I. The brutal economics of education
Recent events starkly prove that private education is far from a super-profit industry. Wall Street English Vietnam, once backed by tens of millions of dollars, recently sold for only $6 million—a fraction of its original investment. Apax Holdings reported a loss of nearly 170 billion VND in a single quarter, and a former high-flying EdTech company is now dramatically scaling back operations after substantial losses.
Many prominent business magnates who invested in higher education ultimately retreated. They entered the sector with philanthropic intent, not for money, but most were amateurs in the education business. Consequently, many private universities have either stagnated or collapsed under crisis.
The financial reality check:
- Low margins: The average profit margin for education is a modest 8 to 18%—and after accounting for depreciation (which many school owners overlook), the margin for excellence is often reduced to 7 to 15% at best. Compare this to the 50% margins seen by simple businesses like street food vendors or shoe shiners.
- Perfect competition: The English language center market is now defined by perfect competition. In economic terms, this means profits are pushed extremely low, often approaching zero.
- Misunderstanding cash flow: The biggest misconception is that cash collected upfront equals high profit. The unique advantage of education is collecting tuition before service delivery, which optimizes working capital. However, this upfront cash is not profit; it is deferred revenue, which must be carefully managed as a liability.
II. The scale and capital barrier
No Vietnamese education corporation has yet reached a valuation exceeding a few hundred million dollars, meaning no genuine “giant” exists. Companies like Vinschool rely heavily on the real estate projects of Vingroup for subsidy, and FPT Education relies on the massive FPT brand for growth.
- Slow return: Education is not like real estate, where sales begin quickly. Enrollment grows slowly. A school needs 7 to 10 years of exceptional growth to reach a capacity of 1,000 students. With an initial investment (CAPEX) of hundreds of billions of VND, it takes over a decade to recoup the capital.
- Regulatory cost: Absurd state regulations mandating minimum land areas of 5 hectares and capital investments of 1 trillion VND severely choke off investment from honest, qualified entrepreneurs. This forces consolidation and M&A, where only a few players remain.
- The long game: Pioneers like Olympia and Newton struggled for over a decade, almost failing during economic crises, to reach their current enrollment. They succeeded only because of a profound passion for education; financially, they likely would have been wealthier had they invested in real estate.
III. The consequences of the bubble
The low accumulated profits mean that when these schools are successful, annual profits are often distributed entirely as dividends, leaving minimal reserves for reinvestment. New universities are forced to borrow heavily, using scarce profits to pay interest instead of investing in quality improvement.
The reality is simple: Investing in education is exceptionally difficult and is not for the amateur.
