Start a driving school by following these 9 steps:
You have found the perfect business idea, and now you are ready to take the next step. There is more to starting a business than just registering it with the state. We have put together this simple step guide to starting your driving school. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
STEP 1: Plan your Business
A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:
- What are the startup and ongoing costs?
- Who is your target market?
- How long it will take you to break even?
- What will you name your business?
Luckily we have done a lot of this research for you.
What are the costs involved in opening a driving school?
For an online only business, the cost is getting the state certification, the website design, website registration, hosting, and marketing a website. Good quality websites are around $1,000. Registration is about $12 per year. Hosting can be free or about $10 per month. Marketing is open-ended and will be based on response rates. A minimum is $100 to $200 per month. There is no maximum. If you spend $100,000 and earn $105,000 you will be very happy.
The classroom part of this business requires hiring teachers and renting a classroom. Teachers who are certified get about $30 per hour. Classroom space for up to 30 people rents for about $50 per day. If on-road training is part of your business model, you will need special vehicles that are equipped with dual controls. This is so your instructors can override the control of the vehicle if the student is making a mistake. If a new vehicle costs around $50,000, expect the dual control modification to cost about $20,000. You will need signage for the vehicle as well so for this allow $5,000 per vehicle. This is both a warning to other drivers that the vehicle is being operated by a student learner and also an advertisement for your company. You will need very good insurance coverage that is extremely expensive. Allow about $5,000 per month for each vehicle that is used for training.
What are the ongoing expenses for a driving school?
For the web-based efforts, the costs are web hosting of about $10 to $100 per month and web marketing from $100 to $5,000 per month depending on the success of getting sufficient customers to pay for the marketing expenses and make a profit.
For in-class teaching, the cost is the instructor(s) for about $30 per hour and the rental of the classroom (about $50 per day).
For on-road teaching, the cost is the lease of the vehicle (about $1,000 per month) and the insurance for the vehicle (about $5,000 per month).
Who is the target market?
Young persons or adults who are first learning to drive, those who have to attend a course because of getting a traffic ticket, and those who voluntarily want to attend a course to lower their vehicle insurance rates are preferred customers.
How does a driving school make money?
Typically, these businesses charge a fixed price for a full course of instruction.
How much can you charge customers?
Online driving schools in very competitive areas like California charge only $9.95 per student. In-class instruction for a six-week/six-session course averages about $99 to $150 per student. On-the-road instruction is typically a two-week (or fourteen days of teaching) course and costs $50 to $100 per day.
How much profit can a driving school make?
Online driving schools are only limited by their online marketing success. The best ones can make thousands in revenue per year; however, the competition is very severe for new entrants in this business. Successful in-class schools and on-road instruction programs make around $5,000 or more in profit per month.
How can you make your business more profitable?
Profits come from making many affiliations. Contracting with local high schools to give their students driver’s education and pay the school a commission is a good way to create new business. Offering programs that are co-promoted with insurance companies that share revenues with the insurance companies is also a good idea.
Making your traffic school stand out by being sure it meets the legal requirements and at the same time has a unique offering, such as a Comedy Traffic School in California is a wonderful way to make your business distinct.
What will you name your business?
Choosing the right name is very important. We recommend checking if the business name you choose is available as a web domain and securing it early so no one else can take it.
After registering a domain name, consider setting up a professional email account (@yourcompany.com). Google's G Suite offers a business email service that comes with other useful tools, including word processing, spreadsheets, and more. Try it for free
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC prevents you from being personally liable if your driving school is sued. There are many business structures to choose from including: Corporations, LLC's, and DBA's.
You should also consider using a registered agent service to help protect your privacy and stay compliant.
For most small businesses forming an LLC is a great option, and it's easy enough to form by yourself, or check out the top business formation services.
STEP 3: Register for taxes
You will need to register for a variety of state and federal taxes before you can open for business.
In order to register for taxes you will need to apply for an EIN. It's really easy and free!
You can acquire your EIN for free through the IRS website, via fax, or by mail. If you would like to learn more about EINs and how they can benefit your LLC, read our article, What is an EIN?.
STEP 4: Open a business bank account & credit card
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.
Open a business bank account
- This separates your personal assets from your company's assets, which is necessary for personal asset protection.
- It also makes accounting and tax filing easier.
Recommended: You can get $200 when you open a Chase business checking account with qualifying activities. Learn more.
Get a business credit card
- This helps you separate personal and business expenses by putting your business' expenses all in one place.
- It also builds your company's credit history, which can be useful to raise money and investment later on.
STEP 5: Set up business accounting
Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
STEP 6: Obtain necessary permits and licenses
Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
State & Local Business Licensing Requirements
In most states, it is necessary to obtain a driving instructor’s license. Find out more about this requirement at your local department of motor vehicles (or equivalent). Certain state permits and licenses may be needed to operate a driving school. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.
In addition, certain local licensing or regulatory requirements may apply. For more information about local licenses and permits:
- Check with your town, city or county clerk’s office
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources.
Release of Liability
Liability waivers are essential since consumers will be in high risk environments, operating potentially dangerous machinery. For this reason, it is best to require clients to sign a liability waiver. Here is an example of one such form.
Recommended: Rocket Lawyer makes it easy to create a professional release of liability form for your driving school when you sign up for their premium membership. For $39.95 per month, members receive access to hundreds of legal agreements and on call attorneys to get complimentary legal advice.
Services Contract (e.g. MSA)
Driving schools should require clients to sign a services agreement before starting a new project. This agreement should clarify client expectations and minimize risk of legal disputes by setting out payment terms and conditions, and service level expectations.
Certificate of Occupancy
A driving school is generally run out of a physical location, such as a classroom. Businesses operating out of a physical location typically require a Certificate of Occupancy (CO). A CO confirms that all building codes, zoning laws and government regulations have been met.
If you plan to lease a location:
- It is generally the landlord’s responsibility to obtain a CO.
- Before leasing, confirm that your landlord has or can obtain a valid CO that is applicable to a driving school.
- After a major renovation, a new CO often needs to be issued. If your place of business will be renovated before opening, it is recommended to include language in your lease agreement stating that lease payments will not commence until a valid CO is issued.
If you plan to purchase or build a location:
- You will be responsible for obtaining a valid CO from a local government authority.
- Review all building codes and zoning requirements for your business’ location to ensure your business will be in compliance and able to obtain a CO.
STEP 7: Get Business Insurance
Insurance is highly recommended for all business owners. If you hire employees, workers compensation insurance may be a legal requirement in your state.
STEP 8: Define your brand
Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
How to promote & market a driving school
The best way to promote you business is through affiliations. Examples of affiliations include:
- Offering discount programs to students from local high schools.
- Having special programs that are connected to specific auto insurance companies.
- Getting on the list of qualified driving schools for traffic courts in the local area.
- Creating cross-promotional campaigns with auto dealers and rental car companies.
- Having vehicles specially equipped for handicapped drivers and getting publicity because of this.
How to keep customers coming back
Attracting customers is important, retaining them is less important. The customers usually pay a non-refundable fee for the entire course when they sign up. Although repeat customers are possible, these are very rare. The best way to attract customers is by affiliation programs as described above. Marketing is possible as well. For Internet-based classes only, online marketing is critical.
We know of one company that had workers stationed outside of traffic courts who handed out flyers for their driving school to those leaving the courts. In states where attending a traffic school gets a ticket dismissed this is a very effective way to advertise the business.
For those driving schools that offer on-the-road training, it is important that the school is advertised on the vehicles used for training. In addition to this, it is possible to use advertisements on taxis or other modes of public transportation for the same purpose of attracting new customers.
STEP 9: Establish your Web Presence
A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.
Start A Driving School In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
Is this Business Right For You?
An online driving school (also called a “traffic school”) can be started by anyone who has an affinity for creating web-based services, who is also willing to go to the trouble to be legally certified by a state authority. Schools that offer in-class instruction needs certified teachers who are skilled in public speaking. If getting up in front of a crowd of strangers to explain things does not intimidate you, you would be very good at this. Most driving schools also offer on-the-road training, which requires instructors to be both patient and firm with students, so as to help them learn how to drive while avoid making dangerous mistakes.
What happens during a typical day at a driving school?
For an online driving school, you will concentrate on Internet marketing and be sure your website is operational. For a driving school that offers in-classroom sessions, you will make sure the facilities are clean and that the instructor(s) show up on time. For the on-road instruction business, you will check the maintenance records of the vehicles and any accident damage that needs to be repaired. You will be very diligent about making sure the insurance coverage for those training vehicles is up-to-date. In all cases, you will monitor the marketing campaigns for effectiveness.
What are some skills and experiences that will help you build a successful driving school?
It goes without saying that a driving instructor will need to be an excellent driver. There are courses you could take to improve your driving skills before teaching others.
It is also crucial to be aware of the current laws and regulations regarding driving, so that you are not giving your students outdated information.
What is the growth potential for a driving school?
The growth potential is almost unlimited, yet there is significant competition. Every city in America needs a driving school and most have more than one. It is possible to start in a single location and expand nationwide.
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Take the Next Step
Find a business mentor
One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
Resources to Help Women in Business
There are many resources out there specifically for women entrepreneurs. We’ve gathered necessary and useful information to help you succeed both professionally and personally:
If you’re a woman looking for some guidance in entrepreneurship, check out this great new series Women in Business created by the women of our partner Startup Savant.
How and when to build a team
The demand for classes and the demand for on-road training is the support for when to add more instructors. It is possible to start this business as an owner/operator and then as the demand for instruction and classes increases you can add other instructors. At first, they do not have to be full-time and only be part-time workers that are scheduled when there are students who paid for the services.