As a business manager, you need to stay steady and not collapse.
Article | Reporter Zhao Dongshan from China Entrepreneur
Editor | Li Wei
Source of Head Image | Interviewee
Even in the education and training industry, which is like riding a roller coaster, Jin Xin, founder and CEO of Xueda Education, is among the most exciting ones.
The 2021 Spring Festival is a special day for him. On New Year’s Eve, he had just regained control of the company that he had lost for five years, and at the same time, 822 million yuan in private placements had also been received.
Jinxin founded Xueda Education in 2001, initially providing online information aggregation services, and later focused on the field of private tutoring. In 2004, Xueda Education opened its first offline learning center, and six years later the company went public on the New York Stock Exchange in the United States. In 2016, Yinrun Investment acquired Xueda Education for 2.3 billion yuan, and Xueda was privatized and delisted from the US stock market, becoming the first Chinese concept company to return to the A-share market through mergers and acquisitions.
At that time, during the peak of the A-share market, policies encouraged the return of Chinese concept stocks, and coupled with the revision of the People’s Republic of China’s National Education Promotion Law, the education resources of A-shares were extremely scarce. As a scarce education stock, Quantong Education was driven up, and various educational asset reorganizations emerged one after another. The underperforming universities in the United States also aspire to return to the domestic capital market.
In Jinxin’s plan, Xueda Education’s return to A shares is a two-step process: the first step is for Yinrun Investment to raise cash to quickly complete Xueda Education’s privatization; The second step is for Yinrun Investment to launch a targeted issuance of 5.5 billion yuan to no more than 10 issuers at a price of 19.13 yuan. If everything goes smoothly, the founding team and shareholders of the university will enter the listed company as shareholders, and Yinrun Investment will only inject resources and enjoy capital returns.
The first step went smoothly. However, due to the rapid decline of the capital market in 2015 and the 180 degree policy shift, the second step of Jinxin’s plan for targeted private placement was not successfully implemented. After several unsuccessful efforts, Ziguang, the company behind Yinrun Investment, terminated the private placement plan. As a result, the founding team of Xueda Education, including Jin Xin, unexpectedly lost control of the company.
However, in the following five years, Jin Xin never left the university and tried various ways to regain control of its education.
The transfer occurred in July 2020.
Jinxin Holdings’ Jinfeng Culture has subscribed to 10% to 45% of the new round of private placement fundraising for Tsinghua University. Jinxin holds a total of 20.73% to 28.8% of Tsinghua University’s shares through Jinfeng Culture, Tianjin Ante, and Yelinwan, finally becoming the actual controller of Tsinghua University again.
In the five years since Jinxin lost control of Xueda, online education has developed rapidly, with talent and funds pouring into this industry. Although Xueda Education maintains an annual revenue of over 2 billion yuan, the growth rate is slow and many opportunities have been missed. He admitted, “Our energy and effort are all spent on solving the problem of company control, and we feel like we are outside the industry
At the moment when he regained control of university education, Jin Xin recalled that he was “ambitious and passionate”. However, just half a year later, in July 2021, the “double reduction” policy was implemented, and university education once again faced a life and death test. Having just stepped on the accelerator, Xueda Education had to quickly apply the brakes. Jin Xin described the feeling as “like a roller coaster, with a huge drop”.
The brand image of Xueda Education. Source: Interviewee
Now, more than a year has passed since the “double reduction” policy, and the number of employees in Xueda Education has been reduced from 14000 to over 4000. More than 300 campuses have been closed, and hundreds of millions of students have been refunded. The 822 million yuan private placement originally intended for business expansion financing has become a reserve for winter, “Jin Xin sighed, and had to transform with Xueda Education.
At present, the university has identified four transformation directions: quality education, vocational education, cultural space, and educational technology informatization. On October 25th, Xueda Education also announced the acquisition of 100% equity of Dalian Quanzhihui International Education Holdings Co., Ltd. for 13.86 million yuan. This is the third vocational education school acquired by Xueda Education within two months, demonstrating its determination to transform into vocational education.
Looking back on the past 20 years, Jin Xin still feels lucky and fortunate to have seized the huge opportunity of China’s economic development. However, Jin Xin also deeply realized that “the days when revenue increased from 50 million to 1 billion in just 4 years, like 10 years ago, no longer exist. Now we need to work steadily and pursue the health and quality of the enterprise
When Jin Xin rang the bell on the New York Stock Exchange in 2010, he was only 33 years old. At that time, his goal was to retire at the age of 35. However, during his more than 20 years of entrepreneurship, he never left the university. Yao Jinbo and Li Rubin, who started the business together with him, have already established 58.com and Baojia Car Rental respectively.
After all, Xueda was founded by myself. Without a good development, I am not willing to accept it. There will definitely be many ideas and long cherished wishes that have not been realized. I still want to take it to a better stage, “Jin Xin told” Chinese Entrepreneur “.
The following is a self statement by Jin Xin, founder and CEO of Xueda Education, with some deletions and modifications.
After regaining actual control
Around the Spring Festival of 2021, I officially regained control of the university education that I had lost for five years. On the day before the Spring Festival, all the funds for private placement were received. On April 23, 2021, Xueda Education completed the re-election of its board of directors and the renaming of its listed company.
In the first half of 2021, we had great ambitions and passion, mobilized the whole company, and everyone’s morale was high. The business momentum was indeed very good. In the previous few years, the revenue growth of Xueda was only about 10% per year, sometimes even less than 20%. However, in the first half of last year, it had basically reached over 20%.
At that time, many rumors about the “double reduction” had already spread. Although we knew there would be major policies, we still didn’t believe it, or rather didn’t want to believe it. When the document was circulated on July 23rd, we were very surprised. The chain reaction in the industry was also significant, and the entire market was very panicked.
Not long after gaining actual control, there was a “double reduction” policy, and I was very depressed at that time. Because when we returned from the US stock market to the A-share market in 2016, we had been dealing with the issue of regaining actual control. However, from 2016 to 2020, which happened to be a period of great development in the online education industry, we missed many opportunities because during that time, our energy and focus were difficult to focus on business, and we were powerless.
After regaining actual control, we began to press the accelerator hard. In 2021, the company’s development momentum was also very good, but immediately it was like hitting a wall, and all the previous business logic was destroyed. That feeling is like a roller coaster, with a significant drop.
It is very difficult and challenging for a company to transform its organization from suddenly stepping on the accelerator to suddenly stepping on the brake. Especially since I was still recruiting in the first half of the year, I have to lay off the newly recruited people in the second half. This kind of transformation is actually difficult to accept psychologically, but it must be done.
Since the policy has already been implemented, the foundation for the survival of the enterprise no longer exists. It is necessary to comply as soon as possible to ensure the survival of the enterprise. So we had to scale back our business and reduce the number of campuses. At the same time, we also need to pay attention to the company’s financial situation and seek new directions.
So we had to fight on multiple fronts. Originally, there was a priority ranking for things, but at that time, everything became urgent and prioritized. More importantly, as a business manager at this time, you need to remain stable. Although the business is retreating, you need to achieve an orderly retreat and not be defeated.
During that time, I basically held meetings with campuses across the country every day to understand the situation in each place. It was also quite chaotic at that time, and everyone was anxious. At this time, the company must have a backbone to let everyone know that Mr. Jin did not run away. Many companies collapse from within first.
Fortunately, we were fortunate enough to have resolved the issue of actual control before the “double reduction” policy. If the actual control is not mine, I can leave at any time. When a company has an owner (actual controller) and is also a founder, it definitely means that it will not give up easily. Moreover, the financing of over 800 million yuan for private placement was originally intended for expanding food and supplies, but now it has become a winter reserve.
Our business structure also determines that we still have room for rapid transformation. The proportion of K9 business in the university is around 40%, and the proportion of high school business is 60%.
Why did the university form such a revenue structure? It’s actually related to our business model. Our main form of personalized tutoring is one-on-one, which is characterized by quick results but also high prices, almost three times the price of class courses. Therefore, it naturally attracts students and parents with strong needs, and parents will also spend money on the most critical stage of college entrance examination preparation.
But at that time, whether it was employees or students, everyone was concerned about how much money the company still had? Many students and parents have also come to refund their fees, and we have refunded them all because if you don’t refund, everyone will panic even more and there will be a run on the bank. I want to tell everyone that we have refunded all the money, and the company still has a lot of money, which is indeed the case.
In the end, we reduced our workforce from over 14000 to almost 4000, closed more than 300 campuses, and refunded several hundred million yuan. Everything went smoothly. But no matter how smooth it goes, after all, it’s a retreat, and I’m still very frustrated. My colleagues used to love and kill each other, but now they are sympathetic to each other. At that time, my mood was very low, but I still had to find direction.
The turning point occurred on October 12, 2021. We have carefully studied the document “Opinions on Promoting the High Quality Development of Modern Vocational Education” issued by the Central Office and the State Council, which has put forward many new viewpoints and represents many new opportunities. We studied the transformation direction that matches with universities and ultimately chose vocational education.
The scale of transformation is not important immediately, what is important is that everyone needs a sense of direction and direction. No matter how difficult the current situation is, when you have hope and direction, everyone feels that you can be stable, and then take steps to do things.
Dongguan Dingwen Vocational and Technical School, invested and acquired by Xueda Education. Source: Interviewee
Coffee made by Xueda Education
After the “double reduction” policy, many media outlets reported that the university is preparing to transform into making coffee, but it is not entirely accurate.
We have identified four business directions: the first one is a relatively conventional business, originally a personalized education business, but more focused on quality education; The other three are newly added, the second being vocational education; Thirdly, cultural services. Currently, there are two main products in this area, one is the Sentence Elephant Bookstore, and the other is the Picture Book Library; Fourth, information technology services.
Coffee belongs to the cultural space business. In terms of business model, the format of bookstores or cultural spaces is indeed not sexy enough, especially under the epidemic, offline operation is even more difficult. Recently, there have been reports of several bookstores closing one after another, which is quite heartbreaking. But in fact, we have conducted research before and found that there are also bookstores that are doing very well, such as Sisyphus, which has more than 300 directly operated stores across the country.
Of course, we are not trying to be another Sisyphus, but we believe that offline experiential formats can allow us to cover more people and have a longer user lifecycle.
In the past, when we were doing education and training, we mainly provided one-on-one pre exam tutoring to meet the needs of the strong. This was a one-time deal, and once they got into college, they left and ignored us.
Transforming into a cultural space, we hope that users can stay with us for a long time. You may only spend a few hundred yuan per year. As long as the time is long enough, the scale is large enough, and it is also very stable, it is a good business model. We believe that this business model is in long-term demand by the public. Whether you are a child, high school student, college student, or professional, including those who have started a family or have children, you can come.
On New Year’s Day this year, we opened our first store in Shenzhen – Juxiang Bookstore. Although it was closed due to the epidemic, we calculated that there will still be about 1 million foot traffic this year, which is a considerable traffic entrance. The revenue of cultural spaces is also very rich, including book sales, book borrowing, coffee and meals, venue leasing, cultural and creative retail, membership services, and so on. We calculate that a single store can be tied in the first year of opening, and even profitable, with a good operating profit margin.
At present, we are also accelerating the speed of opening stores. The second store in Shenzhen is already in preparation, and other cities in Beijing will gradually open stores. Of course, it may take some time to form a large business scale.
Sentences are like bookstores. Source: Interviewee
Key Transformation Vocational Education
At present, the most important and main strategic transformation sector of university education is the vocational education sector.
As practitioners in the education and training industry, we were not particularly sensitive to policies before. After the “double reduction” policy, we realized that in the future, the company’s business should be encouraged by policies and needed by the country. We should put our own work in the context of the national strategy; Secondly, we need to combine our own abilities, resources, and foundation to find the direction that suits our strengths.
At present, the national policy is vigorously promoting vocational education, and the Vocational Education Law of the People’s Republic of China has also undergone its first revision in 26 years this year. The overall idea is to encourage it. However, our approach to vocational education is different from that of civil service examination and training programs such as Zhonggong Education. It is already a very mature market, and if we rashly enter a fully competitive market, it will not be beneficial to us. Therefore, we are more concerned about new changes.
Since the State Council issued the “Implementation Plan for National Vocational Education Reform” in 2019, we have seen a trend and the changes it has brought about:
Firstly, the status of vocational education has been significantly elevated. Previously, vocational education was positioned as a component of general education in the national education system, but now it has become equally important as general education;
Secondly, policies encourage social forces to actively participate in organizing vocational education. In the “Opinions on Promoting the High Quality Development of Modern Vocational Education” issued on October 12th last year, it specifically mentioned encouraging listed companies and industry leading enterprises to hold vocational education, and encouraging all types of enterprises to participate in vocational education in accordance with the law;
Thirdly, the positioning of secondary vocational education has shifted from focusing on employment to emphasizing both employment and further education, which is a significant change. Following this significant change, the Ministry of Education has launched vocational education entrance exams and vocational undergraduate programs. By 2025, the enrollment scale of vocational undergraduate education will not be less than 10% of the enrollment scale of higher vocational education, and it may be even larger by 2035, which is a major trend.
At present, there are various ways for Xueda Education to participate in the vocational education sector, including cooperation, implantation, joint education, trusteeship, and acquisition. As long as we acquire a school, its original vocational majors will settle down, and we will also upgrade and iterate it.
Secondary vocational schools, which belong to the high school stage, correspond to regular high schools. Prior to attending university, the advantage lies precisely in high school, where various pathways for further education are fully covered, including art education, strong foundation programs, independent enrollment, regular college entrance exams, etc. We can transfer our original strengths and abilities.
Qingdao Green Jersey Coastal New Area Green Jersey Film and Art School under the custody of Xueda. Source: Interviewee
This business also requires strong offline operational capabilities as support, which may not necessarily be the advantage of many online companies, making it the fastest market we can enter.
Of course, our vocational education is more than that. Higher vocational education is divided into higher vocational education and vocational undergraduate education. Now the country encourages modern industry colleges and enterprise colleges. In the future, we must connect with the industry, encourage the dual teacher system, and emphasize the integration of students and industry. Our second shareholder is Tsinghua Unisplendour, which is the head of the industry in integrated circuits, semiconductors, the Internet, and cloud computing. There are many resources to connect. In addition, Xueda Education is also acquiring some local vocational schools.
Regarding the future, we believe that it will be difficult for the education sector to experience explosive growth like it did 10 years ago. We need to work steadily and pursue the health and quality of business operations.
Xueda Education was founded by myself. Although I have experienced many twists and turns and difficulties in the past 20 years, if the company does not have a good development, I will not be willing to accept it. There are still many ideas and long cherished wishes that have not been realized. I still hope to bring it to a better stage.
