An education technology – or edtech – business leverages technology to improve education. Many of these companies focus on educating students, typically in areas related to science, technology, engineering, and mathematics (STEM). However, there are many different types of edtech businesses and the variety continues to increase. While some edtech businesses do things like teaching programming and engineering using robots, others use tech to do things like create real-time classroom management apps and online learning platforms that teach languages.
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Learn how to start your own Edtech Business and whether it is the right fit for you.
Start an edtech business by following these 10 steps:
- Plan your Edtech Business
- Form your Edtech Business into a Legal Entity
- Register your Edtech Business for Taxes
- Open a Business Bank Account & Credit Card
- Set up Accounting for your Edtech Business
- Get the Necessary Permits & Licenses for your Edtech Business
- Get Edtech Business Insurance
- Define your Edtech Business Brand
- Create your Edtech Business Website
- Set up your Business Phone System
There is more to starting a business than just registering it with the state. 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.
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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 much can you charge customers?
- What will you name your business?
Luckily we have done a lot of this research for you.
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.
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.
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC or corporation protects you from being held personally liable if your edtech business is sued.
Form Your LLC
Read our Guide to Form Your Own LLC
Recommended: You will need to elect a registered agent for your LLC. LLC formation packages usually include a free year of registered agent services. You can choose to hire a registered agent or act as your own.
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?.
Small Business Taxes
Depending on which business structure you choose, you might have different options for how your business will be taxed. For example, some LLCs could benefit from being taxed as an S corporation (S corp).
You can learn more about small business taxes in these guides:
- LLC Taxes
- Sole Proprietorship vs LLC
- LLC vs Corporation
- LLC vs S Corp
- How to Start an S Corp
- S Corp vs C Corp
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.
Additionally, learning how to build business credit can help you get credit cards and other financing in your business's name (instead of yours), better interest rates, higher lines of credit, and more.
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.
Recommended: Read our Best Banks for Small Business review to find the best national bank or credit union.
Open net 30 accounts
Net 30 accounts are used to establish and build business credit as well as increase business cash flow. With a net 30 account, businesses buy goods and repay the full balance within a 30-day term.
NetMany net 30 credit vendors report to the major business credit bureaus (Dun & Bradstreet, Experian Business, and Equifax Business Credit). This is how businesses build business credit so they can qualify for credit cards and other lines of credit.
Recommended: Read our best net 30 vendors, guide and start building business credit.
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.
Recommended: Apply for an easy approval business credit card from Divvy and build your business credit quickly.
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.
Learn more about General Liability Insurance.
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.
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.
If you aren't feeling confident about designing your small business logo, then check out our Design Guides for Beginners, we'll give you helpful tips and advice for creating the best unique logo for your business.
If you already have a logo, you can also add it to a QR code with our Free QR Code Generator. Choose from 13 QR code types to create a code for your business cards and publications, or to help spread awareness for your new website.
How to promote & market an edtech business
One effective way to promote and market an edtech business is through market research. You already need to get close to your target market to ensure that you are meeting their needs. In the process of your research, you can develop relationships with people and organizations that will help sell your product or service once it is available.
For example, if you are creating a history education app, you might reach out on social media to various history education groups. As you work with those groups to refine your offering, they will become invested in your success. Once you are ready to go live, those groups will often be the first users – and advocates – of your product.
How to keep customers coming back
Be willing to adapt to whatever situation you find your business in. It is common for edtech companies to release products and services that get mixed reviews from their target markets. You can’t think of everything before you launch. Only once your product is used by thousands of customers will you recognize some of the major flaws. If multiple users are complaining of an issue, try to avoid getting defensive. Instead, be responsive and make changes as necessary. Adaptability to your target market will show them you care and are serious about meeting their needs.
Still unsure about what kind of business you want to start? Check out the latest Small Business Trends to help inspire you.
STEP 9: Create your business website
After defining your brand and creating your logo the next step is to create a website for your business.
While creating a website is an essential step, some may fear that it’s out of their reach because they don’t have any website-building experience. While this may have been a reasonable fear back in 2015, web technology has seen huge advancements in the past few years that makes the lives of small business owners much simpler.
Here are the main reasons why you shouldn’t delay building your website:
- All legitimate businesses have websites - full stop. The size or industry of your business does not matter when it comes to getting your business online.
- Social media accounts like Facebook pages or LinkedIn business profiles are not a replacement for a business website that you own.
- Website builder tools like the GoDaddy Website Builder have made creating a basic website extremely simple. You don’t need to hire a web developer or designer to create a website that you can be proud of.
Using our website building guides, the process will be simple and painless and shouldn’t take you any longer than 2-3 hours to complete.
STEP 10: Set up your business phone system
Getting a phone set up for your business is one of the best ways to help keep your personal life and business life separate and private. That’s not the only benefit; it also helps you make your business more automated, gives your business legitimacy, and makes it easier for potential customers to find and contact you.
There are many services available to entrepreneurs who want to set up a business phone system. We’ve reviewed the top companies and rated them based on price, features, and ease of use. Check out our review of the Best Business Phone Systems 2023 to find the best phone service for your small business.
Recommended Business Phone Service: Phone.com
Phone.com is our top choice for small business phone numbers because of all the features it offers for small businesses and it's fair pricing.
Start a Edtech Business in your State
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- South Carolina
- South Dakota
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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.
Want to know if you are cut out to be an entrepreneur?
Take our Entrepreneurship Quiz to find out!
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.
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.
Learn from other business owners
Want to learn more about starting a business from entrepreneurs themselves? Visit Startup Savant’s startup founder series to gain entrepreneurial insights, lessons, and advice from founders themselves.
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.
What are some insider tips for jump starting an edtech business?
Don’t assume you know there is a need for the product and/or service you are planning to provide. It’s easy in the excitement of a new idea and with the right support to assume your target market will be ecstatic to buy your product. Then, after you have spent all that time and money, you may discover that your offering is not as compelling as you thought it was.
Market research is vital in edtech. Talk to your potential customers. Find out if they have a need that your product will meet. It’s better to find out now, before you dig in, that you need to change directions.
How and when to build a team
If you want your edtech business to grow, you need the help of others. Realistically, if you plan to do anything ambitious – like producing programmable robots – you need to build a team sooner rather than later. Even if you are just designing an app and have all the right skills, you will quickly need to build a team for marketing, customer service, investment, and more.
Edtech entrepreneurs are typically aiming for large markets. If that’s you, start adding to your team as soon as possible. Recruit experts, educators, advocates, and support staff to give your product legitimacy and ensure it meets the needs of your target market.