13 April 2023
If you enjoy teaching one-on-one, tutoring may be just the opportunity you’ve been looking for to start a small business.
Students today face growing pressure to excel. And the skyrocketing demand for extra help is driving the tutoring market to new heights. The U.S. tutoring industry was valued at a whopping $8 billion in 2020 and is expected to grow more than 7% annually through 2025. Now that’s some serious extra credit!
The dictionary defines “tutor” as a private teacher, typically one who teaches a single student or small group. Tutors help build confidence, learning skills, and knowledge. As coach, mentor, and counselor, tutors can profoundly impact their community by guiding students toward educational success.
With few upfront costs and a flexible work schedule, tutoring can be a low-risk venture with many potential rewards. Here are a few tips to improve your learning curve:
1. Test the waters: If you’re new to teaching but curious about becoming a tutor, why not jump in? Tap into your trusted network of friends, family, and neighbors to see if they might need tutoring help. This is a great way to hone your skills and build your confidence to succeed.
2. Target your client base: If tutoring feels like a good fit, your next step is to decide who you want to tutor and what subjects you want to cover. Here are some questions that may help you identify your ideal clients:
3. Hone your expertise: After deciding who your ideal client is, your next step is to assess and sharpen your subject-matter skills. Here's how to get started:
4. Choose Your Business Model: Next, it’s time to consider the type of tutoring business you prefer. You can choose from the following models — or a hybrid — when starting your tutoring business:
A franchise model such as Kumon or Sylvan Learning may require a significant initial investment, but it also can be the most profitable. For example, startup costs for a Sylvan franchise are $85,525-$186,930, but for the top 25% of territories by gross revenue, those businesses can generate an AUV of over $500,000 .
A franchise can be a significant financial commitment and may limit how you operate, so it may not be a good fit for someone looking for a low-cost flexible model.
The in-person model requires much less investment, both upfront and over time. Aside from basic learning supplies like paper, pencils, and dry-erase boards, you’ll typically only need a computer to get started. You can even save on commuting expenses with a separate home office for sessions. If you’re uncomfortable sharing your address, you can travel to a client's home or meet at a local school, library, or café. Bonus — your mileage and other travel expenses may now also be tax deductions!
Online tutoring may involve the lowest overall cost. And you generally shouldn’t need more than a web presence, internet service, and a computer to launch, but there might be other equipment to consider purchasing to maximize your presentation. This option is best for tutors who want to run a remote business, with the opportunity to connect with students worldwide. Since the early days of COVID-19, online tutoring has exploded. So let’s take a closer look at this fast-growing sector of the tutoring market.
There are more than 3,500 online tutoring businesses in the U.S., with an expected annual growth rate of approximately 15% through 2030.
Tutoring entrepreneurs should view these market predictions as an opportunity to expand their reach and revenue. Here are some tips on how to grab your piece of the pie:
1. Set the scene: Setting the right atmosphere for a productive online tutoring session is key. Let’s face it — online video can sometimes look grim. Find a quiet place in your home with plenty of light and a clean, neutral background.
2. Get hardware ready: Along with your physical classroom, make sure your computing hardware is ready for prime time. You’ll need a computer with a strong internet connection, webcam, and microphone. You also may want to consider lighting and other audio/video equipment.
3. Get software ready: Be sure to look for a video conferencing service that allows you to schedule sessions, send meeting links, and share your screen. Zoom, Google Hangout, and Skype are some of the top-rated free services you may want to consider.
Google Docs is a powerful tool for sharing documents, editing, and making comments. Google Classroom is an all-in-one teaching and learning platform that provides a central hub for resources, assignments, and grading.
You also may want to consider purchasing virtual whiteboard software to illustrate and share concepts with your students.
4. Join an online tutoring website: Starting your online tutoring business by creating an independent website can take significant time and effort. Instead, consider joining an existing tutoring platform. Often, it’s as simple as filling in your basic credentials, a bio, and tutoring preferences. Tutoring services such as Chegg, Preply, and Skooli will connect you to students and provide high-tech booking, scheduling, and payment options.
It’s never easy to start a business, but tutoring is one of the least complicated.
Here are some essential steps to launch your tutoring venture:
1. Choose your business structure: Some tutors who are just starting out might not consider their side hustle a legit business. But Uncle Sam and your state may beg to differ.
So to properly comply with both, start by choosing a business structure. This critical decision will likely determine your tax rate among other implications.
For most tutors, a sole proprietorship is the most common business structure. But don’t panic — a sole proprietorship is easy to form. Once you begin conducting business and don’t pick another entity type , the IRS automatically considers your business a sole proprietorship.
There may come a time when you’ll want to consider a more complex business structure such as an LLC (Limited Liability Company). For more information on the differences between an LLC and sole proprietorship, go here.
2. Pick a name: First impressions matter; this is your chance to define your brand and distinguish yourself from competitors. When you start a sole proprietorship, your legal name is, by default, your business name. But you have the option to create a separate business name, referred to as Doing Business As (DBA).
Check out the U.S. Patent and Trademark Office website to ensure your business name isn’t already taken. And sites like GoDaddy can tell you if your chosen website domain name is available.
3. Register your name: No further action is required if you opt to use your full legal name for your business. However, if you plan to use another name, you may need to register a DBA. Check with your secretary of state or county clerk’s office to ensure you’re completing the process correctly. Requirements to file vary from state to state.
4. Separate your business and personal finances: Even if you’re a sole proprietor, maintaining this divide will help you track and simplify your finances. And you will thank yourself when income tax season rolls around!
5. Create a business plan: All startups — large or small — need a road map. Sounds intimidating, right? Don’t panic, we’ve got you! Check out this helpful step-by-step guide that includes a free business plan template.
6. Report your income: As a self-employed individual, you must file an income tax return if your annual net earnings are $400 or more. Don’t stress, though! Starting a tutoring business means you can now deduct business expenses from your taxable income!
Good news! Tutors don’t need any specific qualifications or degrees to start a business. While not required, a college diploma or advanced degree may give you a leg up. The career-planning site Zippia estimates that more than 60% of tutors hold bachelor’s degrees, and 13% hold associate degrees.
Although you don’t need a teaching degree or license, if you tutor for a school or at a tutoring center, you may need certification from the National Tutoring Association. Certification can enhance your credibility with potential clients and employers, even if not required.
Another industry pro tip — consider getting a self background check that you can share with potential clients, especially if you plan to tutor minors. This process can build trust and provide peace of mind for parents who aren’t able to supervise your session. You can request a background check at GoodHire for $29.99 and up.
The requirements vary from state to state, but most small businesses need a combination of licenses and permits from both federal and state agencies. Sound overwhelming? We've done the research for you. Simply go here and choose the state where you operate to learn more about your licensing process.
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As a successful tutor, you know the importance of dotting every “I” and crossing every “T.” But even when you pay close attention to every detail, accidents can still happen. And one disgruntled student or parent who thinks you were negligent can sue you.
Simply Business® offers insurance for tutors that protects your business when the unexpected happens. No need to study up on tutor insurance — we’ve got you covered with the info and resources you need to make the best decision for your business.
In just minutes, you can get an insurance quote, get insured, and be on your way.
When we refer to “tutor insurance,” we mean any one or combination of multiple business insurance policies that will help cover a tutoring business. We’ll get into more detail below.
Here are three types of business insurance generally available to tutors:
Each type of policy covers different scenarios, but insurance generally offers these benefits:
First, it can protect your business from specific claims.
It can cover damages caused by your negligence.
Proof of insurance can help clients feel good about your work.
It may be required where you’re located.
You can learn more about private tutor insurance here.
Get an affordable & customized policy in just minutes. So you can get back to what matters: Your business.Start Here>
If you don’t use an office, start-up costs might range from about $2,000 to 5,000. Stick to online tutoring, and your costs could be even lower. If you plan to rent space and employ other tutors, you should have between $5,000 and $10,000 available. And a sizable online tutoring business may run you anywhere from $15,000 to $25,000 for office expenses, website development, and marketing expenses.
These costs may be in addition to any franchise costs, if you decide to go that route.
When you’re just starting out, you may want to offer a below-average hourly rate until you build your reputation. To determine the best prices for your market, research tutoring businesses in your area.
According to Glassdoor, a private tutor with one to two years of experience can earn between $14,000 and $42,000 annually. Tutors.com says the price for a one-hour tutoring session ranges from $25-$80, with an average of $52.50. But location can make a huge difference. For example, private tutor rates in New York might range between $120-$200 per hour, according to New York City Tutoring.
Whether your business will turn a profit will depend on how many regular sessions you can book, times your hourly rate, minus expenses. Let’s take a look at an example:
If you can book five one-hour sessions per week at $52.50 per hour, you’ll make $13,650 per year in revenue. Assuming insurance and marketing may run you roughly $300 per month, you’ll realize a profit of approximately $10,000, as long as you don’t have any other expenses. Any additional expenses would be deducted from your revenue.
1. Word-of-mouth referrals: The people you know can be the first ones to contact about your new business, especially fellow educators, family, and neighbors. Let your community know about the launch of your new tutoring business with a kick-off email or text. You also can ask local schools to refer clients or post a flier on their bulletin boards.
2. Join an online marketplace: Create a tutoring profile on an online marketplace such as TutorOcean, Wyzant, or Varsity Tutors. These platforms match you with clients, and you can share your profile like a website.
3. Spread the word on Social Media: Establish your online presence with a website linked to a Facebook and Instagram page. And don’t forget to post your services on hyperlocal sites like Nextdoor.
Looking for more information on marketing your brand-new tutoring business? Check out these helpful guides:
Word of Mouth Marketing: How to Grow Your Business
What are the Do’s and Don’ts of a Small Business Website?
Creating Consistent Facebook Content for Your Business Page
If you have a passion for helping others reach their educational goals, you’re in luck. The data shows that demand for private tutoring isn’t slowing down any time soon. And there’s never been a better time to start your tutoring business. So let’s get you teaching!
Born and raised in the fishing port of Gloucester, MA, I grew up listening to the sea stories of local fishermen. My first job was “chum girl” on my dad’s tuna boat, where I spent my formative years covered in fish guts. Since then, I’ve worked as a researcher, blogger, and writer for documentary films. When not at work, you can find me surfing the cold waters of the North Atlantic or searching for warmer waves around the world.
Courtney writes on a number of topics such as risk assessment, starting a small business, and financial resources.
This content is for general, informational purposes only and is not intended to provide legal, tax, accounting, or financial advice. Please obtain expert advice from industry specific professionals who may better understand your business’s needs. Read our full disclaimer
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