Start a home tutoring business 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 guide to starting your home tutoring business. 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 home tutoring business?
Arguably, the most attractive thing about a home tutoring business is that there is very little cost to open it. This because there is no need to buy or rent a dedicated office space for the business: all of the tutoring takes place in either your home or theirs. Accordingly, there is none of the overhead and utilities costs associated with the office space of a typical business. For marketing and research purposes, you will need a computer and internet connection, but you likely have those at your home. Similarly, if you are driving to students' homes, you will need to pay for fuel. You may pay for more traditional marketing, possibly spending thousands of dollars on a professionally-designed website, traditional advertising, and a bevy of brochures and business cards. However, it's important to note that much of the marketing for this business—advertising via social media, outlets such as Craigslists, and via in-person networking at schools and other locations—can be done with no investment except for your time.
What are the ongoing expenses for a home tutoring business?
The ongoing expenses for a home tutoring business are truly minimal. You must pay for fuel to travel to area homes and schools, and you should always have professional business cards that you can hand to area schools, administrators, and counselors, which is part of an ongoing advertising expense that may also include local commercials. Beyond these expenses, however, there is little to pay for.
Who is the target market?
The best customers for a home tutoring business are regular ones. Because you are charging an hourly fee (and should not really be charging any other kinds of fees on top of that), some of your best customers will be those whose parents are trying to help them succeed with a subject in school. If they reach out to you early enough, you may be tutoring them for a semester or two—anywhere between 16 and 32 weeks. Aside from that, some of your best customers will be college students and adult learners, as these are the groups who realize that sessions with you are an investment to either save or make them more money, respectively.
How does a home tutoring business make money?
The business model for a home tutoring business is very straightforward: you typically charge clients a fixed hourly fee. This fee should accurately represent both your education and experience in the chosen subject and should also account for the average price of your competition in the area.
How much can you charge customers?
The price to charge for tutoring should be commensurate to the complexity of a subject and how experienced you are. As with any business, you should also be mindful of how much the competition is charging. Typically, you should charge students between $30 to $40 per hour for standard tutoring. If you are teaching them something much more complex, or if you are the only tutor for this subject in an area, you may consider charging more than this, especially after you have established your reputation within the community. However, you should be wary of pricing yourself out of business: students see this cost as additional to what they are already possibly paying (especially college students who have paid for expensive textbooks and even more expensive classes).
How much profit can a home tutoring business make?
The profit for a home tutoring business is entirely dependent on your hourly rate and the number of students you have at any given time. For instance, if you stay relatively busy, tutoring for 30 hours a week and charging a minimum of $30 per hour, the annual wages would be $46,800 gross income. That jumps to $62,400 gross income, though, if you charge $40 per hour. Obviously, that amount can go higher with more hours and/or a higher hourly charge, but it is important to be mindful of the season: summer typically has much fewer students than other seasons because your primary clients—students--are mostly out of school. When budgeting profits for the year, it is important to remember that.
How can you make your business more profitable?
At the risk of sounding redundant, the primary path to a more profitable home tutoring business is more students, and the primary path to more students is more advertising. In addition to the previously-mentioned advertising via print, television, social media, and networking with local schools and community centers, you might consider offering free workshops or seminars at local schools and colleges. This helps you both advertise your services and demonstrate your value to potential customers, and it may eventually blossom into a nice “sideline” job for you to begin charging for later, more in-depth workshops and seminars. You may also consider guest publishing on educational blogs or blogs related to your field—this helps you become more of an established name when someone is looking for more specialized instruction. Finally, don't underestimate the importance of featuring customer reviews on your website and social media page. Your students will tend to be millennials or younger, and they like the ability to research the experiences of others before they commit to paying for your services.
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.
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 home tutoring business is sued. There are many business structures to choose from including: Corporations, LLC's, and DBA's.
Form Your LLC
Read our Guide to Form Your Own LLC
Check out the Top Business Formation Services from our friends at StartupSavant.
You should also consider using a registered agent service to help protect your privacy and stay compliant.
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: Find the right bank for you, read our review of the Top 5 Banks for Your Small Business
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
Although there are typically no state or federal licensing requirements that apply to home tutoring businesses, certain local licensing or regulatory requirements may apply. For more information:
- Check with your town, city or county clerk’s office for information about local permits and licenses
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources.
A home tutoring business is generally run out of a residential building. 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 home tutoring business.
- 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.
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.
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.
How to promote & market a home tutoring business
As mentioned above, a home tutoring business can be advertised via more traditional means, such as a professional website, advertisements in local newspapers and on television, etc. However, the actual students that you will tutor tend to favor online browsing and interaction, and you are likely to make just as much of an impact by creating a social media presence online and allowing word of mouth to help you advertise. That word of mouth is especially important in schools: establishing a positive relationship with local teachers, administrators, and guidance counselors means that you will get direct referrals from those who are best in a position to recommend that struggling students seek out additional help.
How to keep customers coming back
Attracting initial customers is mostly a matter of the aforementioned marketing techniques. Your home tutoring business is providing potential solutions to problems that students already know they have (which is what has drawn them to seek out a tutor in the first place). To retain customers, you must demonstrate that you definitively offer the value they are hoping for. If possible, you can coordinate with students' teachers and professors to make sure you understand their assignments as fully (and possibly more so) than they do.
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 Home Tutoring Business 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?
This business is ideal for current and former teachers, which is why many teachers begin their home tutoring business as a part-time job. You must be a people person, as most of the business regards direct, one-on-one interaction with others. It helps to be good with children of all ages, as they comprise the vast majority of your customers. Finally, it helps to be organized and self-motivated: conducting home tutoring as a full-scale business means managing many contacts, reaching out to local schools, and making sure you have enough time during each session for your various clients.
What happens during a typical day at a home tutoring business?
The primary day-to-day activities of a home tutoring business involve conducting previously-scheduled tutoring sessions. In-between sessions, you will spend time reviewing client emails, brushing up on student progress between sessions, and corresponding with potential clients. You should also spend time seeking out online learning tools that you can show to your clients as a supplement to what they are learning from you and what they may be learning at school. Finally, time between sessions can be a great time to work on advertising for your business.
What are some skills and experiences that will help you build a successful home tutoring business?
Some of the best skills to help you build a home tutoring business come from having visible degrees or credentials in your subject area. While it is obviously possible to know much about a subject from private study, it helps to advertise yourself as having formally studied a subject for years before starting your business. Others skills include networking and knowing the local area: having previous relationships with professionals in schools, libraries, and even venues such as gyms and coffee shops can help you in advertising in those areas. Finally, skills in basic business management are helpful: you must be able to keep detailed records, maintain a set schedule, and be comfortable in accepting different payment methods and following up on bills to students.
What is the growth potential for a home tutoring business?
To some degree, the size of a home tutoring business is limited by its nature. That is, people are willing to pay a premium for a one-on-one teaching experience, so most home tutoring businesses eventually reach a limit: specifically, that the tutor no longer has enough hours in the day or the week to take on more customers. It IS possible for a successful tutor to eventually create a tutoring center with multiple tutors as employees, but that requires large amounts of additional time, funds, and licenses, and many home tutors enjoy their business specifically because it has a low overhead and they maintain schedule flexibility and business autonomy.
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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
Building a team for a home tutoring business is notoriously tricky. As mentioned previously, some of the most attractive features of this business include the low overhead and complete autonomy. If, however, you wish to expand your business and no longer have the time to service all of the potential customers in your area, it may be time to expand. Alternatively, if you wish to partner with someone in a different area, then you can collectively serve more people than any one person in one area can. It is possible to build a small team—say, a group of friends and/or colleagues—and still retain the benefits of low overhead if everyone is willing to retain the model of either inviting students to their own homes or, more likely, traveling to the homes of students. As long as you are willing to coordinate and network with your team from your own home, and to still process bills from students and payments to employees, there is no need to lease or purchase a completely different office space.