the bull market. In tough times, it should grow even faster.
