This is a call to action for all those math wizards, bilingual experts, ardent artists, or scientists out there. If you have in-depth knowledge and passion for a specific subject area, are a good communicator, and relate well to students from various backgrounds, then why not turn that knowledge into a profitable small business?
This guide provides an overview just how to do that with an overview of the tutoring industry, the steps to get started, answers to common questions, and more.
Business Overview
Private tutors teach a specific skill or subject to individuals or small groups of kids or adults. Services are tailored to each student’s needs and can include help with academic studies, college entrance exam prep, study skills coaching, homework assistance, and more. Tutors work one-on-one or in small groups to provide personalized attention.
Tutors work with students to provide resources and instruction to help them understand concepts and material. Some tutoring businesses will cover multiple subjects, but consider narrowing down into a particular subject area to generate a name for the business and possibly generate higher rates. By defining your niche – being an expert in subject matter from test prep and helping people pass exams such as the SAT, ACT, etc., to teaching language skills, to math, and more, you will have a clearer vision and understanding of the audience you are trying to help.
Tutoring businesses operate through physical locations, online via video chat platforms, or a hybrid model. The business structure is flexible and many tutors begin by offering services part-time before transitioning to full-time. Franchise opportunities are also available for those seeking an established brand.
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Tutoring Industry Summary
The tutoring industry has seen steady growth in recent years, as more parents seek out additional help for their children. According to IBISWorld research, in 2022, the industry generated $2.1 billion in sales and has grown by a staggering 18.7 percent annually between 2018 and 2022. During this time, online tutoring has become increasingly popular, as it can be more convenient and cost-effective. The increasing availability of online resources has also made it easier for students to access tutoring services.
Target Market
Different tutoring companies typically have different audiences. Your target market largely depends on the expertise or skill you will be teaching. Some subjects will be better suited to teaching face-to-face, while others can be easily offered online and can even be enhanced with online teaching tools.
What you intend to teach will also determine the age group or grade level and, potentially the group size. If you are planning to tutor younger children, be aware of the regulations relating to child safety and well-being, and remember that the parents will be the decision-makers. High school students are another great target to help them with college prep or students needing help passing their GED.
Steps To Start A Tutoring Business
Starting a tutoring business can be an incredibly rewarding experience, but it’s important to make sure you’re prepared for the challenges ahead. Use this list of steps to help get your business off on the right foot.
Step 1: Research the Market
Before investing time or money into launching your tutoring business, it’s important to do your due diligence and research the market. With the right research and focus, entrepreneurs can better understand the market and make an informed decision about whether their business idea is viable.
Define Your Target Market
The first step in researching the market for a tutoring business is identifying the target market. Who will your services cater to? Will you specialize in tutoring for a specific subject or grade level? Will you focus on children or adults?
To define your target market, start by looking at the demographics of your area. Are there a lot of families with school-aged children? What subjects are typically challenging for students in your area? Understanding your local demographic will help you tailor your services to meet their needs.
Once the target market has been narrowed down, are there enough potential customers to make starting this business worthwhile?
Analyze the Competition
Once you have defined your target market, take a look at the competition. Are there already established tutoring businesses in your area? What services do they offer? What are their strengths and weaknesses?
Analyzing the competition will give you insight into what services are currently in demand and what areas you can improve upon. Look for gaps in the market that you can fill with your unique offerings.
Research Pricing
The next item to research is pricing. It’s important to understand the average cost of tutoring in their area, investigate rivals’ price points, and research discounts from other businesses. This will help entrepreneurs determine how much they should charge for their services and how they can differentiate themselves from competitors.
Armed with this information, is the profit potential worth the work?
Step 2: Write a Business Plan
Starting any business is a challenging yet exciting journey, but before you launch your tutoring business, a business plan is a helpful step. It’s totally optional, but the business plan can help take the ideas out of your head and create an organized document that outlines the goals, vision, and strategies for running and growing your business. It might seem like a big task, but it’s simply about getting your ideas down on paper and giving them a good think-through.
When you have a business plan, it means you’re not just thinking about your business; you are planning for real. It is all about jotting down your thoughts, what kind of tutoring you want to offer, who are the kids or adults you want to help, and how much you want to charge. By writing them down, you give your ideas a shape and a home, and this is the first step to bringing them to life.
Starting a business does come with its risks, but having a business plan helps you to see possible bumps in the road before you even start. It’s a safe space to make errors because you only use pen and paper, not real money. For example, you might figure out that renting a space is too expensive, and starting online or at your home can be a better option. It’s all about spotting the issues early on so you don’t find yourself in a tough spot later.
Step 3: Register the Business
Starting your tutoring company is not just about being good at what you teach; it also involves being set up to operate legally. This process might seem challenging, but we’ll walk through the common requirements.
Business structure: When you’re starting, you have to decide how to structure your business. You can register your tutoring business as a sole proprietorship, general partnership, corporation, or a Limited Liability Company (LLC). Each structure has its own advantages. For instance, a sole proprietorship is easy to start up and generally costs less, while an LLC or a corporation offers liability protection, meaning your personal assets are protected if your business is sued.
The sole proprietorship is a very popular choice as they are easy and inexpensive to start, and the potential for the business to be sued is low.
Related: Comparison of business structures
Forming an LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.
Some popular LLC formation services include:
IncFile - $0 plus state fees & free registered agent for 1 year!
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Business name registration: After registering the business structure, you may need to register your business name. This process will vary depending on what business structure you pick. Sole proprietors and partnerships will often be required to register a “Doing Business As” (DBA), while corporations and LLCs register with the state during the formation process.
During this time, it’s also a good idea to check if the name you want is available as a web domain, even if you’re not ready to set up a website yet.
Related: Finding a domain name for your business
Obtain business licenses and permits: Tutors do not need teaching certifications to operate a private tutoring business.
Even though tutors don’t usually require a specific license to operate, you may still need to apply for a general business license, business tax registration, or sales tax permit, depending on the state and county you live in.
Related: State guides for general business licensing
Step 4: Set Up Operations
With the research and registration phases out of the way, it’s time to finally start setting up the business to take on students.
When setting up operations, the primary consideration is where you will offer your services. You might consider offering this from home or online. You also might decide to provide tutoring at the student’s home or in a classroom after school hours, or you might start your business with several employees in a rented or purpose-built facility. These decisions will greatly influence your start-up and monthly expenses, such as insurance, rent, and staffing costs.
Depending on your niche and teaching style, you may need various materials such as textbooks, workbooks, a whiteboard, markers, a computer, and software applications. If you’re planning on running an online tutoring business, a stable internet connection, a quiet space for lessons, and a high-quality webcam and microphone are essential.
If you’re planning to tutor from your home, additional insurance coverage is recommended, as most homeowners’ or renters’ insurance policies do not cover accidents related to business activities.
Step 5: Create a Marketing Strategy
Before starting a marketing plan, it is important to understand who you want to reach. Make sure to define your ideal customer base’s demographic and psychographic characteristics. This can include age, gender, interests, education level, income level, geographic location, etc. Doing this will enable you to understand better who you are targeting with your services.
Once you have identified the characteristics of your target audience, it’s time to get into their minds and understand their needs and wants. Research what they value most regarding tutoring services – do they prefer one-on-one or group classes? Are they looking for something more affordable or something more luxurious? Understanding their needs will help you create an offering that meets them exactly where they are at.
Next, research what other tutors in your area are doing: It’s always helpful to research what other tutors in your area are doing when it comes to targeting their audience. Look into how they structure their classes, what pricing strategies they use, how they promote themselves online or offline, essentially anything that gives you insight into what works for them and what doesn’t work so well so that you can apply this knowledge when fine-tuning your marketing.
Last, once you have identified your target audience and their needs or wants, it is time to determine which marketing channels and strategies would be most effective for reaching out to them effectively without breaking the bank. Depending on the demographic characteristics of your target market – some strategies might be more suitable than others. For example, if school age students make up part of the customer base, then talking with teachers in your local school district can be a great way to let potential students know about your tutoring service.
Step 6: Prepare to Launch!
Starting a tutoring business involves several key steps, and as you enter the final stages of setting up your business, there are a few areas that you’ll likely need to address. Every business will have different needs, but here are some of the most common ones:
Business Insurance: As mentioned before, if you’re planning to tutor from your home, additional insurance coverage is recommended, as most homeowner’s or renter’s insurance policies do not cover accidents related to business activities.
Bookkeeping: Setting up a system for tracking income and expenses is necessary. You might consider using accounting software like Wave Accounting (FREE) or Quickbooks.
Contracts: Having a contract in place with your clients is essential. This should outline the terms of service, cancellation policy, payment terms, and confidentiality agreement. Some tutors also use non-compete agreements to prevent clients from hiring their tutors directly. RocketLawyer and Law Depot have free and inexpensive templates that may be helpful.
Bank account: Opening a separate bank account for your business can help keep your personal and business finances separate, making tax time much easier
Pricing: Set your prices based on your expertise, the going rate in your area, and the subjects you teach. It’s important to strike a balance between competitive pricing and profitability.
Credit card processing: Accepting credit cards can increase the convenience for your clients. Payment processors like Square or Stripe offer simple solutions without monthly fees.
Industry Associations: Joining industry associations such as the National Tutoring Association can provide networking opportunities, professional development resources, and credibility for your business.
Common Questions When Starting A Tutoring Business
How much does it cost to start a tutoring business?
Starting a tutoring business can be very affordable compared to other types of businesses, with an average startup cost ranging from $500 to $5,000.
Some of the primary costs include:
Location: The costs can be quite substantial if you plan to tutor from a rented space rather than your home or online. Initial deposits for renting a commercial space can vary greatly depending on your location, but anticipate setting aside at least $1,000 to $5,000 for this.
Insurance: The initial cost for business insurance could range from $250 to $600, based on your chosen coverage. This will protect you from potential liabilities and unforeseen events.
Marketing: Initial marketing costs to consider might involve setting up a professional looking website, which can cost around $100 to $500 for a basic setup. Plus, budget for flyers, business cards, and online ads, putting aside at least $200 to $500 for these.
Resources and supplies: You’ll need to budget for educational materials like books, software, and possibly even educational toys or games, which might cost between $200 to $500 initially.
Training and certification: Though not required, getting certified can boost your credibility. Initial costs for training or certification programs can range from $200 to $500
Legal and administrative costs: Registering your business, acquiring necessary licenses, and fulfilling other legal prerequisites will entail some costs, potentially ranging between $100 and $800.
Technology: If you decide to offer online tutoring, you might need to invest in a good quality computer, camera, and microphone. The initial setup might cost you around $1,000 to $2,000.
How profitable is a tutoring business?
The profit potential for a tutoring business can vary substantially based on factors like location, niche, and client base. However, a common formula is for tutors to charge an average hourly rate of $40 – $60 and aim to bill for 20 – 30 hours per week if operating full-time.
To provide a rough estimate of potential profit, let’s consider a formula common to tutoring businesses: Revenue – Expenses = Profit.
Revenue: Let’s say you charge an average of $50 per hour for your services and work 20 hours per week. In a year, this would equate to a revenue of roughly $52,000 ($50 * 20 hours * 52 weeks).
Expenses: Consider costs such as marketing, software, materials, insurance, and other overheads. For example, if your total yearly expenses amount to $12,000.
Profit: Subtracting expenses from revenue gives you the profit, i.e., $52,000 (Revenue) – $12,000 (Expenses) = $40,000 (Profit).
This is a simplified example; actual numbers can vary greatly depending on your location, the subjects you teach, and the number of hours you work.
Keep in mind that these are gross profits before taxes. You’ll need to account for income tax, which will reduce your net profit.
What skills are helpful in running a tutoring business?
Teaching experience: Regardless of the subject area or skill you will be teaching, it is important that you are familiar with teaching methods as well as learning styles. Skills also include lesson planning, evaluating student work, and understanding the curriculum and corresponding assessments.
Communication and interpersonal skills: Of course, it is important that you have expert knowledge of your subject area, but it’s equally important that you enjoy sharing your knowledge with others, communicate well, you can relate to different characters, and understand learning needs. You will likely get to work with students of all ages and from all walks of life. Not only that, if you are working with younger children, you will also be communicating with their parents, reporting on progress, or discussing any issues.
Knowledge of subject-specific and teaching trends and requirements: We highly recommend you stay current with the latest research and expertise in your subject area. It’s also valuable to keep informed about trends in teaching and learning. If you plan on offering online tutoring, be sure you are familiar with the latest technologies and teaching platforms to enhance your business offering.
Knowledge of regulations and requirements: You might be required to have specific qualifications to offer private tutoring services. There are also a number of requirements relating to teaching children and youth. This might differ from state to state, but it is important that you understand and implement all requirements.
Management skills: You might hire multiple teachers to offer expert tutoring in a broad range of subject areas or at different levels. In that instance, previous experience hiring, training, and managing others will be helpful.
Marketing skills: Your excellent customer service and subject knowledge will promote customer loyalty. A good reputation can easily attract customers by word of mouth, But marketing and a strong communications strategy will be essential, especially to start your business. Experience with social media is particularly helpful in this industry.
Do I need a teaching license to be a tutor?
This is a common question, and in most cases, a teaching license is not required to be a tutor.
To be a private tutor, there aren’t any licensing requirements, but having one may boost your credentials with potential customers. However, a few states require a teaching certification if a school district employs a tutor. In South Carolina, for example, candidates must complete a teacher education program from an accredited college or university, complete a student teaching internship, hold a minimum of a bachelor’s degree, and provide a letter of recommendation for a teaching certification.
What is the NAICS code for a tutoring business?
The NAICS code for a tutoring business is 611691, which is classified under Exam Preparation and Tutoring.
The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.
