How to Start a Driving School

Driver’s education for new drivers is required in many states, and sometimes it’s court-ordered for people with driving violations. This makes driving schools a billion-dollar industry in the U.S. If you want to help keep our roads safe, you could start your own driving school and get a share of that market.

But in addition to driving skills, you’ll need some business know-how. Luckily, this step-by-step guide has all the information you need to jump start your successful driving school. 

Step 1: Decide if the Business Is Right for You

Pros and cons

Driving school industry trends

Industry size and growth

• Industry size and past growth – The U.S. driving school industry is worth $1.2 billion in 2023 after growing 1.2% annually for the last five years.((https://www.ibisworld.com/industry-statistics/market-size/driving-schools-united-states/))
• Growth forecast – The U.S. driving school industry is projected to grow .6% in 2023.
• Number of businesses – In 2022, 21,428 driving schools were operating in the U.S.((https://www.ibisworld.com/united-states/market-research-reports/driving-schools-industry/))
• Number of people employed – In 2022, the U.S, driving school industry employed 34,644 people. 

Trends and challenges

Trends

• Online driving schools are becoming more common, presenting an opportunity for entrepreneurs to start an online business for little money.
• Driver’s education can lower insurance premiums, which increases driving school demand.

Challenges

• Fewer schools are requiring driver’s education as part of their curriculum, presenting a challenge for driving schools.
• Not all states require driver’s education, presenting a challenge for driving schools in those states.

Demand hotspots

• Most popular states – The most popular states for driving instructors are New Jersey, Georgia, and South Carolina.((https://www.zippia.com/driving-instructor-jobs/best-states/))
• Least popular states – The least popular states for driving instructors are Ohio, Iowa, and Alaska.

What kind of people work in driving schools?

• Gender – 30% of driving instructors are female, while 70% are male.
• Average level of education – The average driving instructor has a bachelor’s degree.
• Average age –The average driving instructor in the US is 43.4 years old.

How much does it cost to start a driving school?

Startup costs for a driving school range from $3,000 to $18,000. On the low end costs include classroom space rental and furnishings. The high end includes a down payment on a car outfitted with dual controls, and car insurance, which will be expensive.

You’ll have to decide if you want to incur the extra upfront costs to be able to offer on the road instruction.

Costs also include a driving instructor certification and certification for your school.

You’ll need a handful of items to successfully launch your driving school business, including: 

• Chairs
• Driving booklets
• Car with dual controls

Start-up Costs	Ballpark Range	Average
Setting up a business name and corporation	$100 - $500	$300
Business licenses and permits	$100 - $300	$200
Insurance	$200 - $2,000	$1,100
Website	$500 - $1,000	$750
Classroom space rental and furnishings	$1,500 - $3,000	$2,250
Car with dual controls - down payment	$0 - $10,000	$5,000
Sales and marketing budget	$200 - $500	$350
Driving instructors license and school certification	$200 - $300	$250
Total	$2,800 - $17,600	$10,200

How much can you earn from a driving school business?

You’ll likely charge about $100 per student for a 6 week in classroom course. On the road instruction is about $50 per session and generally 14 sessions are offered. This would give you per student revenue of $800. Your profit margin after fuel and insurance should be about 70% if you are working on your own. 

In your first year or two, you might have 12 students every two months, bringing in $57,600 in revenue. This would mean $40,320 in profit, assuming that 70% margin. 

As you gain traction, you might expand, hire staff, and have 40 students every two months. Costs of the staff and extra space would reduce your profit margin to about 40%.  With annual revenue of $192,000, you’d make a tidy profit of $76,800.

What barriers to entry are there?

There are a few barriers to entry for a driving school. Your biggest challenges will be:

• Breaking into a competitive market
• Funding the startup costs

Step 2: Hone Your Idea

Now that you know what’s involved in starting a driving school, it’s a good idea to hone your concept in preparation to enter a competitive market. 

Market research could give you the upper hand even if you’ve got the perfect product. Conducting robust market research is crucial, as it will help you better understand your customers, your competitors, and the broader business landscape.

Analyze your competitors 

Research driving schools in your area to examine their services, price points, and customer reviews.

• Make a list of driving schools that offer similar services. 
• Review your competitors’ services – their features, pricing, and quality – and marketing strategies
• Check out their online reviews and ratings on Google, Yelp, and Facebook to get an idea of what their customers like and dislike.
• Identify your competitors’ strengths and weaknesses. 

This should identify areas where you can strengthen your business and gain a competitive edge to make better business decisions.

Why? Identify an opportunity

You’re looking for a market gap to fill. For instance, maybe the local market is missing a driving school that offers defensive driving classes. 

This could jumpstart your word-of-mouth marketing and attract clients right away. 

What? Determine your products or services

You could offer new driver training, court ordered driver’s education, or defensive driving classes. You can offer classroom only education, or on the road instruction, which would bring in significantly more revenue.

How much should you charge for driver’s education?

Your prices should be based on market prices in your area, but also on your costs.

Once you know your costs, use our profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.

Who? Identify your target market

Your target audience will primarily be the parents of new drivers, who you can target on Facebook. You could also form partnerships with schools.

Where? Choose a driving school location

You’ll need to rent out a classroom space. You can find commercial space to rent in your area on sites such as Craigslist, Crexi, and Instant Offices.

When choosing a commercial space, you may want to follow these rules of thumb:

• Central location accessible via public transport
• Ventilated and spacious, with good natural light
• Flexible lease that can be extended as your business grows
• Ready-to-use space with no major renovations or repairs needed

Step 3: Brainstorm a Driving School Name

Your business name is your business identity, so choose one that encapsulates your objectives, services, and mission in just a few words. You probably want a name that’s short and easy to remember, since much of your business, and your initial business in particular, will come from word-of-mouth referrals.

Here are some ideas for brainstorming your business name:

• Short, unique, and catchy names tend to stand out
• Names that are easy to say and spell tend to do better 
• Name should be relevant to your product or service offerings
• Ask around — family, friends, colleagues, social media — for suggestions
• Including keywords, such as “driving school” or “driving instruction”, boosts SEO
• Name should allow for expansion, for ex: “DriveWise Academy” over “RoadMasters Driver Training”
• Avoid location-based names that might hinder future expansion
• Use online tools like the Step by Step Business Name Generator. Just type in a few keywords and hit “generate” and you’ll have dozens of suggestions at your fingertips.

Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these. 

Finally, make your choice among the names that pass this screening and go ahead and reserve your business name with your state, start the trademark registration process, and complete your domain registration and social media account creation. 

Your business name is one of the key differentiators that sets your business apart. Once you pick a name, reserve it and start with the branding, it’s hard to switch to a new name. So be sure to carefully consider your choice before moving forward. 

Step 4: Create a Driving School Business Plan

Every business needs a plan. This will function as a guidebook to take your startup through the launch process and maintain focus on your key goals. A business plan also enables potential partners and investors to better understand your company and its vision:

• Executive Summary: Provide a brief summary of your business plan, outlining your business’s goals and target market.
• Business Overview: Describe the driving school’s mission, location, and legal structure, highlighting its role in driver education.
• Product and Services: Explain the range of services your driving school offers, including driving lessons, classroom instruction, and any additional services like permit testing.
• Market Analysis: Analyze the local demand for driver education services, considering factors like the number of potential students, demographics, and competition.
• Competitive Analysis: Evaluate other driving schools in your area, emphasizing what sets your school apart, such as unique teaching methods or specialized courses.
• Sales and Marketing: Outline your marketing strategy for attracting students, including online and offline advertising, partnerships with schools, and promotions.
• Management Team: Introduce key team members responsible for managing the driving school, emphasizing their qualifications in driver education and business management.
• Operations Plan: Detail how your driving school will operate day-to-day, from scheduling lessons to managing instructors and maintaining vehicles.
• Financial Plan: Present financial projections, including startup costs, tuition pricing, revenue forecasts, and profitability, and explain how you plan to secure initial funding if needed.
• Appendix: Include any supplementary materials, such as instructor certifications, curriculum outlines, or testimonials, to support your business plan.

If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist to create a top-notch business plan for you.

Step 5: Register Your Business

Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business! 

Choose where to register your company

Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you are planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to driving schools. 

If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state. 

Choose your business structure

Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your driving school will shape your taxes, personal liability, and business registration requirements, so choose wisely. 

Here are the main options:

• Sole Proprietorship – The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
• General Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
• Limited Liability Company (LLC) – Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts. Here’s how to form an LLC.
• C Corp – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation. Read how to start a corporation here.
• S Corp – An S-Corporation refers to the tax classification of the business but is not a business entity. An S-Corp can be either a corporation or an LLC, which just need to elect to be an S-Corp for tax status. In an S-Corp, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.

We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have. 

Step 6: Register for Taxes

The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN. 

Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.

It is important to consult an accountant or other professional to help you with your taxes to ensure you are completing them correctly.

Step 7: Fund your Business

Securing financing is your next step and there are plenty of ways to raise capital:

• Bank loans: This is the most common method but getting approved requires a rock-solid business plan and strong credit history.
• SBA-guaranteed loans: The Small Business Administration can act as guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan.
• Government grants: A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
• Friends and Family: Reach out to friends and family to provide a business loan or investment in your concept. It’s a good idea to have legal advice when doing so because SEC regulations apply.
• Personal: Self-fund your business via your savings or the sale of property or other assets.

Bank and SBA loans are probably the best option, other than friends and family, for funding a driving school business.

Step 8: Apply for Driving School Licenses and Permits

Starting a driving school business requires obtaining a number of licenses and permits from local, state, and federal governments.

You’ll need to check what certifications and licenses are required for driving schools in your state.

Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits. 

You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more. 

You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.

If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.

Step 9: Open a Business Bank Account

Before you start making money, you’ll need a place to keep it, and that requires opening a bank account.

Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your driving school business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.

Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account. 

Step 10: Get Business Insurance

Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.

Here are some types of insurance to consider:

• General liability: The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
• Business Property: Provides coverage for your equipment and supplies.
• Equipment Breakdown Insurance: Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
• Worker’s compensation: Provides compensation to employees injured on the job.
• Property: Covers your physical space, whether it is a cart, storefront, or office.
• Commercial auto: Protection for your company-owned vehicle.
• Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
• Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of the above insurance types.

Step 11: Prepare to Launch

As opening day nears, prepare for launch by reviewing and improving some key elements of your business. 

Essential software and tools

Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks.  

You may want to use industry-specific software, such as DriveScout, or DrivingSchoolSoftware, to manage your classes, schedule, and student information.

Accounting

• Popular web-based accounting programs for smaller businesses include Quickbooks, Freshbooks, and Xero. 
• If you’re unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences for filing incorrect tax documents can be harsh, so accuracy is crucial.

Create a website

Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism. You can create your own website using services like WordPress, Wix, or Squarespace. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.

Your customers are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. SEO will help your website appear closer to the top in relevant search results, a crucial element for increasing sales. 

Make sure that you optimize calls to action on your website. Experiment with text, color, size, and position of calls to action such as “Enroll Now”. This can sharply increase purchases. 

Marketing

Here are some powerful marketing strategies for your future business:

1. Local Partnerships: Forge alliances with local businesses, like auto repair shops or insurance agencies, to cross-promote services and gain access to a wider audience.
2. Student Referral Programs: Implement referral incentives for current students who bring in new clients, encouraging word-of-mouth marketing within their social circles.
3. Social Media Challenges: Leverage social media platforms by creating engaging challenges or contests related to safe driving, encouraging participation and spreading awareness about your school.
4. Community Events: Participate in or host events like safety workshops, car care clinics, or community fairs to establish a presence and showcase your commitment to safe driving education.
5. Discount Packages: Offer discounted packages for multiple lessons or group bookings, providing an incentive for prospective students to choose your driving school over competitors.
6. Testimonial Videos: Create compelling video testimonials featuring satisfied students and their success stories, sharing them on social media to build trust and credibility.
7. Mobile Advertising: Invest in targeted mobile advertising to reach potential students in specific geographic areas, ensuring your ads are seen by those actively seeking driving lessons.
8. In-Car Branding: Adorn your driving school vehicles with eye-catching branding and contact information to serve as moving advertisements, raising awareness as they navigate local streets.
9. Online Reviews Management: Actively manage and encourage positive online reviews on platforms like Google and Yelp, as they significantly influence the decision-making process for potential students.
10. High School Partnerships: Establish partnerships with local high schools to offer discounted or exclusive programs for students, creating a pipeline for new learners entering driving age.

Focus on USPs

Unique selling propositions, or USPs, are the characteristics of a product or service that sets it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your driving school meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire. 

Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your driving school business could be: 

• Get your child on the road safely
• Convenient classes, low prices
• Meet your driver’s education requirements on your time

Networking

You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a driving school business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in driving schools for years and can offer invaluable insight and industry connections. 

The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in driving schools. You’ll probably generate new customers or find companies with which you could establish a partnership. 

Step 12: Build Your Team

If you’re starting out small from a home office, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for a driving school business include:

• Driving Instructors – teach classes
• Marketing Lead – create and implement marketing strategies
• General Manager – accounting, scheduling

At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need. 

Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent. 

Step 13: Run a Driving School – Start Making Money!

Driving schools provide a critical service, so by starting your own driving school, you’d be adding value to your community. You can also make a nice living in a billion-dollar industry. It doesn’t take much to get started, even if you’re going to purchase a car for on the road lessons.

Now that you understand the business, you’re ready to hit the road to driving school success!