Inquiries by parents triggers $48M-a-year idea.

INSPIRING PERSPECTIVES

Each Sunday, the AJC brings you insights from metro Atlanta’s leaders and entrepreneurs. Matt Kempner’s “Secrets of Success” shares the vision and realities of entrepreneurs who started their dreams from scratch. The column alternates with Henry Unger’s “5 Questions for the Boss, ” which reveals the lessons learned by CEOs of the area’s major companies and organizations.

Find previous columns from Unger and Kempner on our premium website for subscribers at www.myajc.com/business.

Kim’s tips:

— You can learn something from all businesses, no matter what industry they are in.

— Manage cash flow closely. Businesses often fail not because of one giant loss, but lots of little ones.

— You can’t listen to everybody. Get confident in your decisions.

C2 Education

Based in Johns Creek.

David Kim, CEO and founder.

Launched website in 2000.

Annual revenue: About $48 million in 2013. Projecting $65 million this year.

Profitability: Overall profit margin of about 15 percent. Mature centers have margins of about 30 percent.

Business: 142 centers in 13 states provide tutoring and academic counseling services, primarily to high school students. Customers end up paying an average of $47 an hour. On average, customers pay about $5,000 over a year and a half.

Staff: 1,100 employees, about 300 of them full time.

Ownership: Kim now owns 30 percent of the company. A private equity partner has 60 percent, purchased for $30 million four years ago. Another 10 percent is used in stock compensation plans.

Pay: The first five years, Kim worked 70 to 80 hours a week, took no vacation and paid himself $50,000 a year in wages and dividends. Now, he is paid about $250,000 a year.

“There’s this constant self doubt…. But you can’t show that to other people.”

David Kim had the credentials to pursue lots of careers. But the high school valedictorian with a 4.0 GPA and a near-perfect SAT score, had pushed more than half way through his time at Harvard before finding a captivating business path.

It stemmed from a small tutoring operation he launched in college. Now, at the age of 35, Kim is chief executive of C2 Education, a Johns Creek-based chain of 142 centers primarily serving high school students. The business had revenues of $48 million last year, Kim says.

Luck helped, he says. But so did the lessons he learned as a child from the rise and collapse of his father’s martial arts business.

My parents came to the United States from Korea in 1972. I grew up in Baltimore. My father came to study at the University of Maryland. He was working out at this tae kwon do place. He got to be good friends with the guy who owned the place. My dad inherited this tae kwon do dojo basically.

(His) belief is that you are always going to have competitors come near you, so instead of having somebody come pick off your business, you should expand your business (to additional locations). The business just took off. We would go on these center visits. I’ve been looking at real estate since I was four years old. I’ve been in sales meetings a lot, just bored out of my mind hearing the same pitch.

The business grew to about 60 centers.

I was probably 11 or 12 years old when things started imploding. I got to see a lot of those mistakes that my dad made. I saw him being distracted and not focused on the business. My dad wanted to show the world how successful he was. He’d buy the flashiest car, the flashiest clothes. You saw what that did to (employees’) morale.

While attending Harvard, Kim kept meeting people who wanted him to advise their kids on how to prepare themselves to get into a great university. And they wanted to pay him for his services. Jim Narangajavana, a friend from Kim’s dorm, joined as a tutor. Soon, the two recruited other Harvard and MIT students to do the tutoring.

We made probably each $1,500 a month off of other people’s labor basically. You’d recruit them; you’d train them; you’d vet them out. I was a sophomore when I started doing that.

I was trying to figure what it is I wanted to do (for a career). Dot.com was shooting off at that time. I said I’d like to do a startup, but I don’t have any technical expertise. I kind of like working with kids. I felt like I’m making a difference. My dad did a kind of similar business, getting people to feel good about themselves. I said I think there’s a way to mix what I saw as a kid with what I’m doing now.

The second semester of my junior year I didn’t go to any of my classes.

Instead he met with Harvard professors, asking questions about teaching high school kids and how to best train tutors. He recruited a childhood friend, a student at the University of Chicago, to help.

I felt comfortable that I could do the business side. I didn’t feel as comfortable that I could immediately find great tutors that I could trust. You have to believe in your product at the end of the day.

There was a need for this more holistic program. It wasn’t this tutoring need that really got us into it. There were a lot of people going to a Kaplan or Princeton Review to get help on SAT or ACT, but there really wasn’t someone creating a whole academic road map for a high school student, that encompassed course selection, extracurriculars, how you really go about applying for a college.

Kim pulled together $40,000 he earned from working and, particularly, from loans he took out to pay for his senior year of college, which he no longer needed because he was able to graduate early. He figured he needed another $110,000 for his startup.

At the time credit was very loose. I was able to open 10 credit cards, each with a limit around $7,000. I got $10,000 from my mom and dad, (and another) $20,000 that was spread out among five uncles and aunts.

If we shut down this business I can still go back and get a job as a banker or consultant. The job market was strong enough. I always wanted to pick decisions that had big upside and very little downside.

He staked out rival tutoring operations to find out how much they charged and how many customers they had. He chose a spot in Maryland for the first center. It was close to people he knew who could help with the business. A big break came when someone his dad knew agreed to lease him the space, pay for interior construction costs and not require Kim to give a personal guarantee.

If the business went belly up, nobody was going to come after me. It was all about minimizing risk when we launched this. The first mistake we made was we leased out too much space. It puts a lot of pressure on you. A lot of times, people go out of business because they can’t collect what is owed to them. So at C2, everything we do is prepaid (by tutoring customers).

In the high school market it is hard to get into the schools and talk to the counselors. A lot of high schools have pre-negotiated agreements with Kaplan or Princeton Review. You get boxed out.

So they looked for other places where they could find parents or students, including PTAs, drivers ed programs and sports camps.

How do you get new customers to believe in your product? You’ve got to show the voice of the customer constantly. We solicit testimonials maniacally. Word of mouth grew quickly. (Six months after opening,) we had paid off all the credit card debt. I paid back all my relatives.

With little upfront cost, he leased space for new centers in Virginia and recruited friends from top-notch universities to be tutors.

Up to the first 20 centers, someone I personally knew either from growing up in high school or college was embedded at each center as a tutor. You need people who are super passionate and are really aligned with your culture and your product. Because it’s a constant fight to get this business launched and stable.

(I) lived and breathed this business for the first five years. It wears on you. The only time I felt at peace was driving in the car. There’s this constant self doubt. Did I make the right decision? Even now. But you can’t show that to other people, especially when you are launching a business.

An attempt to expand internationally was a costly mistake that led to lawsuits against Kim. And he stopped selling new franchises because he grew concerned that some franchisees weren’t sufficiently protecting the brand. But he says he doesn’t regret his career choice.

Having built something and see it grow, it’ such a gratifying feeling.