School and edtech unit economics
Build the P&L of a private school in Dubai from capacity and fees, test what happens when seats are empty, and judge a test prep edtech product on contribution, CAC, and renewal.
Industry brief, with a one-minute summary: Education and edtechFirm processes and online tests change from year to year and differ by office. Use this to prepare, and confirm the exact current steps on the firm's own careers page.
Key takeaways
- A school has high fixed costs, so profit swings with how full it is.
- Admissions: marketing to parents or students, open days, tests, and waiting lists; most schools fill for the next year months in advance.
- Timetable and staffing: classes, teachers, and rooms are planned together; a class of 20 and a class of 28 need the same teacher.
- Curriculum and quality: inspections, exam results, and teacher training decide reputation.
Key idea
A school has high fixed costs, so profit swings with how full it is. An edtech product is cheap to deliver to one more learner, so profit depends on the cost to win each learner and how many come back.
Worked case
The economics of a private school in Dubai
The prompt
An illustrative private school in Dubai has capacity for 1,500 students and is 80 percent full. The average fee is AED 45,000 a year. It keeps a student-teacher ratio of 12 to 1 and pays each teacher AED 180,000 a year in total cost. Other staff (teaching assistants, administration, and support) cost AED 9.6 million, rent is AED 8 million, and other costs are AED 7 million. What are revenue and EBITDA, and what happens at 60 percent utilization if the school keeps the same ratio?
The structure
- EBITDA = students x fee minus teachers minus other staff, rent, and other costs
- Students = capacity x utilization
- Teachers = students / student-teacher ratio
- Other staff, rent, and other costs are mostly fixed
Working it through
1. Students
80 percent of 1,500.
Students:1,500 × 0.8 = 1,2002. Revenue
1,200 x AED 45,000, in AED millions.
Revenue (AED millions):1,200 × 45,000 ÷ 1,000,000 = 543. Teacher cost
100 teachers x AED 180,000, in AED millions.
Teacher cost (AED millions):1,200 ÷ 12 × 180,000 ÷ 1,000,000 = 184. Staff cost share
Teachers plus other staff, as a share of revenue: about half, inside the usual range for a private school.
Staff cost (percent of revenue):(18 + 9.6) ÷ 54 × 100 = 51.115. EBITDA
Revenue minus teachers, other staff, rent, and other costs.
EBITDA (AED millions):54 - 18 - 9.6 - 8 - 7 = 11.46. EBITDA margin
EBITDA as a share of revenue.
EBITDA margin (percent):11.4 ÷ 54 × 100 = 21.117. At 60 percent utilization
900 students, 75 teachers, other costs unchanged.
EBITDA at 60 percent (AED millions):900 × 45,000 ÷ 1,000,000 - 900 ÷ 12 × 180,000 ÷ 1,000,000 - 9.6 - 8 - 7 = 2.4
The recommendation
The school should focus on filling seats, because EBITDA falls from AED 11.4 million at 80 percent full to AED 2.4 million at 60 percent, a drop of almost 80 percent from a 25 percent fall in students. First, rent, other staff and other costs of AED 24.6 million do not fall with enrolment. Second, this means utilization, driven by reputation such as inspection ratings and exam results, decides profit. The risk is that fees are regulated in Dubai (frozen for 2026-27), so growth must come mainly from filling seats. As a next step, track enrolment and re-enrolment by year group each term.
Risks: Fee increases are regulated in Dubai (no increase at all was allowed for 2026-27), so revenue growth must come mainly from filling seats; Teacher hiring is lumpy: one class of students still needs a full teacher.
Worked case
Does an online test prep course in India pay back?
The prompt
An illustrative online test prep company in India sells a one-year course for INR 5,000. For each student it spends INR 1,000 on teachers and content, INR 500 on platform and support, and 2 percent of the price on payment fees. It spends INR 1,500 in marketing to win each student. 40 percent of students buy the next year's course at the same price and costs, with no new marketing. What is contribution per student, first-year profit after marketing, and the two-year LTV to CAC ratio?
The structure
- LTV to CAC = contribution over two years / cost to win the student
- Contribution per year = price minus teacher, platform, and payment costs
- Two-year contribution = year 1 + renewal rate x year 2
Working it through
1. Contribution per student
INR 5,000 minus 1,000, 500, and 100 in payment fees.
Contribution per student per year (INR):5,000 - 1,000 - 500 - 5,000 × 0.02 = 3,4002. First-year profit after marketing
Subtract the INR 1,500 CAC.
First-year profit per student (INR):3,400 - 1,500 = 1,9003. Two-year contribution
Year 1 plus 40 percent of year 2.
Two-year contribution (INR):3,400 + 0.4 × 3,400 = 4,7604. LTV to CAC
Divide by INR 1,500.
LTV to CAC ratio:4,760 ÷ 1,500 = 3.17
The recommendation
Contribution is INR 3,400 per student a year, so the course pays back in the first year with INR 1,900 of profit after INR 1,500 of marketing. Because 40 percent of students buy a second year, two-year contribution reaches INR 4,760, an LTV to CAC ratio of about 3.2. The risk is marketing cost: in crowded markets CAC can rise above the first-year contribution, which is part of what went wrong at several heavily funded edtech firms. As a next step, track CAC and the renewal rate by channel each month.
Education operations
- 1Admissions: marketing to parents or students, open days, tests, and waiting lists; most schools fill for the next year months in advance.
- 2Timetable and staffing: classes, teachers, and rooms are planned together; a class of 20 and a class of 28 need the same teacher.
- 3Curriculum and quality: inspections, exam results, and teacher training decide reputation.
- 4For edtech: content production, live and recorded classes, doubt-solving support, and learning analytics; many products mix online and offline centres (hybrid).
A private school in Nigeria has 960 students and wants a student-teacher ratio of 16 to 1. How many teachers does it need?
For 2025-26 Dubai allowed eligible private schools to raise fees by up to 2.35 percent. A school with revenue of AED 54 million takes the full increase. If enrolment is unchanged, how much extra revenue does it earn, in AED millions, to two decimal places?
A university in the UK admits 1,000 international students a year, each paying GBP 24,000 a year for a 3-year degree. Visa rules cut the intake by 20 percent for one year. How much fee income does that one smaller cohort lose over its 3 years, in GBP millions?
A new school opened at 40 percent utilization and loses money. What is the best first question?
Sources for this lesson (3)
- Recognized public explanations of case-interview concepts and frameworks
- Khaleej Times: Dubai's KHDA confirms no increase in private school fees for the next academic year (May 2026)
- Gulf News: Dubai Education Cost Index set at 2.35 percent for 2025-26
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