Testing & Educational Support in The US Industry Report PDF

Testing & Educational Support in the USFebruary 2015 1
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Making the grade: Higher school enrollment will

support demand amid cuts to education funding
IBISWorld Industry Report 61171
Testing & Educational

Support in the US
February 2015
David Witter
2 About this Industry
17 International Trade
Industry Definition
19 Business Locations
Main Activities
Similar Industries
21 Competitive Landscape
34 Industry Data
Additional Resources
21 Market Share Concentration
34 Annual Change
21 Key Success Factors
34 Key Ratios
4 Industry at a Glance
33 Industry Assistance
34 Key Statistics
22 Cost Structure Benchmarks

23 Basis of Competition
5 Industry Performance
24 Barriers to Entry
Executive Summary
25 Industry Globalization
Key External Drivers
Current Performance
35 Jargon & Glossary
26 Major Companies
10 Industry Outlook
26 Pearson PLC
12 Industry Life Cycle
27 Educational Testing Service
14 Products & Markets
30 Operating Conditions
14 Supply Chain
30 Capital Intensity
14 Products & Services
31 Technology & Systems
16 Demand Determinants
31 Revenue Volatility
17 Major Markets
32 Regulation & Policy
www.ibisworld.com | 1-800-330-3772 | info @ibisworld.com
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About this Industry

Industry Definition
Operators in this industry provide

noninstructional support services for
education industries. The major segments
of this industry are educational testing
services and educational consultants. This
Main Activities
The primary activities of this industry are
industry does not include computer

software designers that develop education
support software; those operations are
included in the IT Consulting industry
(IBISWorld industry report 54151).
Providing college selection services

Providing educational consulting services
Providing educational guidance counseling services
Providing educational support services
Providing educational testing services
Attending school buses
Facilitating student exchange programs
The major products and services in this industry are
Educational consulting
Educational testing services
Student exchange programs
Other educational services
Similar Industries
61144 Business Certification & IT Schools in the US

Operators in this industry offer courses in office procedures and secretarial skills.
61169 Tutoring & Driving Schools in the US
Operators in this industry offer exam preparation, tutoring services and other miscellaneous education
services.
61171 Testing & Educational Support in the US
Operators in this industry provide noninstructional support services for education industries.
62431 Job Training & Career Counseling in the US
Operators in this industry offer job training for the unemployed, underemployed, physically disabled and
persons who have a job market disadvantage due to lack of education or job skills.
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About this Industry
Additional Resources
For additional information on this industry

www.iecaonline.com
Independent Educational Consultants Association
www.iie.org
Institute of International Education
www.nces.ed.gov
National Center for Education Statistics
www.chronicle.com
The Chronicle of Higher Education
www.ed.gov
US Department of Education
IBISWorld
writes over 700 US

industry reports, which are updated
up to four times a year. To see all
reports, go towww.ibisworld.com
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Testing & Educational Support in the US February 2015
Industry at a Glance
Testing & Educational Support in 2015
Key Statistics
Snapshot
Revenue
Annual Growth 10-15
Annual Growth 15-20
Profit
Wages
Businesses
$16.2bn
1.0%
$905.6m
$5.5bn
Number of college students
Revenue vs. employment growth
Pearson PLC
10.4%
% change
Educational
Testing Service
7.8%
16
12
% change
Market Share
3.3%
7,195
4
0
4
2
0
2
Year 07
09
11
13
Revenue
15
17
19
21
Year
08
10
12
14
16
18
20
Employment
SOURCE: WWW.IBISWORLD.COM
p. 26
Products and services segmentation (2015)
9%
Number of college
students
13%
Number of K-12 students
Per capita disposable

income
Government funding
for primary and
secondary education
60%
18%
p. 5
SOURCE:
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SOURCE:
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Industry Structure
Life Cycle Stage
Growth
Regulation Level
Light
Revenue Volatility
Low
Technology Change
Medium
Capital Intensity
Low
Barriers to Entry
Medium
Industry Assistance
Low
Industry Globalization
Concentration Level
Low
Competition Level
FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 34
Low
Medium
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Industry Performance
Executive Summary | Key External Drivers | Current Performance

Industry Outlook | Life Cycle Stage
Executive
Summary
In 2015, revenue for the Testing and

Educational Support industry is expected
to grow 2.7% to $16.2 billion. Over the past
decade, the controversial No Child Left
Behind (NCLB) Act of 2001 has been an
important driver of growth. The primary
beneficiary has been the industrys
educational testing segment; under NCLB,
schools take assessments to ensure they
meet the requirements to receive federal
aid. While reform is currently taking place,
industry operators are still reaping the
benefits of schools attempts to maintain
Rising
high school graduate rates will spur

demand for placement tests, boosting revenue
standards. In the five years to 2015,
IBISWorld estimates industry revenue will
increase an average of 1.0% annually.
Industry operators provide educational
testing, educational consulting and
student-exchange programs. Testing
service providers generate the lions share
of revenue and help develop, distribute and
score accountability and performance tests.
They also provide college entrance exams,
such as the SAT. With an increasing
number of high school graduates taking the

The number of students in college
influences demand for some of the
services provided by this industry. These
services include educational testing,
guidance counseling and student
exchange programs. A rise in the number
of university students will bolster
demand for testing services, benefiting
the industry. The number of college
students is expected to increase in 2015.
The number of students at elementary
and secondary schools influences most
SAT or ACT and international students

taking Test of English as a Foreign
Language, competition for college
placement is high, helping boost revenue
generated from standardized tests.
Relatively strong industry growth has
enticed new companies into the industry.
In the five years to 2015, the number of
enterprises is expected to increase at an
annualized rate of 1.3% to 7,195. The
rising number of operators, coupled with
increasing wages, has put downward
pressure on industry profit; however,
profit declines have been mitigated by the
increased use of online testing, which is
particularly prone to automation.
Websites offering college advice and
comparison tools have also emerged to
assist budget-conscious consumers.
In the years to come, industry growth
will depend on government legislation and
funding, and many operators are waiting to
see what will emerge after NCLB. However,
the increasing number of high school
graduates will continue contributing to
growth, despite falling unemployment,
which is expected to turn potential college
students to the job market. In the five years
to 2020, IBISWorld projects industry
revenue will grow 3.3% annually on
average to $19.0 billion.
segments of this industry. An increase in

the number of students attending
elementary or secondary school increases
demand for testing services, school bus
attendant services, career guidance
counseling and other support services.
The number of K-12 students is expected
to increase slowly during 2015. However,
if it increases too slowly, it could pose a
potential threat for the industry.
Per capita disposable income
An increase in per capita disposable
incomes raises demand for education
consultants, as parents can more easily
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afford to purchase services for their

children. This factor is more important
in private markets. Per capita
disposable income is expected to
increase in 2015.
Government funding for primary
and secondary education
The level of federal government funding
and the associated academic and
reporting requirements influence

demand for the industrys services.
Increased funding allows schools to
purchase more educational support
materials and seek the services of
educational consultants. Government
spending for primary and secondary
education is expected to increase during
2015, posing a potential opportunity for
the industry.

8
1.0
0.5
% change
% change

continued
2
0
0.5
2
4
Year
0.0
08
10
12
14
16
18
20
1.0
Year
08
10
12
14
16
18
20
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Higher college
enrollment bolsters
demand
The Testing and Educational Support

industry has expanded over the five years
to 2015. During this time, revenue grew
an annual average 1.0% to $16.2 billion in
2015. This industry is composed of three
main segments: educational testing
providers, educational consultants and
student-exchange program providers.
While overall growth has been strong,
these segments have experienced
different levels of growth over the past
five years, with educational testing
services accounting for the greatest share
of revenue growth.
The No Child Left Behind (NCLB) Act
of 2001 has driven industry demand
during much of the past decade. Under
NCLB, which was signed into law in
January 2002, states had to implement
major educational changes to remain
eligible for federal funding. These
changes included stronger accountability
for the results of students. While some
states have received NCLB waivers, the
program has nevertheless heightened
demand for testing and assessment over
the past five years, leading to an average
2.7% annual increase in employment to
95,021 workers in 2015.
Unfortunately for industry operators,
many states have cut education funding.
Schools are operating under tighter fiscal
conditions, and more conservative
budgets have reduced demand for
nonessential support services. According
to a 2013 report by the Center on Budget
and Policy Priorities, for the 2013 to 2014
school year, 34 states provided less
funding per student than they did before
2010, and 15 provided less funding to
local school districts than they provided
the year before. Consequently, annual

revenue growth has been relatively slow.
Nevertheless, IBISWorld estimates that
revenue will increase 2.7% in 2015 due to
an increasing number of college students.
Despite budget constraints, schools
cannot cut back on essential support
services, a factor that has mitigated
industry declines. Federal stimulus
spending early in the period helped
support ongoing demand for education
support services. Slow but steady
growth in the number of elementary
and secondary students has also
stimulated stable demand for industry
services. Total student enrollment
drives demand for testing services,
school bus attendant services, career
guidance counseling and other support
services. According to the US
Department of Educations National
Center for Education Statistics, the
number of K-12 students is expected to
increase an estimated average of 0.4%
annually in the five years to 2015.
Over the five-year period, the number of

college students is anticipated to grow at an
average annual rate of 0.2% to reach an
estimated 21.3 million, despite marginal
declines in 2011 and 2012. Colleges
experienced a historically high number of

high school graduates seeking enrollment.
Consequently, some state universities have
imposed enrollment caps, intensifying
competition for college placement. College
Industry revenue
16
12
% change
Current
Performance
8
4
0
4
Year 07
09
11
13
15
17
19
21
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Higher college
enrollment bolsters
demand continued
entrance exams, such as the SAT and ACT,

and graduate school entrance exams, such
as the GRE and GMAT, are important to
the selection process and stimulate
demand for testing services.
Recently, critics have accused the SAT
of being a false predictor of academic
achievement and unfair to students who
do not have access to test preparation
services (see IBISWorld report 61169,
Tutoring and Driving Schools). A number
of liberal arts colleges have joined the
SAT-optional movement, reducing the
weight of the test. This trend of testoptional admission policies has lowered
demand for tests in some areas;
nonetheless, IBISWorld expects the effects
to be minimal. In 2008, the College Board
announced an option called Score Choice,
which allows students to decide which
scores are released to colleges. Industry
operators benefit from the policy because
The NCLB effect
This industry also benefits from federal

funding of elementary and secondary
schools. In 2009, the American Recovery
and Reinvestment Act gave the education
sector a much-needed boost. As part of the
package, schools were able to draw on a
$54.0 billion stabilization fund to prevent
budget cuts. These funds were desperately
needed, since many states suffered budget
shortfalls and made cuts in every area they
could. While school systems will continue
to need testing and assessment services to
fulfill their obligations under NCLB, other
educational support services are expected
to decline as schools are forced to
prioritize their funding in core areas. As a
result, demand for educational testing
services has continued to rise, but demand
for other services, including educational
consulting, has fallen.
Despite NCLBs positive contribution
to the industry, its measurable impact on
educational outcomes has been called
into question. Its lack of popularity has
it allows students to take the test multiple

times, generating higher sales for test
providers. Most recently, in March 2014,
the College Board announced plans to
revise the SAT to better reflect high school
curriculum. The new SAT is expected to be
introduced in the spring of 2016.
Growing demand has led some
universities to outsource a portion of
their testing to private providers. While
this trend is not new, it has recently
spread to new areas. According to the
Chronicle of Higher Education, more
than 1,000 colleges have used Google
Apps Education Edition or Microsoft
Lives educational portal to provide email
services because they are often more cost
efficient than developing in-house
systems. By outsourcing these activities,
schools can cut costs and reallocate
money to other needs, such as
educational support services.
The
No Child Left Behind

Act created demand for
testing, assessment and
data analysis
prompted many states to seek waivers. As
of February 2015, 43 states and the
District of Columbia had received some
type of NCLB waiver. However, states
that are approved for waivers are still
required to raise standards and improve
accountability. Consequently, testing
providers will still be used to ensure that
progress is being made.
Meanwhile, profit margins have
strengthened slightly over the past five
years. Growing demand for industry
services and electronic delivery methods
have offset rising wage costs. Industry
profit is expected to account for 5.6% of
revenue, up from 5.3% in 2011.
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Other services
support growth
Counseling services are also in demand.

According to the Independent
Educational Consultants Association,
an average US high school has one
counselor for 700 students. This ratio
prevents many students from readily
receiving career advice. For students
who can afford it, independent
counseling has been an attractive
option, which has boosted demand for
smaller industry players. Independent
operators, including sole
proprietorships and nonemploying
associates, often provide counseling
services. In the five years to 2015, the
number of companies operating in this
industry is expected to increase an
average 1.3% annually to 7,195;
subsequently, employment is
anticipated to increase an annualized
2.7%. An increasing number of highly
educated employees has caused wages
to increase from $4.5 billion in 2010 to
$5.5 billion in 2015.
Independent
counseling
has been an attractive
option, boosting demand
for small industry players
This industry also provides studentexchange programs. International student
numbers have trended upward over the
past five years thanks to college
recruitment efforts and government
streamlining of student visa policies. The
number of international students in US
colleges and universities increased 8.0%
from 2012 through 2013 to 886,052,
according to the latest available data from
the Institute of International Education.
Revenue from international students is
primarily derived through the Test of
English as a Foreign Language, which must
be taken by all international students who
wish to study at US institutions.
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Industry
Outlook

industry has felt the effects of state cuts
to education, but the news is not all bad.
College enrollment will continue to
expand over the five years to 2020, and
international student growth will
continue, driven by high demand from
China and India. While tighter state
budgets will limit unnecessary
expenditure, underlying demand for
support services will remain. Demand for
counseling services will be strong in these
uncertain times; there is opportunity for
expansion in this market considering
how underserviced some schools are.
Meanwhile, legislative changes at the
federal level will strongly influence
demand for educational testing and
consulting services over the next five
years. Revenue is forecast to rise 3.3%
annually on average over the period to
reach $19.0 billion in 2020, with 2.7%
growth expected in 2016.
The industry will continue to make

productivity gains, spurred by rising
competition and government funding.
The increased use of the internet for
administering tests and delivering
results, in addition to improvements in
back-office administration, are
expected to reduce costs and improve
the profitability of this industry
segment. Nevertheless, wages are
anticipated to increase marginally as a
proportion of revenue, a continuation
of the trend that occurred throughout
the five years to 2015. This may
pressure profitability for operators.
Enrollment remains
strong
Over the next five years, enrollment growth

in elementary and secondary schools and
higher education will remain steady, driving
continued demand for educational support
services. The number of college students is
expected to increase 1.3% per year on
average to 22.7 million in the coming five
years, bolstering industry revenue.
Universities in the United States are
among the best educational institutions
in the world; therefore, demand higher

education in the United States will likely
remain high. Education is also an
expensive aspiration, so it is not quickly
abandoned. The recent rise in
international student numbers bodes
well for future years. This growth will
have positive downstream effects on
demand for the Test of English as a
Foreign Language.
Online growth
Economic uncertainty created more

budget-conscious consumers, slower to
pile on debt without a concrete plan.
Demand for counseling services is
expected to continue increasing, as high
school graduates and college students look
to counselors for advice on courses and
colleges, as well as growing and stagnant
careers, applying for financial aid and
weighing the costs of different options.
Due to this trend, a number of websites

that offer college advice have emerged
over the past five years, including those
that provide tools for students to compare
colleges and access information about
higher education institutions.
Testing services are particularly strong
candidates for greater automation and
online delivery. Plato Learning has noted
that 99.0% of K-12 public schools have
Rising
competition will
push companies to improve
productivity and preserve
profit
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Online growth
continued
internet access, and are increasingly

turning to web-based methods of
instruction as a supplement to their
instructor-led programs due to their
flexibility, cost-efficiency and
effectiveness. Demand for these sites
will likely spur more entrants into the
industry. In the five years to 2020,
IBISWorld projects that the number of
companies operating in this industry
will increase at an average rate of 4.1%
annually to 8,815 as employment
Government
legislation and
support
Legislation to overhaul college loans will

affect the industry in the next five years.
Under recent legislation aimed to keep
college costs down and increase
transparency, colleges and universities
must report more information regarding
their costs to the Department of
Education. Regulations deal with
textbooks, tuition and fees, alumni
activities, fire safety, graduation rates
and various other areas. While this may
create business for educational
consultants, the legislation also contains
measures to simplify federal financial
aid forms, including the Free
Application for Federal Student Aid.
This may reduce demand for educational
counselors who help students navigate
these complicated forms.
This industry depends heavily on
government funding for education.
Consequently, future education policies
and budgets will influence demand for
increases an annualized 4.1% to 116,378

workers. The increased competition
caused by enterprise growth will put
pressure on profitability for face-to-face
providers, but will likely be offset by
the expansion of internet-based
services. Wage costs are anticipated to
increase as a proportion of revenue
over the next five years, albeit at a
slower rate, because many support
services cannot be automated and
require face-to-face interaction.
Continued
emphasis on
school accountability will
support stable demand for
services
the industry. Educational reform has
been highlighted as a key priority of the
Obama administration, which benefits
many educational institutions. The
unpopularity of the No Child Left Behind
(NCLB) Act has caused many states to file
for waivers. While 43 states had been
approved for some type of NCLB
flexibility as of February 2015, President
Obama has indicated that he will pursue
accountability in schools as part of the
education policy. This strategy will
undoubtedly result in continued demand
for testing and assessment services,
benefiting the testing services segment.
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The industry is experiencing revenue and value added growth
Life Cycle Stage
Increased use of technology has improved

and expanded the industrys services
Demand for industry services is rising
due to legislative changes
% Growth in share of economy
Product development has been continuous in some

segments of the industry, assisting expansion
20
Maturity
Quality Growth
Company
consolidation;
level of economic
importance stable
High growth in economic

importance; weaker companies
close down; developed
technology and markets
15
Key Features of a Growth Industry

Revenue grows faster than the economy
Many new companies enter the market
Rapid technology & process change
Growing customer acceptance of product
Rapid introduction of products & brands
10
Quantity Growth
Many new companies;

minor growth in economic
importance; substantial
technology change
Testing & Educational Support

Book Publishing
Public Schools
Private Schools
Tutoring & Driving Schools
Decline
-5
Business Certification & IT Schools
-10
-10
-5
Shrinking economic
importance
10
15
20
% Growth in number of establishments

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Industry Life Cycle

This
industry
is G
rowing
During the five years to 2015, the Testing

and Educational Support industry has
experienced growth in revenue and
industry value added (IVA). Some
segments of this industry have been
growing faster than others, and this is
expected to continue through 2020. IVA,
which measures an industrys
contribution to the economy, is forecast
to grow 4.9% annually on average over
the 10 years to 2020, compared with
forecast annualized GDP growth of 2.5%
over the same period.
Industry operators are increasingly
using technology in their services. For
example, computerized grading is now
used in several standardized tests. This
reduces the cost and the time required,
leading to an increase in overall
efficiency. Establishments offer online
practice tests, test registration and
related information, as well as
supplementary education materials and
services for teachers and other education

professionals. These developments have
helped to sustain continued industry
expansion and industry revenue growth.
Legislation relating to education has
also influenced growth in this industry.
Under the federal No Child Left Behind
Act of 2001, federal government funding
for schools has been tied to the testing
and demonstrated achievement of
students. This has increased demand for
educational testing services, and
education consultants. However, the
legislation is starting to be waived for
some states. The long-term outcome of
this will influence future demand for
academic testing and assessment services
over the near term. However, IBISWorld
expects that the focus on accountability
will remain in educational policy, which
will keep the Testing and Educational
Support industry in a growth stage over
the next few years.
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Products & Markets
Supply Chain | Products & Services | Demand Determinants

Major Markets | International Trade | Business Locations
Supply Chain
KEY BUYING INDUSTRIES

61111a
Public Schools in the US

Public elementary and secondary schools utilize educational guidance counseling services,
testing services, school bus services and student exchange programs.
61111b
Private Schools in the US

Private schools utilize educational guidance counseling services, testing services and student
exchange programs.
61121
Community Colleges in the US

Junior colleges require consulting services, guidance counseling services and testing services.
61131a
Colleges & Universities in the US

Colleges, universities and professional schools require college selection services, educational
consulting, guidance counseling and testing services.
61131b
For-Profit Universities in the US

For-profit colleges, universities and professional schools require college selection services,
educational consulting, guidance counseling and testing services.
KEY SELLING INDUSTRIES
Products & Services
51113
Book Publishing in the US

Testing and educational support companies purchase educational texts and books from book
publishers, which are used as part of service delivery.
51121
Software Publishing in the US

Testing and educational support companies purchase software to be used for computer-based
test development and service delivery.
53112
Commercial Leasing in the US

Testing and educational support companies lease office space from the commercial leasing
industry.
The industry can be split into four main

types of services: educational testing,
educational consultants, student
exchange programs and other
educational services.
Testing services
Educational testing services form the
largest segment of this industry,
accounting for an estimated 60% of
industry revenue. Testing services may
include test development, candidate
registration, test delivery, provision of
data and analysis of results. Tests are
provided in hardcopy or via computer.
They can be conducted over the internet,
at special testing centers, or at the site of
the school or business using the service.
Some of the better-known education tests
include the SAT, the ACT, the National
Assessment of Educational Progress

(NAEP) and the Test of English as a
Foreign Language (TOEFL) tests.
Industry operators develop a variety of
tests. The SAT and ACT are college
entrance exams taken by high school
students. Industry operators provide,
process and score the tests. The NAEP
provides a tool for schools, students and
the government to compare their schools
grades with those of others. NAEP tests,
provided by the National Center for
Education Statistics, are standardized
and given across the country to give a
clear picture of academic progress.
Finally, the TOEFL is required by all
international students wanting to study
at US institutions.
Over the past decade, the education
testing segment has experienced strong
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Products & Markets
Products & Services

continued
Products and services segmentation (2015)
9%
13%
18%
Total $16.2bn
growth. The No Child Left Behind Act of
2001 aided revenue growth with its
increased requirements for educational
institutions to be accountable for student
results. However, enrollment trends have
also pushed up demand for education
testing. The SAT and ACT tests are
commonly used for college entry, and
historically high numbers of high school
graduates are lifting demand for these
tests. Future policies by the colleges
could change this, as hundreds of colleges
no longer require the SAT test as a
prerequisite for admission.
Growing graduate school attendance
contributed to increased demand for
exams such as the GMAT and GRE.
According to major player Educational
Testing Service, the number of people
taking the GRE increased 9.0% in 2009
to 670,000 test takers. By 2011, the
number of people taking the test had
increased to 800,000. In 2013, 731,000
GRE tests were taken worldwide.
Educational consultants
Educational consultants account for an
estimated 18.0% of industry revenue.
These businesses are more likely to be
sole proprietors than other industry
60%
operators. Educational consultants

generally provide their expertise in a
specific element of education, such as
identifying the IT needs of educational
institutions, advising on curriculum
content and providing support services
for students.
Students who are considering career
options and college application strategies
use independent counseling, which are
often provided by sole proprietors who
work on a personalized basis. Counselors
work with individuals to find a school
that fits with their achievement, budget
and career goals. Although costly, the
rising competition for positions at
colleges has spurred demand for these
counseling services.
Exchange programs
Student exchange programs increased in
popularity throughout the 2000s. There
are many different student exchange
programs run by for-profit and nonprofit
companies, both at the secondary and
university education levels. In the 2011 to
2012 school year, about 283,332 US
students studied abroad, according to
latest data from the Institute of
International Education. That figure was
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Products & Markets
Products & Services

continued
Demand
Determinants
up from about 200,000 in 2006. This can

largely be attributed to the trend toward
globalization, which has increased
students desire to travel.
Spending a year or a semester studying
abroad has become increasingly popular,
and though not cheap, costs compare with
that of a years study in the United States.
The availability of various scholarships
also encourages students to participate in

exchange programs and gap years.
Demand for the services provided by this

industry is influenced by a number of
different factors. Enrollment trends are a
primary determinant of demand for the
industry. The number of enrollments at
all levels of education in the US affects
demand for educational testing and
educational counseling. Similarly, the
number of high-school graduates affects
demand for college entry exams such as
the SAT and the ACT. Tests are used for
graduate or professional school entry in
fields such as medicine and law.
International student enrollments affect
demand for tests such as TOEFL. Rising
numbers of high school graduates have
also increased demand for educational
guidance counseling services and college
selection services.
Legislative changes can create
demand for educational support
services. The introduction of the No
Child Left Behind Act (NCLB) of 2001
required schools to meet test based
accountability requirements. Federal
government emphasis on standardized
testing, measurement of student
performance and school accountability
has driven demand for educational
testing services. This was responsible for
considerable industry growth between
2001 and 2004. Future legislative
changes by the Obama administration
will affect demand for educational
support services, including plans to
update the Elementary and Secondary
Education Act (ESEA).
The level of government funding at the

federal, state and local level for schools
and universities influences demand for
the services of this industry. Although
federal government funding for school
programs increased significantly in 2002
and 2003 as part of NCLB requirements,
this has since trended downwards.
However, a growing budget deficit and
the poor economic climate suggest that a
significant funding increase is unlikely in
the short term. This applies to state
funding as well, which has been affected
by lower tax revenue and tighter budgets.
Furthermore, there is a long term trend
of declining state support for education
institutions. According to the Center on
Budget and Policy Priorities, 30 states
have reduced spending on primary and
secondary education while 41 states have
cut assistance to public colleges.
A growing tendency to outsource
education services has increased demand
for this industry. Both industry operators
and educational institutions have
increased their use of educational
consultants in the past five years. As
school districts have gained greater
autonomy over spending decisions,
consultants specializing in IT and other
education support services have
benefitted from increased business.
Industry accreditation and licensing
agencies are also outsourcing
development and administration of trade
certification examinations to educational
testing services.

Other educational services account for an
estimated 13.0% of industry revenue.
These businesses provide a broad range
of education related services such as
school bus attendant services.
WWW.IBISWORLD.COM
Products & Markets
Major Markets
Major market segmentation (2015)
5%
15%
Other
Regulatory and trade associations
50%
Elementary and secondary schools
30%
Post-secondary institutions
Total $16.2bn
Elementary and secondary schools
The markets for this industry can be
segmented by academic level or
professional level. IBISWorld estimates
that the elementary and secondary
school market accounts for about 50.0%
of industry revenue. This market
includes students, schools, school
districts and state education
departments. The main services for this
market are educational testing, guidance
counseling and school bus attendant
services. Educational testing services
include high school graduation tests,
college entrance tests and tests of
student achievement and progress as
required by NCLB legislation.
International Trade
provide college selection and consulting

services to colleges and universities.
Regulatory and trade associations
Similarly, regulatory and trade
associations account for a smaller 15.0%
of the market. Industry operators supply
testing services for legislative and
regulatory requirements in a range of
trades and occupations including real
estate and insurance to this market. These
services are usually delivered on behalf of
the relevant industry or trade association.
Post-secondary institutions
Postsecondary institutions account for
30.0% of the market. The major
services provided to postsecondary
institutions are graduate school
admission tests and study abroad
programs. Industry operators also
Other
The remaining segment of the market
represents 5.0% of revenue, and includes
educational services provided to
companies and individuals outside the
education sector. For example,
corporations may seek specialist
consultants or test preparation services
for internal staff development programs.
The market also incorporates pre-K
educational support services.
Although the majority of industry

establishments provide services to
domestic educational organizations and
students, some services are targeted to
foreign students. For example,

Educational Testing Service (ETS)
develops and administers the TOEFL
test. International students take this test
WWW.IBISWORLD.COM
Products & Markets
International Trade
continued
to be eligible for enrollment in US

educational institutions, particularly
colleges and universities. The test is the
most widely accepted English Language
Test available, and is accepted by over
8,500 institutions in 130 countries. ETS
claims that nearly 800,000 students
register for the TOEFL each year. The
TOEFL is taken by students at testing
centers across the world, where the test
can be taken in paper or online form.
IBISWorld estimates that services
provided to foreign students represent
about $100 million. According to the
Institute of International Education,
international student enrollment declined
in 2004 to 2006, but growth has since
rebounded. In the 2012-13 school year
(latest figures available), the number of
international students in US colleges and
universities increased 7.0% from 2011-12

to 819,644. This represents a record
number of international students studying
in the United States, largely due to the
rising interest of students from China.
Student numbers have also rebounded
thanks to government streamlining of
student visa policies, college recruitment
efforts and a depreciated US dollar.
The foreign student market has some
room to expand in the coming five years,
as businesses are increasingly offering
their services via the internet. This
provides opportunities for educational
testing companies and for businesses in
teaching support and educational IT
consulting. However, many of the
services of this industry are geared
towards the domestic market, which will
limit export expansion.
WWW.IBISWORLD.COM
Products & Markets

Business Locations 2015
West
New
England
AK
0.3
Great
Lakes
WA
ND
MT
2.4
Rocky
Mountains
ID
OR
1.7
West NV
0.7
2.2
SD
0.2
WY
0.5
MN
0.1
0.6
Plains
CO
0.9
KY
0.6
OK
0.7
NC
3.2
TN
AZ
NM
2.1
0.9
Southwest
TX
5.7
HI
0.4
Additional States (as marked on map)

1 VT
2 NH
3 MA
4 RI
5 CT
6 NJ
7 DE
8 MD
0.6
1.1
0.6
3.0
3.1
0.4
SC
Southeast
0.8
MS
AL
0.7
0.9
GA
2.9
0.7
LA
0.7
FL
6.4
Establishments (%)
0.4
2.4
AR
0.3
0.8
14.2
WV VA
3.0
1.1
1.3
CA
West
2.8
MO
KS
2.6
OH
1.6
4.8
4.1
IN
IL
0.4
UT
PA
2.6
0.7
0.6
1 2
3
NY
8.4
5 4
MI
0.9
IA
NE
0.2
WI
ME
MidAtlantic
9 DC
1.9
Less than 3%
3% to less than 10%
10% to less than 20%
20% or more
WWW.IBISWORLD.COM
Products & Markets
Distribution of establishments vs. population

30
20
10
Southwest
Southeast
Rocky Mountains
Plains
New England
Mid-Atlantic
Great Lakes
0
West
Establishments in this industry tend to

be located close to other educational
institutions, such as elementary and
secondary schools or universities and
colleges. Consequently, the geographic
spread is generally consistent with the
population of each region. However,
increasing use of internet-based
educational services has reduced the
need for establishments to be located
close to educational institutions. This
factor, which is particularly relevant for
testing services, is expected to continue
over the next five years.
Although the Southeast accounts for
the largest portion of industry
establishments, at 21.4%, New York and
California support the highest
proportion of educational support
services, being education hubs. The
Southeast has a high proportion of small
establishments; the Mid-Atlantic is a
profitable region for the industry, with
establishments that are larger than the
national average. In spite of accounting
for only 15.5% of the population, the
Mid-Atlantic region holds some 20.3%
of industry establishments. The large
Business Locations
Establishments
Population
operations of players in this region also

make it a center of employment. Despite
a concentration of universities in New
England, this region has just 6.3% of
industry establishments, although in
comparison with its 4.7% of population,
the concentration is high.
WWW.IBISWORLD.COM
21
Competitive Landscape
Market Share Concentration | Key Success Factors | Cost Structure Benchmarks

Basis of Competition | Barriers to Entry | Industry Globalization
Market Share
Concentration
Level
Concentration
in
this industry is L ow
Key Success Factors

IBISWorld
identifies
250 Key Success
Factors for a
business. The most
important for this
industry are:
Concentration in this industry is low,

with the two largest operators accounting
for 22.2% of revenue market share. The
industrys large companies operate in a
number of locations, particularly those
providing educational testing services to
schools, universities and industry
associations. However, the industry
players are small, regional operators that
often provide educational consulting
services. Although nine out of ten
companies operating in this industry are
non-employers, these providers generate
less than 10.0% of total revenue.
Even when non-employers are not
taken into consideration, the industry
contains a large number of small
players. About 68.8% of industry
operators have fewer than five
employees, while 80.9% have less than
10. However, some segments of this
industry are more highly concentrated
Understanding government
policies and their implications
Successful establishments need to
understand the implications of
government education policies to best
target their services.
Fast adjustments made to
changing regulations
Businesses must be able to adjust their
services as education regulations change.
Access to highly skilled workforce
Educational consultants require
employees who are specialized in their
field and highly skilled.
Ability to quickly adopt new technology
Establishments that can adopt new
technologies to increase the quality of
Enterprises by employment size (2012)*

No. of employees
1-4
5-9
10-19
20-49
50-99
100-249
250+
Share (%)
68.8
12.1
8.0
5.7
2.4
1.6
0.6
*Includes only firms with at least one employee

SOURCE: US CENSUS BUREAU AND IBISWORLD
than others. The major players in this

industry provide educational testing
services for schools, businesses or both.
These firms generate over a quarter of
the segment revenue. On the other hand,
there are no major players in the
educational consulting segment, which
is largely composed of non-employers
and very small operators.
their services and reduce labor costs will

be at an advantage.
Provision of a related range of
goods/services (one stop shop)
Establishments that can offer a range of
services will be at an advantage. For
example, testing service providers could
offer test development, test
maintenance, student registration,
test-taking supervision, paper grading
and results analysis.
Having a good reputation
Reputation is a key to success in virtually
every education industry. A good
reputation for quality service will help an
establishment win business contracts,
particularly from large organizations
such as school districts and colleges.
WWW.IBISWORLD.COM
22
This industry provides a variety of

services; consequently, this cost structure
represents an industry average.
Operators within this industry have
differing cost structures depending upon
their size and the services they provide.
For example, many of the nonemploying
businesses in counseling and consulting
work will not have large capital or
research costs.
budgets and a rising number of

operators have caused competition to
rise, placing downward pressure on
profit. However, online-based services,
which enjoy reduced wage costs, have
helped to offset some of these pressures.
During the five years to 2020, this
factor, coupled with rising student
enrollment, are expected to boost
industry profitability.
Profit
In 2015, IBISWorld estimates that
industry operating profit (earnings
before interest and taxes) represents
5.6% of revenue. Profit has trended
upward over the past decade as a result
of increased demand for educational
support services, particularly testing
services. Still, this growth has slowed
during the five years to 2015 as federal
funding for NCLB compliance has
declined. Additionally, falling state
Wages
Wages and salaries account for a large
proportion of industry revenue. Like
other education industries, educational
support services are generally labor
intensive. In 2015, IBISWorld estimates
that wages account for 33.9% of industry
revenue. The wage figure also includes an
allowance for the wages of self-employed
owners of nonemploying establishments,
which make up the majority of
establishments in the industry. Within
Sector vs. Industry Costs

Average Costs of
all Industries in
sector (2015)
1.8
100
80
Percentage of revenue
Cost Structure
Benchmarks
Industry Costs
(2015)
5.6
33.9
59.8
60
40
20
8.0
8.0
5.5
Profit
Wages
Purchases
Depreciation
Marketing
Rent & Utilities
Other
15.3
3.0
2.6
6.3
1.5
33.3
15.4
0
WWW.IBISWORLD.COM
23
Cost Structure
Benchmarks
continued
Basis of Competition
Level & Trend
ompetition
C
in
this industry is
Mediumand the
trend is I ncreasing
different segments of the industry,

average wage costs vary depending on the
size of the business, the specialty
provided and the expertise of the
employee. For example, educational
consultants may be able to earn much
higher salaries than an employee of a
large testing company.
The proportion of industry revenue
devoted to wages has increased over the
past five years, despite the rising use of
technology to provide services to
clients. Industry players have continued
to provide more services via the
internet. This enables them to reach a
larger number of customers at a lower
average cost by reducing wage
expenditures. Operators have also
increased their use of automated
functions, including computerized test
grading, which have reduced the
industrys labor requirements.
In a winner-takes-all market, marketing

is crucial to acquiring large contracts at
the district, state and national levels.
Establishments offering student
exchange programs also have
considerable marketing costs.
Recruitment is vital to their ongoing
business, and many providers use agents
based overseas to ensure a steady stream
of students.
Marketing
Marketing costs are a significant
proportion of the cost structure,
accounting for about 2.6% of industry
revenue. A companys reputation is
important to attract clients, so operators
engage in a high level of marketing
activity to promote their businesses,
particularly to large educational bodies.
Other
Operators providing educational testing
services have made greater use of
computer-based testing over the five
years to 2015. Despite providing lower
marginal costs, this factor has increased
capital expenditure and research and
development costs. Research costs, which
account for a significant share of revenue,
are most applicable for the educational
testing companies. Organizations such as
the Educational Testing Service invest
considerable capital into research and
development for new tests.
Industry operators also incur a variety
of other costs, including legal costs and
administrative fees. Furthermore,
educational support providers have
miscellaneous expenses related to
running an office on a daily basis,
including rent and utilities.

industry supplies a range of services,
which keeps competition levels down.
Many companies specialize in providing a
particular service such as educational
testing, consulting or student counseling.
However, the industry has grown during
the past five years, causing competition
among industry players to increase.
In the educational testing market,
competition is relatively low; however,
businesses compete for contracts with
colleges and larger players are
consistently awarded government
contracts to conduct student testing.

For example, major player Educational
Testing Services (ETS) has been
awarded the contract for delivering the
National Assessment of Educational
Progress (NAEP) for about 20 years. It
also exclusively conducts certain tests
of academic performance, including the
SAT tests. Competition among smaller
operators generally occurs at a state or
local level and has increased during the
past five years because many states
have been forced to reduce their
education budgets.
WWW.IBISWORLD.COM
24
Basis of Competition
continued
Industry operators compete based on

the price at which they are able to provide
their services. Educational institutions
generally have limited budgets and
competing priorities, and seek to keep
costs as low as possible. Furthermore,
some of the services provided by this
industry are strategic in nature and are
arguably not a necessity. Price
competition is affected by the efficient
nature of large players in the educational
testing segment, and the presence of
large not-for-profit operators.
Barriers to Entry
Barriers to entry into the industry vary

depending on the segment. There are
higher barriers to entry for educational
testing than for other educational
support services. For services such as
guidance counseling, educational support
services and educational consulting, new
entrants generally have low initial capital
costs. There are no major regulatory
requirements for establishments in this
industry and so entry is not inhibited by
industry-specific regulation. Furthermore
these operations can be run by a single
person, and conducted at clients
facilities, lowering expenses even more.
By contrast, in the educational testing
services segment, new participants face
IT equipment expenses and database
and software development costs.
Complementary services such as
managing test content, registering
candidates, delivering tests and
providing analysis of results data require
varying levels of technology. Some of the
bigger testing companies hold large
contracts with government organizations
and dominate the market. This may
Level & Trend

arriers to Entry
B
in this industry are

Mediumand S
teady
The quality of service provided is an

important competitive factor for
educational support service providers.
Clients often seek specialist advice and
support, particularly in education
consulting. The quality of services can
also be assessed on timeliness, accuracy
and reliability. Establishments that offer
a range of services, such as test
development, test maintenance, student
registration, test-taking supervision,
paper grading and results analysis, will
be at an advantage.
Barriers to Entry checklist

Competition
Concentration
Life Cycle Stage
Capital Intensity
Technology Change
Regulation & Policy
Industry Assistance
Level
Medium
Low
Growth
Low
Medium
Light
Low
affect a new companys ability to

compete successfully in this segment of
the industry.
Reputation is important for
establishments in this industry,
particularly those in testing services.
Organizations seeking the services of
testing companies are seeking a highquality, robust testing procedure that will
provide a reliable indicator of the test
candidates abilities. It is easier for
established players in this industry with a
good reputation to expand their
operations than it is for new players to
enter the market.
WWW.IBISWORLD.COM
25
Industry
Globalization
Level & Trend
lobalization
G
in
this industry is
Lowand the trend
is I ncreasing
This industry has a low level of

globalization. The industry consists
predominately of many small US-owned
establishments meeting local or regional
demand levels. However, several of the
larger enterprises in this industry have
operations outside the United States. For
example, Educational Testing Service has
a for-profit subsidiary known as ETS
Global BV. This subsidiary is based in the
Netherlands and sells the companys

products and services in Europe, South
America, Canada, China, Korea, India, the
Middle East and Africa. The American
Institute for Foreign Study also operates
wholly-owned overseas subsidiaries and
offices in the UK, France, Germany,
Poland, Australia and South Africa. ACT
has an international division to offer
products and services overseas.
WWW.IBISWORLD.COM
Major Companies
Pearson PLC | Educational Testing Service | Other Companies
Major players
(Market share)
Educational Testing Service 7.8%
81.8%
Other
Pearson PLC 10.4%
Player Performance
Pearson PLC
Market share: 10.4%
Pearson is one the worlds largest

publishers of education textbooks and
books. It also publishes the Financial
Times and owns 50.0% of The
Economist. Although Pearson is based in
London, about 55.0% of its sales are in
the US market. The companys operations
are divided into five segments: North
American education, international
education, professional, FT Group and
Penguin. In addition to publishing
textbooks, the companys education
segments provide educational assessment
and testing. In 2013, total company
revenue reached about $8.0 billion.
The North American education
segment provides testing services to
students at all education levels. The
percentage of total revenue the segment
contributes fluctuates regularly due to
changes in currency exchange rates. In
spite of such fluctuations, the North
American education segment has
generally increased as a percentage of
total revenue due to investments the

company has made in the market. In
2011, the company acquired Schoolnet,
an education technology company that
individualizes instruction by combining
assessment and curriculum. In 2008,
Pearson acquired Harcourt Assessment
and Harcourt Education International for
$950.0 million and eCollege for $491.0
million. Such acquisitions have also
boosted revenue over the past five years.
In addition to acquisitions, Pearson
has grown as a result of large contracts
won in recent years. In 2008, it won a
five-year contract to deliver and score the
National Assessment of Educational
Progress. It also won a contract to
develop, administer and score the
National Board Certification program for
accomplished teachers from the National
Board for Professional Teaching
Standards. In 2009, the company
renewed a $210.0 million contract with
the College Board to process and score
Pearson PLC (US industry-specific operations) financial performance*

Year
Revenue
($ million)
(% change)
Operating Income
($ million)
(% change)
2010
1,626.2
N/C
262.7
N/C
2011
1,653.8
1.7
281.9
7.3
2012
1,690.5
2.2
280.0
-0.7
2013
1,745.2
3.2
234.8
-16.1
2014
1,812.8
3.9
133.9
-43.0
2015
1,678.3
-7.4
237.0
77.0
*Estimates
SOURCE: ANNUAL REPORT AND IBISWORLD
WWW.IBISWORLD.COM
Major Companies
Player Performance
continued
Player Performance
Educational Testing
Service
Market share: 7.8%
the SAT over a 10-year period. In 2010,

the company renewed its contracts with
the College Board and the state of Texas,
boosting education revenue about 11.3%
that year. In 2011, Pearson signed
contracts for statewide assessments in
New York, Kentucky and Arizona,
helping boost revenue 1.6%.
Financial performance
Pearson has posted growth in most
segments throughout the past five years;
however, this is not always reflected in
the figures, which have been converted
from pounds to US dollars. Due to the
companys large proportion of US sales,
fluctuating exchange rates have a

significant impact on its reported
results. In 2011, for example, North
American sales declined by 2.0% at
reported exchange rates despite rising in
dollar terms. Pearson was also hurt in
2011 by a 9.0% decline in the textbook
publishing market. Deferred revenue
due to implementation of Common Core
State Standards and declining college
enrollment are expected to lower
revenue 7.4% over 2015. In the five years
to 2015, IBISWorld estimates that
Pearsons industry-specific revenue
increased 0.6% annually on average to
$1.7 billion.
Educational Testing Service (ETS) is a

nonprofit organization formed in 1947
from the testing divisions of the
American Council on Education, the
Carnegie Foundation for the
Advancement of Teaching and the
College Entrance Examination Board.
ETS products and services can be
divided into five categories: research,
assessment development, test
administration, test scoring and
instructional products. The
organization, which has about 9,000
locations worldwide, claims to be the
worlds largest private educational

testing and measurement organization.
Based in Princeton, NJ, ETS provides
testing services in 180 countries and
scores over 50.0 million tests per year.
The company also operates two for-profit
subsidiaries: ETS Pulliam, which sells
assessment software products and
services, and ETS Global BV, which is
based in the Netherlands and sells ETS
products and services internationally.
ETS develops some of the most
common academic tests in the United
States, including the Scholastic Aptitude
Educational Testing Service (US segment) financial performance

Year
Revenue
($ million)
(% change)
Operating Income
($ million)
(% change)
2010
959.9
N/C
26.7
N/C
2011
1,037.6
8.1
26.6
-0.4
2012
1,073.7
3.5
16.1
-39.5
2013
1,138.1
6.0
27.7
72.0
2014*
1,198.9
5.3
27.8
0.4
2015*
1,269.1
5.9
29.4
5.8
*Estimates
SOURCE: INTERNAL REVENUE SERVICE
WWW.IBISWORLD.COM
Major Companies
Player Performance
continued
Test (SAT), Graduate Management

Admission Test (GMAT), Test of English
as a Foreign Language (TOEFL), College
Level Examination Program (CLEP) and
the Graduate Record Examination
(GRE). Paper-based tests are generally
administered at schools or colleges, while
computer-based tests are administered at
ETS-authorized test centers. Tests are
returned to ETS for scoring and analysis.
The TOEFL is now the most widely
recognized English-language test in the
world, administered via the internet in
more than 165 different countries.
Financial Performance
In 2007, ETS acquired Prometric for
$435.0 million. In this transaction, ETS
regained its former subsidiary Capstar,
which it had sold to Prometric in 2005.
The acquisition allowed ETS to expand
into corporate and professional testing
services and to boost its revenue about
7.8% to $879.7 million in 2007. Because
ETS is a nonprofit organization, detailed
financial statements are limited. However,
IBISWorld estimates that ETSs revenue
grew at an annualized rate of 5.7% to $1.3
billion in the five years to 2015.
Other Companies
This industry is largely dominated by

small, nonemploying businesses.
However, some companies operate on a
national basis and hold a significant
market share within their segment of
this industry.
number of international testing volumes

for the ACT.
ACT
Estimated market share: 3.7%

Headquartered in Iowa, ACT was
founded in 1959 and was originally
known as the American College Testing
Program. In 1996, the independent,
nonprofit company changed its name to
ACT. ACT designs educational and
workforce assessment programs. The
organization offers more than a hundred
assessment, research, information and
program management services. It has
also worked with Pearson VUE to develop
and administer the Graduate
Management Admission Test (GMAT).
The company works extensively with
most state governments to deliver ACT
testing to high school students. About
1.8 million high school graduates took
the exam in 2013, up from 1.5 million in
2009 (latest information available). This
rise in the number of students taking
ACTs tests has helped push the
companys revenue up. Growth has also
occurred as a result of an increasing
American Institute for Foreign

Study Inc.
Estimated market share: 1.2%

The American Institute for Foreign Study
(AIFS) is a group of related companies
that organizes cultural exchange
programs. Founded in 1964, more than
50,000 students from more than 500
educational institutions participate in the
organizations programs each year.
The organization is a privately owned
corporation and claims annual earnings
in excess of $180.0 million. Programs
include college study abroad, au pair
placement, camp counselors and staff,
high school study and travel, gifted
education and insurance services. They
are delivered through wholly owned
overseas subsidiaries and offices in the
United Kingdom, France, Germany,
Poland, Australia and South Africa.
AIFS also operates the American
Institute for Foreign Study Foundation, a
nonprofit organization founded in 1967.
The AIFS Foundation provides grants
and scholarships to US students for
overseas study. The foundation also runs
two programs: American Youth Abroad
and Academic Year in America. The
WWW.IBISWORLD.COM
Major Companies
Other Companies
continued
American Youth Abroad program sends

US high school students to study abroad
while staying with a host family in
Argentina, Brazil, Ecuador, France,
Germany, the Netherlands, South Africa,
Spain or Thailand. It also offers summer
programs in a range of other countries.

Academic Year in America does the
reverse by bringing foreign high school
students to study in the United States for
a semester or a year, again staying with a
host family.
WWW.IBISWORLD.COM
Operating Conditions
Capital Intensity | Technology & Systems | Revenue Volatility

Regulation & Policy | Industry Assistance
Capital Intensity
Level
The level
of capital
intensity is L ow
Like the rest of the education sector, the

Testing and Educational Support
industry is labor intensive. The industry
provides a range of educational services
that usually involve face-to-face contact
with clients. This includes specialist
services to cater to the individual needs
of the client, the development of which is
labor intensive.
In spite of this, the use of technology is
increasing the industrys capital intensity.
Educational support service providers are
offering more services via the internet,
increasing capital costs while labor costs
increase as well. Computer software
allows for the automation of test delivery
and grading services, yet labor
requirements persist as companies search
for qualified engineers and computer
Capital intensity
Capital units per labor unit

0.5
0.4
0.3
0.2
0.1
0.0
Economy
Educational
Services
Testing &
Educational
Support
Dotted line shows a high level of capital intensity

programmers. As a result, wages have

increased as a proportion of industry
revenue in the five years to 2015, a trend
Tools of the Trade: Growth Strategies for Success

New Age Economy
Investment Economy
Recreation, Personal Services,

Health and Education. Firms
benefit from personal wealth so
stable macroeconomic conditions
are imperative. Brand awareness
and niche labor skills are key to
product differentiation.
Information, Communications,
Mining, Finance and Real
Estate. To increase revenue
firms need superior debt
management, a stable
macroeconomic environment
and a sound investment plan.
Labor Intensive
Capital Intensive
Traditional Service Economy

Wholesale and Retail. Reliant
on labor rather than capital to
sell goods. Functions cannot
be outsourced therefore firms
must use new technology
or improve staff training to
increase revenue growth.
Book Publishing
Tutoring & Driving Schools
Testing & Educational Support
Public Schools
Private Schools
Business Certification & IT Schools
Change in Share of the Economy
Old Economy
Agriculture and Manufacturing.
Traded goods can be produced
using cheap labor abroad.
To expand firms must merge
or acquire others to exploit
economies of scale, or specialize
in niche, high-value products.
WWW.IBISWORLD.COM
Capital Intensity
continued
that is expected to continue over the next

five years. In 2015, IBISWorld estimates
that wages and depreciation represent
33.9% and 3.0% of industry revenue,
respectively. This means that for every

dollar spent on wages, another $0.09 is
spent on the use and replacement of
buildings and equipment.
Technology
& Systems
Technological changes are primarily

affecting the education testing segment of
this industry. The widespread use of
internet-based testing is improving the
administration of tests and the services
available to customers. Most
establishments offering educational
testing provide at least some of their
services via the internet. For example,
Educational Testing Service (ETS)
launched the internet-based TOEFL in
2005. Similarly, many operators offer
practice tests online. Providing tests
online requires computer software to
manage test content, register testing
candidates, deliver tests, score results
and return testing data.
Technology has also changed the way
that educational tests are graded. For
example, a computer program called
e-rater has been used to score the GMAT
since 1999, and is currently being
considered for other major tests. The
Criterion Online Essay Evaluation
Service, developed by ETS, provides
automated essay evaluation through
e-rater. Essays are rated by the
technology based on structure,
organization and content. Critique

provides real-time feedback on grammar,
usage, style and organization. E-rater
offers automated analysis of conceptual
information in short-answer, free
responses. Essays are generally assessed
by both the computer program and a
person. If their grading differs, the essay
is assessed by a second person. The use of
computers in grading tests allows the
process to be completed faster and at a
lower cost. Software is also being used to
detect plagiarism by students, which is an
increasing problem with the ability of
students to buy ready-made essays
available online.
ETS has launched a service that allows
institutions to make customized searches
of a database that contains Graduate
Record Examination scores, as well as
other student demographic information.
The rising use of such technology has
created a growing role for educational
consultants that specialize in e-learning.
Their services are sought to provide
advice on new learning technologies to
schools, universities and other
educational establishments.
Demand for educational support

services from the corporate sector can
vary with the level of economic
activity. The number of student
enrollments at elementary, secondary
and higher education institutions is
relatively stable, as it is underpinned
by demographic trends. This means
that there is low revenue volatility
in this industry. In the five years to
2015, industry revenue increased as
high as 3.2% in 2014 and decreased as

much as 1.8% in 2012.
Changes in government policy and
funding introduce a moderate level of
variability and, therefore, risk for industry
operators. Changes in the level of
government funding of education can affect
the provision of non-instructional services.
In years of budget shortfall, schools and
other educational organizations will have
fewer resources to pay for educational
Level
The level
of
Technology Change
is M
edium
Revenue Volatility
Level
The level
of
Volatility is L ow
WWW.IBISWORLD.COM
support services. Legislative changes have

also impacted demand for academic testing
services, as demonstrated by the NCLB
A higher level of revenue
volatility implies greater
industry risk. Volatility can
negatively affect long-term
strategic decisions, such as
the time frame for capital
investment.
When a firm makes poor
investment decisions it
may face underutilized
capacity if demand
suddenly falls, or capacity
constraints if it rises
quickly.
legislation. Changes to this legislation and

other legislation concerning education
industries will raise revenue volatility.
Volatility vs Growth
1000
Revenue volatility* (%)
Revenue Volatility
continued
Hazardous
Rollercoaster
100
10
Testing & Educational

Support
1
0.1
Stagnant
30
10
Blue Chip
10
30
50
70
Five year annualized revenue growth (%)

* Axis is in logarithmic scale
Regulation & Policy

Level & Trend
he level of
T
Regulation is
Lightand the
trend is S
teady
Establishments in this industry are

subject to little regulatory control. There
is no centralized government authority
and states assume varying degrees of
responsibility for regulation. However,
educational support service providers
are often required to adhere to the
various state and federal education laws
and regulations due to the industrys
direct links with educational
institutions. Furthermore, professionals
such as guidance counselors and
education consultants are required to
provide advice to clients. This means
that they must understand and be
responsive to legislation changes. For
example, the introduction of the No
Child Left Behind (NCLB) Act of 2001
has had a significant impact on this
industry, despite the fact that there were
no industry operators directly governed
by the legislation.
Under NCLB, signed into law in
January 2002, schools are required to
implement major changes in order for
states to remain eligible for federal
government funding. Among these

changes were stronger accountability
requirements for the results of students.
This created demand for testing,
assessment and data analysis from
schools and school districts. The Testing
and Educational Support industry has
therefore benefited considerably from the
legislation. An anticipated rewrite of the
legislation will determine future demand
for testing and assessment services
currently required by schools and school
districts. The unpopularity of the NCLB
legislation means that it will be changed,
but President Barack Obama has
indicated that he will pursue school
accountability as part of his education
policy, a statement that bodes well for
industry operators. In February 2012,
President Obama started to grant waivers
for NCLB. By July 2012, some 26 states
had received waivers, which require
states to raise standards and improve
accountability. As of February 2015, 43
states and the District of Columbia had
been approved for NCLB flexibility.
WWW.IBISWORLD.COM
Industry Assistance
Level & Trend
he level of
T
Industry Assistance
is L owand the
trend is S
teady
There is no specific assistance for

establishments in this industry. However,
due to their close links to education
institutions and particularly publicly
funded institutions, industry operators do
benefit from various federal government
education policies and funding.
Under the No Child Left Behind Act of
2001, the federal government provides
funding grants to all state education
agencies to establish educational
standards and testing procedures. These
standards are used to measure student
achievement and progress in reading and
math; it also allows the government to
recognize schools with outstanding
performance while holding schools that
perform poorly accountable for change.
While the industry does not receive
funding directly from the government, it
nonetheless benefits from such measures.
Various industry associations exist to
provide members with a range of services
and support. For example, the
Independent Educational Consultants

Association provides members with a
range of training, information and
support services. The non-profit
association also provides its members
with ethical guidelines to ensure
responsible behavior.
About 28.3% of employing
establishments in this industry are exempt
from federal taxation. These
establishments operate on a not-for-profit
basis and are recognized as exempt from
federal income tax under section 501(c)(3)
of the Internal Revenue Code. This is a
high proportion of exempt establishments
when compared with the education sector
average of 23.5% (excluding elementary
and secondary schools, and colleges and
universities). These establishments are
also authorized to receive tax-deductible
charitable contributions. Two of the
largest players in this industry,
Educational Testing Services and ACT,
are non-profit organizations.
WWW.IBISWORLD.COM
Key Statistics
Industry Data
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Sector Rank
Economy Rank
Revenue
($m)
11,244.6
11,765.5
13,001.7
14,636.5
15,392.4
15,403.8
15,132.3
15,250.5
15,740.1
16,171.7
16,600.8
17,089.1
17,593.8
18,312.6
19,049.9
7/18
486/1338
Annual Change
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Sector Rank
Economy Rank
Revenue
(%)
4.6
10.5
12.6
5.2
0.1
-1.8
0.8
3.2
2.7
2.7
2.9
3.0
4.1
4.0
6/18
721/1338
Key Ratios
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Sector Rank
Economy Rank
IVA/Revenue
(%)
43.33
41.91
42.88
31.80
33.71
39.87
41.61
40.52
42.24
42.67
43.01
43.14
43.56
43.62
43.98
11/18
415/1338
Industry
Value Added
($m)
4,871.8
4,931.0
5,574.6
4,654.2
5,188.9
6,141.7
6,297.2
6,180.1
6,647.9
6,900.5
7,140.5
7,371.5
7,664.7
7,987.4
8,377.8
7/18
389/1338
Establishments
6,763
6,781
7,050
7,092
7,490
7,532
7,188
7,372
7,718
7,969
8,319
8,593
8,973
9,309
9,755
12/18
431/1338
Enterprises Employment
6,059
76,196
6,071
71,573
6,251
81,058
6,308
78,106
6,735
83,212
6,712
90,510
6,478
86,345
6,655
87,952
6,967
92,160
7,195
95,021
7,512
99,059
7,765
102,240
8,109
106,657
8,414
110,891
8,815
116,378
11/18
11/18
384/1338
369/1338
Exports
---------------N/A
N/A
Imports
---------------N/A
N/A
Industry
Value Added
(%)
1.2
13.1
-16.5
11.5
18.4
2.5
-1.9
7.6
3.8
3.5
3.2
4.0
4.2
4.9
4/18
508/1338
Establishments
(%)
0.3
4.0
0.6
5.6
0.6
-4.6
2.6
4.7
3.3
4.4
3.3
4.4
3.7
4.8
7/18
285/1338
Enterprises Employment
(%)
(%)
0.2
-6.1
3.0
13.3
0.9
-3.6
6.8
6.5
-0.3
8.8
-3.5
-4.6
2.7
1.9
4.7
4.8
3.3
3.1
4.4
4.2
3.4
3.2
4.4
4.3
3.8
4.0
4.8
4.9
6/18
6/18
263/1338
414/1338
Exports
(%)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Imports
(%)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Imports/
Demand
(%)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Figures are inflation-adjusted 2015 dollars. Rank refers to 2015 data.
Exports/
Revenue
(%)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Revenue per
Employee
($000)
147.57
164.38
160.40
187.39
184.98
170.19
175.25
173.40
170.79
170.19
167.58
167.15
164.96
165.14
163.69
1/18
869/1338
Wages/Revenue
(%)
34.33
32.11
32.48
27.20
29.31
31.57
33.11
33.42
33.94
34.12
34.63
34.81
35.28
35.38
35.77
12/18
278/1338
Wages
($m)
3,859.9
3,778.0
4,222.4
3,981.0
4,511.6
4,863.2
5,010.9
5,097.4
5,341.5
5,518.1
5,749.6
5,948.1
6,206.3
6,479.5
6,814.2
6/18
302/1338
Wages
(%)
-2.1
11.8
-5.7
13.3
7.8
3.0
1.7
4.8
3.3
4.2
3.5
4.3
4.4
5.2
3/18
479/1338
Employees
per Est.
11.27
10.55
11.50
11.01
11.11
12.02
12.01
11.93
11.94
11.92
11.91
11.90
11.89
11.91
11.93
8/18
713/1338
Domestic
Demand
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Government funding
for primary and
secondary education
($b)
600.8
624.8
644.8
648.1
644.7
640.6
656.6
645.5
664.3
680.2
701.3
723.0
737.5
757.4
777.1
N/A
N/A
Government funding
Domestic
for primary and
Demand secondary education
(%)
(%)
N/A
4.0
N/A
3.2
N/A
0.5
N/A
-0.5
N/A
-0.6
N/A
2.5
N/A
-1.7
N/A
2.9
N/A
2.4
N/A
3.1
N/A
3.1
N/A
2.0
N/A
2.7
N/A
2.6
N/A
N/A
N/A
N/A
Average Wage
($)
50,657.51
52,785.27
52,091.10
50,969.20
54,218.14
53,731.08
58,033.47
57,956.61
57,958.98
58,072.43
58,042.18
58,177.82
58,189.34
58,431.25
58,552.30
3/18
482/1338
Share of the
Economy
(%)
0.03
0.03
0.04
0.03
0.04
0.04
0.04
0.04
0.04
0.04
0.04
0.04
0.04
0.04
0.04
7/18
389/1338
WWW.IBISWORLD.COM
Jargon & Glossary
Industry Jargon
AMERICAN COLLEGE TESTING (ACT)A commonly

used college admissions examination.
GRADUATE RECORD EXAMINATION (GRE)A
commercially run standardized test that is an admission
requirement for many graduate schools in the United
States and other English-speaking countries.
NATIONAL ASSESSMENT OF EDUCATIONAL
PROGRESS (NAEP)A periodic assessment of student
progress conducted in the United States by the National
Center for Education Statistics, a division of the US
Department of Education.
IBISWorld Glossary
BARRIERS TO ENTRYHigh barriers to entry mean that

new companies struggle to enter an industry, while low
barriers mean it is easy for new companies to enter an
industry.
CAPITAL INTENSITYCompares the amount of money
spent on capital (plant, machinery and equipment) with
that spent on labor. IBISWorld uses the ratio of
depreciation to wages as a proxy for capital intensity.
High capital intensity is more than $0.333 of capital to
$1 of labor; medium is $0.125 to $0.333 of capital to $1
of labor; low is less than $0.125 of capital for every $1 of
labor.
CONSTANT PRICESThe dollar figures in the Key
Statistics table, including forecasts, are adjusted for
inflation using the current year (i.e. year published) as
the base year. This removes the impact of changes in
the purchasing power of the dollar, leaving only the
real growth or decline in industry metrics. The inflation
adjustments in IBISWorlds reports are made using the
US Bureau of Economic Analysis implicit GDP price
deflator.
DOMESTIC DEMANDSpending on industry goods and
services within the United States, regardless of their
country of origin. It is derived by adding imports to
industry revenue, and then subtracting exports.
EMPLOYMENTThe number of permanent, part-time,
temporary and seasonal employees, working proprietors,
partners, managers and executives within the industry.
ENTERPRISEA division that is separately managed and
keeps management accounts. Each enterprise consists
of one or more establishments that are under common
ownership or control.
ESTABLISHMENTThe smallest type of accounting unit
within an enterprise, an establishment is a single
physical location where business is conducted or where
services or industrial operations are performed. Multiple
establishments under common control make up an
enterprise.
EXPORTSTotal value of industry goods and services sold
by US companies to customers abroad.
NO CHILD LEFT BEHIND (NCLB)Legislation signed

into law by President Bush in 2002 that sets
performance guidelines for all schools students and
stipulates what must be included in accountability
reports to parents.
TEST OF ENGLISH AS A FOREIGN LANGUAGE
(TOEFL)A test required by many institutions for
international students who are applying to study in the
United States.
IMPORTSTotal value of industry goods and services

brought in from foreign countries to be sold in the
United States.
INDUSTRY CONCENTRATIONAn indicator of the
dominance of the top four players in an industry.
Concentration is considered high if the top players
account for more than 70% of industry revenue.
Medium is 40% to 70% of industry revenue. Low is less
than 40%.
INDUSTRY REVENUEThe total sales of industry goods
and services (exclusive of excise and sales tax); subsidies
on production; all other operating income from outside
the firm (such as commission income, repair and service
income, and rent, leasing and hiring income); and
capital work done by rental or lease. Receipts from
interest royalties, dividends and the sale of fixed
tangible assets are excluded.
INDUSTRY VALUE ADDED (IVA)The market value of
goods and services produced by the industry minus the
cost of goods and services used in production. IVA is
also described as the industrys contribution to GDP, or
profit plus wages and depreciation.
INTERNATIONAL TRADEThe level of international
trade is determined by ratios of exports to revenue and
imports to domestic demand. For exports/revenue: low is
less than 5%, medium is 5% to 20%, and high is more
than 20%. Imports/domestic demand: low is less than
5%, medium is 5% to 35%, and high is more than
35%.
LIFE CYCLEAll industries go through periods of growth,
maturity and decline. IBISWorld determines an
industrys life cycle by considering its growth rate
(measured by IVA) compared with GDP; the growth rate
of the number of establishments; the amount of change
the industrys products are undergoing; the rate of
technological change; and the level of customer
acceptance of industry products and services.
NONEMPLOYING ESTABLISHMENTBusinesses with no
paid employment or payroll, also known as nonemployers.
These are mostly set up by self-employed individuals.
WWW.IBISWORLD.COM
Jargon & Glossary
IBISWorld Glossary
continued
PROFITIBISWorld uses earnings before interest and tax

(EBIT) as an indicator of a companys profitability. It is
calculated as revenue minus expenses, excluding
interest and tax.
VOLATILITYThe level of volatility is determined by
averaging the absolute change in revenue in each of the
past five years. Volatility levels: very high is more than
20%; high volatility is 10% to 20%; moderate
volatility is 3% to 10%; and low volatility is less than
3%.
WAGESThe gross total wages and salaries of all

employees in the industry. The cost of benefits is also
included in this figure.
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Testing & Educational Support in the USFebruary 2015 1

Making the grade: Higher school enrollment will

IBISWorld Industry Report 61171

Testing & Educational

2 About this Industry

21 Market Share Concentration

21 Key Success Factors

22 Cost Structure Benchmarks

Key External Drivers

35 Jargon & Glossary

12 Industry Life Cycle

27 Educational Testing Service

14 Products & Markets

14 Products & Services

31 Technology & Systems

32 Regulation & Policy

www.ibisworld.com | 1-800-330-3772 | info @ibisworld.com

Testing & Educational Support in the USFebruary 2015 2

About this Industry

Operators in this industry provide

The primary activities of this industry are

industry does not include computer

Providing college selection services

61144 Business Certification & IT Schools in the US

Testing & Educational Support in the USFebruary 2015 3

About this Industry

For additional information on this industry

writes over 700 US

Testing & Educational Support in the US February 2015

Annual Growth 10-15

Annual Growth 15-20

Number of college students

Revenue vs. employment growth

Products and services segmentation (2015)

Key External Drivers

Student exchange programs

Number of K-12 students

Other educational services

Per capita disposable

Educational testing services

Life Cycle Stage

Testing & Educational Support in the USFebruary 2015 5

Executive Summary | Key External Drivers | Current Performance

In 2015, revenue for the Testing and

high school graduate rates will spur

Key External Drivers

Number of college students

SAT or ACT and international students

segments of this industry. An increase in

Testing & Educational Support in the USFebruary 2015 6

afford to purchase services for their

reporting requirements influence

Number of college students

Key External Drivers

Testing & Educational Support in the USFebruary 2015 7

The Testing and Educational Support

the year before. Consequently, annual

Over the five-year period, the number of

experienced a historically high number of

Testing & Educational Support in the USFebruary 2015 8

entrance exams, such as the SAT and ACT,

The NCLB effect