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Written by: Carolyn Young
Carolyn Young is a business writer who focuses on entrepreneurial concepts and the business formation. She has over 25 years of experience in business roles, and has authored several entrepreneurship textbooks.
Edited by: David Lepeska
David has been writing and learning about business, finance and globalization for a quarter-century, starting with a small New York consulting firm in the 1990s.
Published on November 3, 2021
Investment range
$1,900 - $4,900
Revenue potential
$13,650 - $62,000 p.a.
Time to build
0-3 months
Profit potential
$10,000 - $56,000 p.a.
Industry trend
Growing
Commitment
Flexible
Here are the important elements to think about when starting your tutoring business:
Starting a tutoring business requires time and effort, not to mention some expertise. You will be taking a major risk, so educating yourself is critical before making your decision.
The increasing importance of educational success is driving tutoring growth. STEM subjects in particular are seen as increasingly crucial.
The online tutoring industry took in an impressive $6 billion in 2021 and is expected to grow around 15% through 2030, according to market analyst Grand View Research.((https://www.grandviewresearch.com/industry-analysis/online-tutoring-services-market)) Rather than seeing this as a challenge, tutoring entrepreneurs should view it as an opportunity to expand their reach and revenue by offering online tutoring services.
Trends in the tutoring industry include:
Challenges in the tutoring industry include:
The start-up costs for a tutoring business range from about $2,000 to 5,000. If you set up your own basic website, you can minimize your costs.
You’ll need a few different items to successfully launch a tutoring business. Here’s a list to get you started:
| Start-up Costs | Ballpark Range | Average |
|---|---|---|
| Setting up a business name and corporation | $150 - $200 | $175 |
| Licenses and permits | $200 - $300 | $250 |
| Insurance | $100 - $500 | $300 |
| Business cards and brochures | $200 - $300 | $250 |
| Website setup | $1,000 - $3,000 | $2,000 |
| Initial marketing costs | $200 - $500 | $350 |
| Tutoring supplies | $50 - $100 | $75 |
| Total | $1,900 - $4,900 | $3,400 |
Your profit will vary depending on how many regular students you can book. The cost to tutor a student is minimal, basically limited to $1 for materials, assuming no travel expenses. Industry leader Tutors.com says the price for a one-hour tutoring session ranges from $25-$80, with an average of $52.50.
If you can initially book 5 one-hour sessions per week at $52.50, you’ll see annual revenue of $13,650. Insurance and marketing could cost an additional $300 each month, leaving you with a profit of about $10,000.
As you gain recognition and referrals, you could book 20 sessions per week and start to charge a higher price. At 20 $60 sessions each week, you’d make $62,000 in annual revenue. With expenses increasing to $500 per month, your profit would be a cool $56,000.
There are few barriers to entry for a tutoring business. Your biggest challenges will be:
Now that you have a good idea of what’s involved in starting a tutoring business, it’s time to hone your concept in preparation to enter a competitive market
Market research will give you the upper hand, even if you’re already positive that you have a perfect product or service. Conducting market research is important, because it can help you understand your customers better, who your competitors are, and your business landscape.
Since you will have no track record in the business, you need to find a way to stand out from the competition. One option is to make yourself available for extended hours because not all students want tutoring right after school. You could offer early-morning or late-evening tutoring, and post ads on social media.
As you build a track record, use that in your marketing to prove your experience. You could also market your success stories.
Beyond just tutoring in one subject, you could offer SAT or test-prep tutoring to command a higher price. You could also expand into other subjects, assuming you have the requisite knowledge.
When you’re just starting out, you may have to charge a below-average price until you build a track record. Once you’ve made a name for yourself, you’ll be able to command a more respectable rate. Research online tutoring services and tutoring businesses in your area to determine the best prices for your market.
Once you know your costs, you can use this Step By Step 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.
Your target market will be students who need extra help and their parents. Inform local schools about your services and they will send you referrals. You can also advertise online and in local publications. After you get started, word-of-mouth referrals will be your biggest source of business.
In the early stages, you can operate your business from home to help you keep your overhead expenses in check. But as your business grows and operations intensify, you will likely need to hire workers for various job roles and even rent out an office. You can find commercial space to rent in your area on Craigslist, Crexi, and Commercial Cafe.
When choosing a commercial space, you may want to follow these four rules of thumb:
Here are some ideas for brainstorming your business name:
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 below. 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 with domain registration and social media account creation. Your business name is one of the key differentiators that set your business apart. Once you pick your company name, and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.
Here are the key components of a 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.
Registering your business is an absolutely crucial step — a prerequisite to paying taxes, raising capital, opening a bank account, and other guideposts on the road to getting a business up and running.
Plus, registration is exciting because it makes the entire process official. Once it’s done, you have your own business!
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 tutoring.
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.
Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your tutoring business will shape your taxes, personal liability, and business registration requirements, so choose wisely.
Here are the main options:
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.
Choose Your State
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 on 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.
The IRS website also offers a tax-payers checklist, and taxes can be filed online.
It is important to consult an accountant or other professional to help you with your taxes to ensure you are completing them correctly.
Securing financing is your next step and there are plenty of ways to raise capital:
Bank and SBA loans are probably the best options, other than friends and family, for funding a tutoring business. You might also try crowdfunding if you have an innovative concept.
Starting a tutoring business requires obtaining a number of licenses and permits from local, state, and federal governments.
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.
This is not a step to be taken lightly, as failing to comply with legal requirements can result in hefty penalties.
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.
Before you begin making money, you will need to have somewhere 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 tutoring business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer business account options, just inquire at your preferred bank to learn about rates and features.
But it is a good idea to look at a few options, as banks vary in terms of offerings, and you want to find the plan that works best for you. Once you choose your bank, you just need to bring your EIN (or Social Security Number if you decide on a sole proprietorship) and your articles of incorporation or other legal documentation that proves your business is registered.
Business insurance is an area that often gets overlooked but is vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business, and your life.
Here are some types of insurance to consider:
As opening day nears, prepare for launch by reviewing and improving some key elements of your business.
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 teachworks, ConexEd, and VEDAMO to manage tutors and students, handle scheduling and billing, and conduct online classes.
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.
They are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. These are steps that help pages rank higher in the results of top search engines like Google.
Here are some powerful marketing strategies for your future business:
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 tutoring service 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 tutoring business could be:
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 tutoring business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working as a tutor 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 tutoring. You’ll probably generate new customers or find companies with which you could establish a partnership. Online businesses might also consider affiliate marketing as a way to build relationships with potential partners and boost business.
You may not need to hire any employees if you are starting out small from a home-based business. However, as your tutoring firm grows, you may need to add employees for various job roles. The potential employees for a tutoring business include:
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.
You’re now ready to start your entrepreneurial journey as a tutor. If you have strong networking skills and a creative marketing strategy, you should have no trouble finding your first clients. It’s time to roll up your sleeves and launch your business!
Profit margins for a tutoring business are high, particularly when you are doing it on your own and have no employees to pay. Your margin could be as high as 90%. You could also eventually start an online tutoring service and work nationwide or even internationally and build a large company.
The earning potential for tutors can vary depending on various factors such as location, subject expertise, level of education, demand, and experience. Generally, tutors who specialize in high-demand subjects like STEM (Science, Technology, Engineering, and Mathematics) or standardized test preparation (SAT, ACT, etc.) have the potential to earn higher incomes.
Develop expertise in your subject area and stay updated with the latest curriculum and teaching methods. Establish clear learning objectives and tailor your teaching approach to meet the individual needs of each student. Communicate effectively with students and their parents or guardians to understand their goals and expectations.
Yes, running a tutoring business from home is possible. It can offer flexibility and convenience, especially if you have a dedicated space and the necessary resources. However, it is important to check local regulations and zoning requirements to ensure compliance.
Generally, a one-on-one tutoring session allows for personalized attention and tailored instruction, which can be highly effective. However, small group tutoring sessions with 2-5 students can also be beneficial as they promote peer interaction and collaborative learning.
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