What should a tutoring startup test next?
The companies and data in this case are made up.
Two founders have $3,000 cash and 40 paying families. They must decide whether to spend $2,000 on a feature, run a $300 onboarding experiment or continue unchanged.
Suggested time: 20 minutes for a written response, then 5 minutes for the challenge. This is a practice exercise, not a full Regionals paper or a statement of the final exam format.
A · Monthly operating model
| Measure | Amount |
|---|---|
| Price per family | $25 |
| Software and payment cost per family | $5 |
| Support time per family | 1 hour |
| Value of founder time | $15 per hour |
| Fixed cash costs | $700 |
| Current paying families | 40 |
B · Options
| Option | One-time cash cost | Hypothesis |
|---|---|---|
| New feature | $2,000 | Attracts 10 additional paying families |
| Onboarding experiment | $300 | Reduces support from 1 to 0.5 hour per family |
| No change | $0 | Current customer base holds steady |
Evidence limit: Founders are not currently paid. Hypotheses are untested. Churn, acquisition costs, tax and unexpected expenses are omitted; the current customer count is not a guarantee of future revenue.
Your task
- Calculate monthly cash surplus excluding unpaid founder time, and economic surplus including that time.
- Compare the cash remaining and the economic-surplus effect if each hypothesis is true.
- Choose an experiment with a success criterion and a stopping rule. Explain why cash runway alone can mislead here.
Your answer stays on this page. It is not submitted or saved; copy it before leaving.
Follow-up challenge
The founders say their time is free, so the business is already profitable. How would you respond?
Read a worked response
Cash surplus is 40 × ($25 − $5) − $700 = $100 per month. Valuing 40 support hours at $15 subtracts $600, producing a $500 economic loss. Because the simplified current model generates cash, dividing cash by a positive “burn rate” does not give a meaningful runway. Customer loss or additional spending could change that.
The feature leaves $1,000 cash. At 50 families it would produce $300 monthly cash surplus, but support costs $750 in founder time, so economic surplus is still −$450. The $300 experiment leaves $2,700 cash. If it halves support time at 40 families, it saves $300 of founder time monthly and improves economic surplus to −$200; it does not itself increase cash surplus because founders remain unpaid.
I would run the smaller onboarding test, measuring time per active family, paid retention and satisfaction for comparable cohorts. Success means support approaches 0.5 hour without worse retention or quality; stop or revise if the time saving disappears or customers leave. Even success does not establish a sustainable business: the model still loses $200 after valuing time. Before a larger commitment, test willingness to pay or a lower fixed-cost structure. The feature’s 10-family acquisition assumption needs independent evidence.
Other recommendations can earn full credit when they follow from the exhibits and acknowledge the limits.
Score your response · 100-point practice rubric
This self-assessment assigns 20 points to each category. These weights apply only to this practice exercise; official competition weights remain unpublished.
| Category | Evidence needed for 20/20 |
|---|---|
| Interpretation | Separate cash cost from opportunity cost and an untested hypothesis from an observed result. |
| Evidence | Use family count, price, support hours and both experiment budgets. |
| Reasoning | Compute $100 cash surplus and −$500 economic surplus, then evaluate each option. |
| Judgment | Specify a low-cost experiment, measurable success and a stopping rule. |
| Defense & adaptability | Explain why unpaid work has an opportunity cost even when it does not reduce the bank balance. |
| Score per category | Practice standard |
|---|---|
| 0 | Missing, irrelevant or fundamentally incorrect. |
| 5 | Some relevant observations, with major errors or unsupported assertions. |
| 10 | Partly correct; important evidence or a reasoning step is missing. |
| 15 | Sound analysis with a minor omission or an underdeveloped limitation. |
| 20 | Accurate, supported and complete for the task; assumptions and limits are explicit. |
The worked response illustrates full-credit evidence in the first four categories. For Defense & adaptability, score your own response to the follow-up challenge; reading the model answer does not demonstrate that skill.
What to practice
A founder’s next move with limited money.
- Problem discovery
- Customer validation
- Business models
- Unit economics
- Product–market fit
- Go-to-market
- Experimentation
- Runway
How to use this case
- Read the case and restate the decision in one sentence. List the quantities, units and constraints before calculating.
- Work each question without the model response. Write the calculation and the inference separately.
- Compare your work with the model. Mark one arithmetic error, missing assumption or unsupported claim to correct.
- Ask a partner to challenge your recommendation. Give a specific condition that would change it.
Skills checklist
| Skill | Application in this case |
|---|---|
| Interpretation | Separate cash cost from opportunity cost and an untested hypothesis from an observed result. |
| Evidence | Use family count, price, support hours and both experiment budgets. |
| Reasoning | Compute $100 cash surplus and −$500 economic surplus, then evaluate each option. |
| Judgment | Specify a low-cost experiment, measurable success and a stopping rule. |
| Defense & adaptability | Explain why unpaid work has an opportunity cost even when it does not reduce the bank balance. |
Common mistakes
- Quoting a number without explaining what it changes.
- Treating a forecast as an observed fact, or a correlation as a causal effect.
- Optimizing revenue while ignoring cost, risk or opportunity cost.
- Listing uncertainties without making a provisional decision.
A second practice session
Change one numerical assumption in the exhibit. Recalculate the decision threshold, explain whether your recommendation changes, and say which original assumptions still matter. Have a partner check units and arithmetic.
The content areas above describe preparation topics. They do not assign exam percentages or finalize time limits, permitted resources or grading weights. See the handbook draft for adopted rules.