Testing 1-2-3: Revolution Prep is making its mark on the world of SAT courses by facing off against Kaplan and Princeton, the sector's leaders.

JAKE Neuberg spent most of a recent Saturday in a gym with hundreds of high school juniors and seniors.

They were there to take the newest version of the dreaded SAT. So was Neuberg, but for a different reason--market research. The 28-year-old co-founder of Santa Monica-based test preparation company Revolution Prep wanted to soak up the anxiety, restlessness and boredom of his clients on test day.

"We do this every year to remind ourselves of the hell these kids go through," said Neuberg, who once was a tutor for Kaplan Test Prep.

Whether it's standing in line to take a test or finding ways to reduce the stress levels, Neuberg and his partner Ramit Varma, a former Princeton Review tutor, are trying to do things a bit differently.

The two joined forces while at UCLA's Anderson School, with the idea that they could do a better job than their former employers--as well as undercut them on price. They boot-strapped the company on credit cards in 2002 and nearly went broke the first year. But by 2004, Revolution had more than $1 million in revenues. With an essay question and other changes in the latest version of the Scholastic Aptitude Test, business has been booming, with revenues hitting $500,000 for the first three months of 2005.

"Our largest challenge over the next three to five years is keeping that community feel as we get bigger," said Neuberg. "How do you keep everyone excited on a daily basis?"

Kaplan, which was founded in 1938, and Princeton Review, formed in 1981, dominate the test-prep industry. Princeton Review alone has spent $1 million in new materials for the new SAT, according to Phil Ross, head of partnership development with the firm's Los Angeles office--and he's not shy about taking aim at the competition. "Unfortunately, the business is not regulated. Anybody can hang out a shingle and say they're an SAT specialist," he said.

Established foes

At Kaplan Test Prep, officials have noticed a number of smaller competitors entering the market with the test change, although Krista Plaisted, director of SAT and ACT programs for California, noted, "We have by far more experience in this area."

Revolution Prep emphasizes the quality and high energy of its instructors. According to Neuberg, all of Revolution's teachers scored in the 99th percentile on the SAT. But he says he's turned away applicants with near-perfect scores because some of them have had little in the way of personality.

"We know the SAT is probably one of the most boring things on the planet," Neuberg said. "You can't teach the SAT with just an OK teacher, you have to be an amazing teacher."

Revolution's basic program is a six-week classroom course for $499 that includes five proctored SAT exams. If scores aren't increased by at least 250 points, students are allowed to take the course again for free. Princeton Review charges $999 for 35 hours of classes and four practice tests (it offers a 200-point guarantee), and Kaplan's $899 course ($399 for an online version) with a guarantee based on scores and other factors. (All the services try to avoid money-back promises, although it sometimes happens.)

Beginning in the back room of Neuberg's apartment in 2002, Revolution now has 10 full-time employees, plus about 60 part-time teachers between its L.A. operation and a San Francisco office that opened in mid-2003.

In its first year, the company booked $14,000 in revenues. To cover expenses, Neuberg and Varma maxed out their credit cards, each racking up about $50,000 in debt.

"We wouldn't pay for anything in cash," Varma said. He also owed his former consulting firm $40,000 in business school debt, and sold the lease on his car to maximize cash flow. "I'm still driving my sister's '93 purple Saturn," he said.

By the spring of 2003, Varma faced eviction from his apartment and his phone was cut off. Neuberg found the Jewish Free Loan Association, where he was able to borrow $15,000 in much-needed cash.

Catching on

Revolution's big break came when the pair convinced administrators at Taft High School and El Camino Real High School in Woodland Hills to allow them to do a pro-bono, two-week standardized testing workshop. After that, students started signing up for the paid SAT courses. "By summer, we had 120 students," Neuberg said.

But they were still working from Neuberg's apartment, with a stack of four cordless phones as their communication system. Each morning, there would be 10 teachers traipsing through the living room while his wife was getting ready for work. "It was chaos," he said.

Revolution designed its own materials by working with students and trying to figure out what keeps them interested. Within a few days of turning practice essays, students can see them online, graded with teacher comments.

One tool, called a "Test Zone," is meant to ease nervousness by developing routines and habits around studying and taking the exam. The aim is to make test day a replica of the previous several Saturdays.

Revolution moved out of Neuberg's apartment last year. It is now housed in office space in Santa Monica; the company rents classroom space from local high schools for teaching classes. "We're still scrappy," Varma said, pointing to the carpet, which he said was the cheapest he could find.

At Calabasas High School, where both Revolution and Kaplan run classes, the advisors try to remain neutral on test-prep companies.

"Revolution has been very successful and they offer a good product at a value," said Susi Weisman, college and career advisor at Calabasas. She also relies on Kaplan and Princeton Review. "The bottom line is that I think test prep is valuable, and I've gotten some good feedback on the new kid on the block."

PROFILE

Revolution Prep

Year Founded: 2002

Core Business: Test prep tutoring

Revenues in 2003: $420,000

Revenues in 2004: $1,030,000

Employees in 2003: 15 (4 full time)

Employees in 2004: 65 (8 full time)

Goal: To be the largest provider of SAT preparation and study skills in California.

Driving Force: Rising number of college applicants, and admissions officers' increasing reliance on standardized tests