How to Start a Tutoring Business from Scratch: A Complete Guide with 11 Simple Steps for Tutors
Starting a tutoring business can be a great way to expand your teaching expertise and make more profits while also positively impacting your community.
With such an increasing demand for tutors, this industry is booming and is forecasted to grow by $8.37 billion with a CAGR of about 8% during 2021-2025.
So you have finally decided that starting your own tutoring business is perfect for you! But…
- How do you even go about starting a tutoring business?
- How do you get students for your new venture?
- How do you set yourself apart from your existing competition?
If these are your burning questions, we’ve got you covered!
Try out these simple steps to set up a tutoring business of your own:
- Identify your niche
- Perform market research and competitor analysis
- Choose the right setup for your business
- Set your pricing plan
- Establish a legal business entity
- Keep a check on finances
- Establish your presence online
- Get your initial students
- Create reference materials for your class
- Maintain good relationships with parents
- Gather the right tools for your private tutoring business
Now that we have divided the game plan into eleven easy steps, let’s get started with taking one step at a time!
1. Identify your niche
Own your niche, after all, one size does not fit all!
With the education industry growing exponentially by the day, it is crucial to determine your niche before you start your own tutoring business.
By defining your niche, you will have a clear vision and understanding of the audience you are targeting. You would also have a much clearer idea of what knowledge and skills you need to fine-tune so that you provide more value to your students.
Understand what makes your audience satisfied:
Gone are the days when parents did not inquire much about tutors for their kids. They now know exactly what they want from the tutors and play an active role in the progress of their children. Understand what they want from a tutor and provide services that align with their interests.
These are a few things that your clients may look for:
- 1:1 tutoring: When it comes to teaching, nothing drives more attention than personalized classes! You focus on the exact weaknesses and strengths of a particular student and teach in the way best suitable for them. This is why a lot of parents prefer 1:1 tutoring for their kids.
- Group tutoring: Group tuitions can bring out the best in students. Learning is fun, and it encourages students to think creatively and build strong communication skills. It is the perfect combo of socializing while learning!
This is how you can choose your niche
Before you identify your niche, make sure you ask yourself the following few questions –
- What subjects can I offer the most value in?
- What are my skills?
- Are there already enough tutors for the skills I specialize in?
- How can I stand out from the competition?
- For what subjects is there a demand for tutors in my area?
- Who is my ideal student?
Some examples of tutoring niches are:
- Test prep tutors (SAT, ACT, etc.)
- Language and ESL tutors
- Pre-K tutors
- Specialist tutors
- Admissions and application tutors
- College/ University tutor
Choosing your niche depends on two factors primarily:
- Your area of specialization
- The demand for what you specialize in – This is a crucial criterion that helps you determine whether your tutoring business is the right choice and what your profit margin can be.
To understand the demand in your area, you need to carry out market research and competitive analysis, which takes us to the next part of our guide. (Trust us, it’s not as intimidating as it sounds!)
2. Perform market research and competitor analysis
Whatever industry we start a business in, it is our competitors that push us to do our best!
As you are just setting up your tutoring company, it is important to understand the tutoring market and where your competitors stand. It helps you shape your business and get a better understanding of what your audience is looking for.
Market research helps you understand your ideal audience based on their income level, age, qualifications, and various other factors. You understand their preferences and what they don’t like. It would also give you a clearer idea of the way you want to provide your tutoring services.
For market research, try the following:
- Join Facebook groups of parents where they discuss the education of their kids and connect with them.
- Check out what subjects the students in your area are taking tuition for.
- Try to find out the subjects for which not many tutors are offering tuition in your locality.
- Understand the financial conditions of your clients as it would help you determine how much they would be willing to pay for your services.
For competitor research, find out all the tutoring businesses in your area and once you have a list, you can go about the research in these ways:
- Understand the teaching techniques of your competitors.
- Read reviews and testimonials of your competitor’s students on their website.
- Check out their pricing page, it would give you an idea of how much you can charge.
- Talk to their students and ask them the right questions whose answers actually give you a good insight. You can ask them about their tutor’s teaching methodology and other relevant questions.
- Understand your competition’s marketing strategy and their USP.
Always keep an eagle eye on your competitors!
Identify your Unique Selling Proposition (USP)
Do you know the secret recipe to any successful business? It is their USP – something that has the power to blow off the competition!
Identify what you can do better than your competitors and is difficult for them to replicate. It is this USP that will direct your customers to your services and set your tutoring business apart from the rest.
A few examples of USP’s can be:
- You make learning more interactive
- You offer more personalized learning
- You provide tutoring services for special needs children
As you carry out your competitor research, you would be able to determine your differentiating points and what makes you stand out from the rest.
3. Choose the right setup for your business
Starting your own tutoring business comes with a lot of freedom. The freedom of deciding your fee, the freedom of choosing the setup that works for you, and a lot more! When it comes to choosing the perfect setup, it is important to think strategically – consider your costs and what’s convenient for you and your students.
You may consider any of these options:
- Renting a classroom: You can rent a classroom for your tutoring center. While choosing a classroom, remember that the parents want to ensure a safe and distraction-free environment for their kids. Consider renting a classroom closer to the school district, as it would help attract more students.
- Offering online classes: Covid-19 has completely changed the tutoring scenario! The students and the parents have become accustomed to online learning, so it is a good option to consider. Another benefit of offering your tutoring services online is the reduced costs when it comes to renting a classroom and traveling costs. It saves a lot of time by eliminating the need to commute, hence improving your efficiency.
- Setting up a home office: If you decide to start your tutoring business from home, ensure that the workplace is kept neat and tidy, and free from any distractions. Make certain that the workplace is well lit, and has proper seating arrangements.
- Teaching at a student’s house: Convenience is something that parents always prefer for their kids. By offering your tutoring service at their doorstep, a student’s traveling time is saved and they can be more productive. If you consider providing home services, you should charge slightly higher fees, taking into account your travel costs and commuting time.
4. Set your pricing plan
Setting a price for your tutoring service can be tricky! If you set it too high, you may miss out on clients and if you set it too low, you may lose revenue.
Choosing a pricing strategy for your business doesn’t have to be difficult! There are a number of pricing strategies that you can choose from. Some of these are:
1. Cost-based pricing
It is a practice of setting prices based on the cost of your tutoring service and your business-related expenses. Here, a profit percentage or a fixed profit figure is added to the service cost, resulting in a final fee for your services.
For example, your yearly cost of running a tutoring business is $10,000 and you expect to achieve around 2,000 billable hours in the coming year. By this, we can infer that your cost per hour is $5. If you want to earn a profit of $50,000 per year, you add $25 to each billable hour, resulting in a fee of $30 per hour.
The advantage of this pricing strategy is that you can be assured of your profits as long as you have sufficient markup figures and a decent number of students.
2. Competitive pricing
The Tutoring industry is a highly saturated market. With many businesses competing for the same audience, they try to keep their costs lower to have an edge over others. The competitive pricing strategy uses the competitor’s prices as a benchmark and it doesn’t take into account the cost of running your business or the cost of your service.
For example, if you provide math tutoring classes, and your competitors charge a fee between $40 – $50 hourly, you can take a fee that is slightly lesser than your competitor’s. You may consider charging about $35 – $45 hourly.
Competitive pricing is a great option when you are just starting a tutoring center of your own.
3. Premium pricing
If you are charging premium fees for your tutoring services, you have to have an exemplary record with students and parents. While you may earn great revenue by having premium prices, you should understand that high-value clients can be much more demanding. You should be able to add significant value that justifies your pricing.
It is a good idea to have a premium pricing strategy if you have the following:
- Access to high-value clients
- High operating budget
- High socio-economic client base
Choosing the right pricing model is important and the one that works for your business can be determined by market research and competitor research.
There is a wide range of pricing models that you can choose from. Some of these are:
- Fee on an hourly basis
- Price per lesson
- Prepaid payment plan
- Price for group tuitions
- Price based on the topic
How much you should charge depends on the following criteria:
- How much your competitors are charging: When you are just starting out, try to keep competitive prices for your tutoring service. With time, as you gain more trust from the parents and establish yourself as an expert, you can increase your price accordingly.
- Your locality: Location can make a huge difference when it comes to your pricing strategy. If you are teaching in a posh locality, you can charge a higher fee. You need to understand the paying capacity of your clients before charging a fee.
- Your expertise: Are you a tutor with experience of 5+ years or are you just starting out? When it comes to pricing, experience matters a lot. As time goes by, and as you gain more experience, your pricing should also increase for a profitable business.
- The subject you are teaching: Depending on what you teach, the fee can vary greatly. Parents will pay different fees if you are a tutor preparing students for exams like SAT, ACT, etc, or if you are an elementary school tutor.
5. Establish a legal business entity
The business structure you choose will determine a lot of aspects of your tutoring business from liabilities to taxes. Before choosing any one legal structure, make sure you research all the different types of legal structures and go for the one that suits your business the best.
Here are a few legal structures that you can consider for your tutoring business based on what suits you the best.
- Sole proprietorship: It is for the tutors who decide to operate the business alone with no employees. It is easier to set up a sole proprietorship and taxes are also simpler than a corporation. Here, the business is just an extension of the owner and you file the business taxes and personal taxes together.
- Limited Liability Corporations (LLCs): This is an ideal option if you have people to start the business with. LLC owners also file their business revenue on their personal taxes. It is less complex than corporations and they offer limited liability protection to the owners.
- C-corp: In this case, the taxes of the business are filed separately from personal taxes. The business is a separate entity from the owner, who is the shareholder of the company.
- S-corp: It has similarities with the C-corp, however, a few restrictions come into play like you need to have fewer than 100 shareholders, and each of them has to be a U.S. citizen or resident. Along with the article of incorporation, you are also required to file IRS Form 2553.
If you opt for a sole proprietorship, there is no need for any formal paperwork to legally create your entity. However, for LLC you have to file articles of the organization whereas, for corporations, you file articles of incorporation.
For detailed information on different legal structures, you can look up the IRS website.
6. Keep a check on finances
Keeping track of your finances is more important than you think. It is a critical step to chart out a profitable business. It would play a major role in deciding what you would charge your clients for your services and how much you can afford to spend on the business.
You do not need to have a precise plan, but a rough estimate is good to go, as the actual costs can vary from what you had originally decided. Keep in mind the following things when you plan your expense:
- Salaries: If you plan to keep employees for your business, their salary is a heavy expenditure. The labor cost in this industry is generally high and you might have to spend a little more if you hire good professionals.
- Rent and utilities: If you rent a workspace where you can teach students, consider its monthly costs. Along with the rent, you should keep in mind the cost of utilities like electricity, furniture, etc.
- Teaching materials: This would include the cost of software that you would be purchasing, like video conferencing software, appointment scheduling software, etc. It also includes the cost of chairs and tables, whiteboard, markers, and other equipment if necessary.
- Marketing costs: As you grow you have to spend on marketing your business in order to acquire more customers. It can be in the form of Google ads, newspapers, flyers, running social media ads, and much more.
- Travel costs: If you are giving tuition at students’ homes or dorms, include the cost of transportation, the cost of fuel, and parking costs if you use your own transportation.
- Legal costs: Starting from registering a business, to insurance you need some money for them.
- Miscellaneous: You need money for the maintenance of your tutoring business on a regular basis.
7. Establish your presence online
A strong online presence not only gives you credibility but also makes you a professional to the parents. To create a strong web presence:
- Get your business listed on Google My Business: Google gets traffic of almost 3 billion per day! By listing your business on Google My Business, you not only improve your local SEO ranking but also increase your visibility owing to the incredible number of daily visitors of Google.
- Add your business to Reserve with Google: To help the local businesses further and improve the user experience, Google has introduced “Reserve with Google”. It enables the users to directly book appointments with the businesses and reduces drop-offs to a great extent.
- Create a website: Developing a website gives you credibility and can help you get more clients for your business. It highlights your services and adding the testimonials of parents and students on the website can go a long way.
- Set up social media: Social media is one of the best places you can get your students from. Understand on what platforms your audience is the most active and leverage the platform to your advantage. You can create and put up content related to what you teach and establish yourself as an industry expert. As more and more students and parents notice you, they would contact you for your services. Make sure to link your website and contact information on your social media profiles.
- Get listed on online directories: Online directories are important to increase the visibility and exposure of your tutoring center. Have your business listed on sites like Yelp, Google My Business, Craigslist, Yahoo! Local, etc. Yelp is a very powerful platform that can get you your customers. It encourages more students and parents to leave reviews and can direct potential leads to your services. Check out the Yelp profile of Kumon Math and Reading Centre of Irvine here. It has great reviews from parents and proves the credibility of the institute.
8. Get your initial students
Starting a tutoring business and gaining initial students can be tricky sometimes, but there is nothing to worry about. You can get students for your new business if you spread the word the right way
- Use your contacts: Request your friends, families, and neighbors to spread the word about your tutoring institute. Word of mouth is the most effective way of finding new clients.
- Try giving out introductory offers: Pricing plans can be a huge differentiating factor between you and your competitors. As you are just opening a tutoring business, think of giving the parents an introductory discount. There are many different ways you can offer discounts such as early bird discounts, discounted packages, etc.
- Tie up with local schools: Schools are the best place to get your word out about your tutoring business. It is where your target audience will get to know about your services. Consider contacting local schools for tutor referral programs, and you will definitely get good leads.
- Offer group discounts: Offering group discounts can be highly beneficial for you as you gain more students in the same time slot. It would entice more students to enroll in your classes. For example, you can offer a 20% discount to any student if they get a friend with them.
- Offer referral discounts: Referral is the best review a client can give! Word of mouth has better credibility than any advertisement. Reward your students with referral discounts if they get students for you.
- Consider giving free demo classes: A lot of parents are not sure of your services if you are a newbie. Give them an opportunity to have a free demo class for their children to see if you are a good fit for them. This would imbibe their confidence in you and you would get honest feedback on your services.
If you want to know more on how you can build your initial client base, check this blog out: How to get tutoring clients for your business
9. Create reference materials for your class
An interactive classroom isn’t the only element of a good learning experience for the students. Along with teaching, the ability to create a structured learning experience for your students should also be your forte. To make learning more effective and impactful, you can follow these steps:
1. Create thoughtful lesson plans:
Do you want to evaluate whether or not your students are on track? Do you want an organized classroom for an effective teaching-learning process? If your answer to the above questions is yes, then you should have a well-thought-out lesson plan for your classes.
While having amazing teaching skills is of utmost importance, being able to create good, thoughtful lesson plans should also be your forte.
A lesson plan will also inspire you to give your best and meet the objectives of a class. You will be confident and you can stay on top of your tasks. Creating a lesson plan is quite simple. Here is a sample lesson plan template you can refer to:
2. Create handbooks for your students
All the important points of a module at your fingertips? It’s a win! Handbooks are advantageous for the students as it lets them go through entire modules in just a glance. It makes revision much easier and saves a lot of time.
At the end of every module, you can provide the students with handbooks for the chapter. They are usually no longer than 2-3 pages and have all the important formulas, syntaxes, or concepts for quick reference.
3. Create reading lists
A large part of a student’s education revolves around reading about the subjects that are taught. With such a plethora of resources available on the internet, students can sometimes get confused about which information to consume. Reading from unreliable sources will do nothing other than confusing the students even more! That is where a reading list comes in handy.
A good reading list will have reliable resources and study materials for the students to refer to. It can have links to e-books, websites, video series, articles, etc. A student can refer to it anytime they want.
By creating these supplementary materials, you can stay organized and never lose focus of your work. After all, good order is the foundation of all things.
10. Maintain good relationships with parents
A good client relationship is a strength of any business! Cultivating relationships with the parents is not only necessary to gain their trust, but is also important for your business to thrive.
Parents value the teachers who understand their unique needs and demands and offer tailored tutoring services. To build a good rapport with the parents, you can consider doing the following:
- Keep the parents updated about their child’s progress.
- Try to get to know the student, about their strengths and weaknesses.
- Regularly have a meeting with the parents to discuss if the child is facing any specific challenges and try to work out a way to help the child.
- Make it apparent that you are including any specific concern of the parents in their child’s tutoring program.
Have a genuine concern for the child and don’t just focus on the hours you have worked or the money you are making. After all, it is super frustrating when we go for a massage and the masseuse focuses only on the time left for your session to get over, isn’t it?
11. Gather the right tools for your private tutoring business
As a tutor, your success depends on a students’ performance. It all comes down to how well you communicate with the students, how easily you can bridge the gap between school education, and how interesting you make your lessons.
A student can only focus if your classroom is distraction-free from noise, electronics, and games. Keep these in mind when you are choosing a learning space.
You should also have all the necessary learning materials for your student. For example, if you are a math tutor, you will need a calculator, a geometry box, statistical packages, and a math handbook.
Along with physical infrastructure, it is also important to build a technological infrastructure for your business. Technology makes lives and businesses so much easier and once you get a hang of it, there is no going back!
Here are some online software that you should consider for your business:
- Video conferencing platform: Even if you have a physical classroom, you never know when you need to take online classes – after all, the online tutoring industry has boomed due to Covid-19. We suggest you go for platforms like Zoom, Google Meet, etc. for a seamless online class experience.
- Class scheduling platform: With an increasing client base, it can sometimes be difficult to stay on top of your game and manage bookings simultaneously. This is where an online class scheduling platform comes in! It would help you keep track of all the bookings and would also send you and your students reminder notifications. The parents can also book classes with you conveniently and there is less chance of you losing a client.
- Email service: You can use your client’s emails for marketing purposes like sending them discount coupons, newsletters, e-gift cards, and offers. Emails will help you with appointment reminders, booking notifications and would reduce the chances of no-shows.
- Student database system: Having a database of the details of your students and their parents can be very helpful. You can easily track all your appointment history, past transactions, attendance, and much more. This way, you can understand your students better and deliver personalized sessions.
- Business analytics: A business analytics tool will enable you to track the growth of your business. It would tell you the appointments booked so far, the performance of your employees, payment insights, etc. The insights you get from this tool will help you make crucial decisions for your business.
- Payment processing system: Use a credible payment processing system that supports gift cards, discount coupons, and prepayment options.
The list of tools might seem endless, but you know the best part? Appointy’s tutor scheduling software has all of these features integrated into it! It helps you manage classes easily, reduce no-shows and manage employee productivity so that you can focus on your work.
With an increase in demand for tutors, it is a great time to start a tutoring business. It can be a bit of a struggle when you first start, but if you invest your energy and time in it and provide superior service, it is a great opportunity for you.
We hope that this comprehensive guide will help you in your entrepreneurship journey of starting a tutoring business.
All the very best!
We at Appointy, help business owners grow and run their businesses with our online scheduling software. This blog was a part of our ‘Manage your Business’ category, where we provide expert tips, resources, or simply talk about the challenges that small and medium businesses face every day.
If you have any thoughts on this blog, or would like to chat about your business struggles and achievements, let us know in the comments below.
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