How to Start an Edtech Business

Start an edtech business by following these 10 steps:

1. Plan your Edtech Business
2. Form your Edtech Business into a Legal Entity
3. Register your Edtech Business for Taxes
4. Open a Business Bank Account & Credit Card
5. Set up Accounting for your Edtech Business
6. Get the Necessary Permits & Licenses for your Edtech Business
7. Get Edtech Business Insurance
8. Define your Edtech Business Brand
9. Create your Edtech Business Website
10. Set up your Business Phone System

We have put together this simple guide to starting your edtech business. These steps will ensure that your new business is well planned out, registered properly and legally compliant.

Exploring your options? Check out other small business ideas.

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 will you name your business?
• What are the startup and ongoing costs?
• Who is your target market?
• How much can you charge customers?

Luckily we have done a lot of this research for you.

What will you name your business?

Choosing the right name is very important. Read our detailed guide on how to name your business. 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.

What are the costs involved in opening an edtech business?

The costs to start an edtech business can range from $0 to millions of dollars. It all depends on your goals and your existing resources. For example, you could start an education app business with your laptop and an internet connection. If you have education credentials, even better. In contrast, starting a robot programming company may require millions of dollars in capital. That’s because you have to produce the robots, which requires research, development, prototyping, and more.

What are the ongoing expenses for an edtech business?

The ongoing expenses for an edtech business will vary depending on the type of business. Common expenses include labor, certifications, licensing, insurance, and for hard goods manufacturers the various costs related to producing those goods.

One type of ongoing expense that edtech companies have that other businesses often don’t is pedagogy research and support. Teaching methods can change periodically and education organizations often require regular certification for product endorsements. For instance, if you are selling a product to state schools, you will need to keep it up to date with the state’s education requirements.

Who is the target market?

EdTech can be helpful to so many different people and organizations – that’s part of what makes it so exciting. It’s not just traditional students and teachers that can benefit from learning technologies. Anyone who wants or needs to learn something, or to teach something, can possibly benefit from the improvements tech offers. All this is to say that your target market could be anyone, so be careful to define it as thoroughly as you can.

How does an edtech business make money?

Edtech businesses offer products and/or services to customers to make money. While some charge a flat fee for a product, most go with the subscription billing model. For example, a school can pay a monthly or yearly fee to use a robot programming platform. In exchange for the subscription fee, the school gets the robots it needs, access to the programming platform, and ongoing support from the edtech business.

How much can you charge customers?

An edtech business can charge a little or a lot, depending on what it’s offering and the target audience. An app for studying languages aimed at K-12 might charge a modest monthly fee to use each app without ads. A programmable robots company that serves school districts might charge tens of thousands of dollars per school or even per grade for its robots and accompanying software.

How much profit can an edtech business make?

An edtech business can be extremely profitable. The global investment in edtech companies is already in the tens of billions and is likely to increase with each passing year. Whatever direction you take your company, whether more informal to reach a global audience or more formal to focus on educational institutions, you have the potential to earn a significant profit if you are successful.

How can you make your business more profitable?

A key strategy for increasing the profitability of an edtech company is to gain endorsements from relevant educational organizations. If your app becomes the favorite engineering-related app for major engineering schools, you are going to grow quickly and your profits will grow as well. That is why it’s so important to include educators and experts in your product development. Find out what their needs are, meet those needs, and make it easy for them to love your product.

STEP 2: Form a legal entity

The most common business structure types are the sole proprietorship, partnership, limited liability company (LLC), and corporation.

Establishing a legal business entity such as an LLC or corporation protects you from being held personally liable if your edtech business is sued.

You can form an LLC yourself and pay only the minimal state LLC costs or hire one of the Best LLC Services for a small, additional fee.

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!

There are specific state taxes that might apply to your business. Learn more about state sales tax and franchise taxes in our state sales tax guides.

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

Besides being a requirement when applying for business loans, opening a business bank account:

• Separates your personal assets from your company's assets, which is necessary for personal asset protection.
• Makes accounting and tax filing easier.

Get a business credit card

Getting a business credit card helps you:

• Separate personal and business expenses by putting your business' expenses all in one place.
• Build your company's credit history, which can be useful to raise money 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.

Make LLC accounting easy with our LLC Expenses Cheat Sheet.

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.

STEP 7: Get business insurance

Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully. Business Insurance protects your company’s financial wellbeing in the event of a covered loss.

There are several types of insurance policies created for different types of businesses with different risks. If you’re unsure of the types of risks that your business may face, begin with General Liability Insurance. This is the most common coverage that small businesses need, so it’s a great place to start for your business.

Another notable insurance policy that many businesses need is Workers’ Compensation Insurance. If your business will have employees, it’s a good chance that your state will require you to carry Workers' Compensation Coverage.

Is this Business Right For You?

This business is right for entrepreneurs who have a passion for technology and education. It can be challenging to find the right angle for an edtech business, so you need to have the drive to keep experimenting until you get it right. But if you love the idea of making a big impact in an innovative way, all the hard work will be worth it.

What happens during a typical day at an edtech business?

There are so many different types of edtech businesses – a typical day can vary considerably depending on the business. However, there are some common tasks that most must take care of. These businesses need to find and maintain funding to get rolling, so a lot of time is spent on courting investors and selling the overall idea of the business. They also need to ensure that their products and services are fully addressing the needs of their target market, which means they focus on research and development. That might include consulting teachers, for example.

One ongoing task of edtech businesses is customer support. Customers need instruction on how to use edtech products and often need continued support – like troubleshooting services – to use the products and/or services in real-world settings.

What are some skills and experiences that will help you build a successful edtech business?

Some edtech entrepreneurs come from tech backgrounds, while others come from educational backgrounds. There are even edtech entrepreneurs with other backgrounds, such as accounting or banking, that partner with tech and education professionals to start a company. It’s helpful to have experience with the problem you are solving so you understand clearly what solutions are needed. For instance, you might have learned programming in college and found it difficult at first – then realized that your experience would have been easier had you learned more about programming at an earlier age. Your kid-friendly programming education product would help solve that problem for others.  

What is the growth potential for an edtech business?

As computers become more and more ubiquitous it is important to understand how they work and what is possible through technology. As far as a learning tool, new businesses start up everyday, and according to a 2020 study the E-Learning market size surpassed $250 billion in 2020 and is expected to grow over 21% between 2021 and 2027. The pace of technology means that there are almost always opportunities to get in on the ground floor of a new innovative business.

Not sure if an edtech business is right for you? Try our free Business Idea Generator and find your perfect idea.