How to Start a Tutoring Business

Students today face growing pressure to keep their grades up — and often need extra help to do so. If you have a modicum of expertise in any subject or know a decent number of people who do, you might be able to run a successful tutoring business.

Starting any kind of business, however, takes a lot of work. The key is to have the knowledge you need before you start so you avoid the usual pitfalls. Moving patiently through the launch and developmental process, as detailed below, is the best way to achieve your business dream.

Step 1: Decide if the Business Is Right for You

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.

Pros and cons

Tutoring industry trends

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.

Industry size and growth

• Industry size and past growth – The private tutoring services industry in the US was valued at $8 billion in 2020.((https://www.technavio.com/report/private-tutoring-market-in-us-industry-analysis)) The market for online tutoring services alone grew 7% on average annually over the past five years.((https://www.ibisworld.com/industry-statistics/market-size/online-tutoring-services-united-states/))  
• Growth forecast – The US private tutoring services market is expected to grow more than 7% annually through 2025. Globally, the industry is expected to expand to $172 billion by 2028, averaging more than 8% annual growth.((https://www.fortunebusinessinsights.com/private-tutoring-market-104753))
• Number of businesses – There are more than 3,500 online tutoring services businesses in the US.((https://www.ibisworld.com/industry-statistics/number-of-businesses/online-tutoring-services-united-states/))
• Number of people employed – More than 320,000 tutors, teachers, and instructors are employed in the US, according to the Bureau of Labor Statistics.((https://www.bls.gov/oes/2019/may/oes253097.htm))

Trends and challenges

Trends in the tutoring industry include:

• Increasing need for supplemental education 
• Online tutoring services continue to gain popularity
• Highly competitive examinations to gain admission into leading universities

Challenges in the tutoring industry include:

• Availability of open source learning materials
• Increasing popularity of massive open online courses

What kind of people work as a tutor?

• Gender – 63% of all tutors in the US are female, while 37% are male.((https://www.zippia.com/tutor-jobs/demographics/#gender-statistics))
• Average level of education – 67% of tutors hold a bachelor’s degree and 13% have an associate degree.((https://www.zippia.com/tutor-jobs/education/))
• Average age – The average age of an employed tutor is 41 years old.((https://www.zippia.com/tutor-jobs/demographics/#age-statistics))

How much does it cost to start a tutoring business?

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:

• Papers and worksheets relevant to your subject
• Books that can be refreshers for you in your subject.

How much can you earn from a tutoring business?

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.

What barriers to entry are there?

There are few barriers to entry for a tutoring business. Your biggest challenges will be:

• Standing out from the competition
• Marketing to build a name and boost awareness
• Proven subject matter expertise in at least one area

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Step 2: Hone Your Idea

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

Why? Identify an opportunity

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.

What? Determine your products or services

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.

How much should you charge for tutoring services?

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.

Who? Identify your target 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.

Where? Choose your business premises

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:

• 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 Business 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
• The name should be relevant to your product or service offerings
• Ask around — family, friends, colleagues, social media — for suggestions
• Including keywords in the name, such as “Study” or “Learning”, boosts SEO
• Choose a name that allows for expansion: “Jim’s Bakery” rather than “Jim’s Cookies”
• 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 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.

Step 4: Create a Business Plan

Every business needs a plan, a rough outline that helps guide a startup through the launch process while maintaining focus on key goals. A business plan is also crucial for helping potential partners and investors understand your company and vision:

• Executive Summary: Brief overview of the entire business plan; should be written after the plan is complete.
• Business Overview: Overview of the company, vision, mission, ownership, and corporate goals.
• Product and Services: Describe your shop’s services in detail.
• Market Analysis: Assess market trends such as variations in demand and prospects for growth, and do a SWOT analysis.
• Competitive Analysis: Analyze main competitors, assessing their strengths and weaknesses, and create a list of the advantages of your services.
• Sales and Marketing: Examine your companies’ unique selling propositions (USPs) and develop sales, marketing, and promotional strategies.
• Management Team: Overview of management team, detailing their roles and professional background, along with a corporate hierarchy.
• Operations Plan: Your company’s operational plan includes procurement, office location, key assets and equipment, and other logistical details.
• Financial Plan: Three years of financial planning, including startup costs, break-even analysis, profit and loss estimates, cash flow, and balance sheet.
• Appendix: Include any additional financial or business-related documents.

If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist at Fiverr 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 done, you 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 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. 

Choose your business structure

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:

• 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.
• 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.
• 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 ZenBusiness’s 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 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.

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.
• Crowdfunding: Websites like Kickstarter and Indiegogo offer an increasingly popular low-risk option, in which donors fund your vision. Entrepreneurial crowdfunding sites like Fundable and WeFunder enable multiple investors to fund your business.
• Personal: Self-fund your business via your savings or the sale of property or other assets.

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.

Step 8: Apply for Licenses/Permits

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.

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 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.

Step 10: Get Business Insurance

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:

• 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 any 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 teachworks, ConexEd, and VEDAMO to manage tutors and students, handle scheduling and billing, and conduct online classes. 

Accounting

• Popular web-based accounting programs for smaller businesses include Quickbooks, Freshbooks, and Xero.
• If you are 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.

Marketing

Some of your business will come from the casual passerby or online visitors, but you should still invest in digital marketing! Getting the word out is especially important for new businesses, as it’ll boost customer and brand awareness. 

Once your website is up and running, link it to your social media accounts and vice versa. Social media is a great tool for promoting your business because you can create engaging posts that advertise your products: 

• Facebook: Great platform for paid advertising, allows you to target specific demographics, like men under age 50 in the Cleveland area. 
• Instagram: Same benefits as Facebook but with different target audiences.
• Website: 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 the number of clients.
• Google and Yelp: For businesses that rely on local clientele, getting listed on Yelp and Google My Business can be crucial to generating awareness and customers.

Kickstart Marketing

Take advantage of your website, social media presence and real-life activities to increase awareness of your offerings and build your brand. Some suggestions include:

• Competitions and giveaways – Generate interest by offering prizes for customers who complete a certain action, such as 10% discount for a successful referral.
• Signage – Put up eye-catching signage at your store and website. 
• Flyering – Distribute flyers in your neighborhood and at industry events. 
• Post a video – Post a video about your tutoring service. Use humor and maybe it will go viral!
• Email marketing/newsletter – Send regular emails to customers and prospects. Make them personal. 
• Seek out referrals – Offer incentives to generate customer referrals to new clients. 
• Paid ads on social media – Choose sites that will reach your target market and do targeted ads.
• Testimonials – Share customer testimonials about how your tutoring service helped them.
• Create infographics – Post infographics and include them in your content.

Develop your website

Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism. 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. 

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.

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 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:

• Superior technology for online tutoring
• Highlight top qualifications in achievement or education
• Stress your unique teaching style
• Tutoring for all educational levels, from K thru grad school

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 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.

Step 12: Build Your Team

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:

• Office Manager – Set schedules, order supplies
• Tutors – To take on more students, subjects 
• Marketing lead – Social media marketing, SEO

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: Start Making Money!

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!