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How to Start a Tutoring Business

Sally Lauckner

Editor-in-Chief at Fundera
Sally Lauckner is the editor-in-chief of the Fundera Ledger. Over the past decade she has held various editorial roles at SmartAsset—a Y Combinator-backed personal finance startup—the Huffington Post, AOL.com, and Glamour magazine. Her work has also appeared in Marie Claire, Teen Vogue, and Cosmopolitan. Sally has a master's degree in journalism from New York University and a bachelor's degree in English from Columbia University.  Email: sally@fundera.com.
Editorial Note: Fundera exists to help you make better business decisions. That’s why we make sure our editorial integrity isn’t influenced by our own business. The opinions, analyses, reviews, or recommendations in this article are those of our editorial team alone.

Tutoring can be a lucrative side business that you can grow into full-time income. There are also several advantages to starting your own tutoring business, like a flexible work schedule and low upfront costs.

However, many people think you need to be a genius if you want to start tutoring. That’s actually a common misconception. You don’t need to be smart at everything—that’s not how starting a tutoring business works. You just need to be well-versed in the subject you’re teaching and understand the needs of your target market.

If you want to apply your knowledge to helping students achieve their academic goals, consider channeling that passion into learning how to build a business. Here are eight steps you can use if you’re wondering how to start a tutoring business.

8 Steps to Starting a Tutoring Business

Step 1: Identify Your Client

As with any business, you should start out by deciding who and what you want to tutor. Deciding who you want to sell your services to influences your entire business plan. Here are some questions you should be asking about your ideal target client:

  • Which grades do you want to tutor for?: The subject matter and teaching style for a high school sophomore will be different from a college freshman.
  • Do you want to tutor for a specific test?: Many tutors specialize in a lucrative niche, like the SATs or the LSAT for law school.
  • Do you prefer group tutoring or one-on-one?: Depending on your preference, you might want to tutor in mini-classes or work with more one-on-one sessions.
  • Do you want to tutor locally or online?: Decide whether you prefer working only with local clients or if you’re comfortable tutoring online, often via video chat.

how to start a tutoring business

Step 2: Build Your Subject Matter Knowledge

To teach somebody something, you must first gain proficiency in that subject. Your expertise will be your money-maker when starting your tutoring business. After deciding who your ideal client is, your next step in this “how to start a tutoring business” checklist is to build your knowledge in a given subject.

Find a Niche to Teach 

A great strategy to building a successful tutoring business is to focus on one niche. There are several broad subjects your tutoring business can tackle, but you can also choose one or two to specialize in. 

Starting a tutoring business focused on STEM subjects like science, technology, engineering, and math is great because they are in-demand skills. Within those subjects, you can narrow your niche even further by focusing on trigonometry or how to write a college-level research paper.

Something else to consider is to find a niche in a standardized test, like the SAT (for college admission) or LSAT (for law school). This can be a highly profitable route—an SAT prep course from The Princeton Review can cost up to $899. There are always students who struggle with these high-stress exams, and parents are willing to spend lots of money to help their children succeed.

Assess Your Strengths and Weaknesses

When you’re starting a tutoring business, you’ll want to know what you have to work on within the subject matter you’re teaching. A great way to do this is to take a practice test in your chosen field. If you decide that tutoring for the LSAT is what you want to niche in, you’ll want to take several practice tests. Evaluate your performance and identify the gaps in your knowledge.

Put Yourself on a Study Schedule

After learning your weaknesses, it’s time to plug the holes in your knowledge. Take note of how you can compensate for your weaknesses. What study tactics are you using? How do you stay productive? This information will come in handy when you’re coaching students through their own practice sessions.

Stay Current With the Syllabus

As a tutor, you’ll need to be familiar with the required texts and materials in current education standards. During the off-season, like summers or winters, dedicate time to learning what teachers are assigning during the school year to ensure that you’re prepared when student vacations are over. 

For example, if you’re an English tutor for high school students, you’ll want to review the assigned readings throughout the year. You can spend your summers re-reading those texts and refreshing your notes.

Learn How to Teach

When it comes to how to start a tutoring business, It isn’t enough to just have knowledge. Teaching is another skill you need to build if you want a successful tutoring business. Learning how to communicate complex concepts while you adapt to student learning styles is how you can build a profitable tutoring business with satisfied clients.

Brush up on your communication skills by reading books and watching videos on the subject. Also, remember to practice, practice, practice. Try tutoring a family member or friend to evaluate how effective your teaching methods are—and be sure to get their feedback about your tutoring skills.

Consider Getting Certified

While the United States does not require any certifications to become a private tutor, it still may be something you want to consider. Getting certified, especially with the National Tutoring Association, can boost the reputability of your services. Being a member of this organization shows that you know the material and are held to a nationally-recognized standard. There are also additional tutoring certifications that may be useful for you to obtain.

Step 3: Choose a Business Structure and Name

If you’re wondering how to start a tutoring business, you’re probably operating as a sole proprietor, especially if tutoring is your side hustle. However, there may come a time when you want to look in to selecting another business structure, like an LLC.

Sole Proprietorship vs. Limited Liability Company (LLC)

Sole proprietorships cost nothing to start and don’t require any state registration. However, this business structure doesn’t offer any protection against personal liability.

When your tutoring business grows to potentially replace your full-time income, it may be time form an LLC. LLCs enjoy additional benefits like reduced liability and the choice to be taxed as either a sole proprietor or corporation. Also, attaching “LLC” to your business name can boost your professional appearance. This can potentially attract high-paying clients.

Choosing a Business Name

Make sure you choose a business name that is both unique and available in your state. A good way to check availability is by doing a quick secretary of state business search

If you’re operating your tutoring business as a sole proprietorship and choose a business name other than your legal name, you’ll need to file a DBA (“doing business as” name) when registering your business. Make sure you research your state’s DBA requirements to ensure you’re completing the process properly.

When registering for an LLC, you will usually be required to include the term “limited liability company,” “LLC,” or “L.L.C.” in your business name.

Buy a Tutoring Franchise

If you prefer to operate within an existing business model, you can consider buying a tutoring franchise. Tutor franchises, like Kumon and Sylvan Learning, already have existing structures you can jump into. However, buying a franchise does have its disadvantages—including startup fees and a lack of freedom—so it’s important to do your research.

Step 4: Separate Your Business and Personal Finances

It’s always a practical idea to separate your business and personal finances, especially if you’ve formed an LLC. When you mix your personal and business finances, you “pierce the corporate veil” which can risk your legal protections. But even if you’re simply operating a sole proprietorship, keeping this divide makes bookkeeping easier, which ultimately makes your job during tax season that much smoother.

If you’re wondering what this means exactly when it comes to how to start a tutoring business, the primary thing is opening a business checking account. You can collect cash or invoice payments and deposit it in this account. Try to only use funds from your business account to pay for business expenses, so all your transactions will be limited to one account and one set of statements.

Also, consider applying for a dedicated business credit card. Many people don’t realize that you have a business credit score separate from your personal credit score. Building your business credit history boosts your financial health and can grow your business down the line, while helping you gain access to reliable funding from banks and other lenders.

how to start a tutoring business

Step 5: Create a Business Budget

After you decide what tutoring services you will offer, it’s time to calculate your starting and operating costs. 

Learning how to create a business budget can be intimidating, especially if you’ve never done it before. However, it’s necessary for any small business and will prepare you for success. To avoid costly errors and maximize your profit, create a budget to help you responsibly manage your finances. Business expenses you want to factor into your budget include:

  • Writing materials (pens, highlighters, index cards)
  • Books and other learning materials
  • Printer and ink
  • Transportation (if you’re traveling to clients)
  • Website upkeep
  • Marketing materials (business cards, online ads)
  • Rent (if you’re renting a space)
  • Invoice and bookkeeping software

Seek Funding If You Need It

Fortunately, starting a tutoring business has low startup costs. The costs are even lower if you decide to tutor at your home, your client’s home, or a public space, like a library. Often, a business credit card might be all you need for your various expenses.

However, if you intend to find a location to rent and employ additional tutors, your startup costs can significantly increase. You may want to consider applying for a business loan or opening a business line of credit to cover your increases expenses. Typically, if this is your first business venture and you haven’t built up much business credit, a traditional bank may be hesitant to offer you funding. However, there are alternative lenders who might look at other factors, such as the financial health of your business and your personal score, to make determinations about lending money.

Alternatively, you could try bootstrapping your business and securing loans from friends, families, and supporters, or you could try crowdfunding sites to raise any capital you might need to get your tutoring business to the next level..

Step 6: Determine Your Pricing

If you’re starting a tutoring business, you’ll want to make sure you set competitive rates that cover your costs while appealing to clients. According to Glassdoor, a private tutor with one to two years of experience can expect to earn $14,000 to $42,000 per year, depending on your rates and how much you work. Here are a few ways you can determine a fair pricing point for your tutoring business:

1. Research the Competition

Are there other tutoring services in your area? Even if they’re not specializing in the same niche as you, what hourly rates are they charging their clients?

This can provide you a baseline for how to price your service. You can even consider charging more if you offer more value than your competitor. For example, when studying for the LSAT, I chose a more expensive tutor because he was available via text even after our tutor sessions. He encouraged his students to text him whenever they were stuck on a problem. He commanded a higher rate because he offered more value.

2. Consider Location

When pricing services for your tutoring business, consider which communities you’re targeting. Can your prospective clients afford to pay premium rates for your tutoring services? 

For example, when it comes to a standardized test like the SAT, students in certain school districts may not seek out private tutoring at a high enough rate for your business to prosper at the price you desire. In other school districts, private tutoring may be more of the norm. The latter school district likely has a higher demand for SAT tutors and you can price your services accordingly, whereas you might have to be more budget-conscious to attract clients in the former.

3. Factor in Your Experience

While a teaching license is not required to become a private tutor, it can boost your credentials. Also, you can use any relevant college degrees or past teaching experience to increase your prices. However, if you don’t have any of these, you may want to consider lowering your price points until you have more experience under your belt.

how to start a tutoring business

Step 7: Market Yourself

Perfect Your Elevator Pitch

When thinking of how to start a tutoring business, you should have a brief, catchy pitch in mind. Write an elevator speech to help communicate your tutoring services concisely, especially when you’re pitching your services by word-of-mouth. For a tutoring business, some points you want to address in your elevator pitch include:

  • Who your target client is (i.e., law school applicants)
  • What their pain point is (i.e., they can’t improve their LSAT practice scores)
  • How your tutoring services solves their pain point (i.e., your one-on-one sessions will help target their weaknesses and improve their scores)

Offer a Discounted Rate Starting Out

Getting your first client can be tough, especially when they ask for past client results and you have nothing to offer. Offering a discounted rate can help you get clients even with little to no experience.

Bonus tip: Since you’re offering a discounted rate, request a positive testimonial from those first clients. These testimonials will boost your marketing potential when seeking new clients.

Build Your Online Portfolio

Creating a small business website adds another degree of professionalism when starting a tutoring business. On your online portfolio, you want to list any experiences you have with tutoring. You also want to list any degrees and tutoring certifications you have. Your online portfolio is like your resume when applying for a job. The right portfolio will attract the right client and will land you the job.

Make Business Cards

While more businesses are going digital, business cards can still advance your branding and marketing strategy. Since many tutoring businesses work with local clients, having a business card to pass around within your community can help spread the word about your services.

Set up a Referral System

Never discount the power of word-of-mouth marketing. Word-of-mouth is often the bread-and-butter strategy for many tutoring businesses’s marketing success. A satisfied client who owes their passing grade to your tutoring services can skyrocket your value. Also, a referral from a trusted friend or family member can make the difference when somebody is on the fence between you and a competitor. Start networking with your clients to increase your business.

Step 8: Prepare Yourself for Tutoring Challenges

Starting a tutoring business can be a great way to earn additional side income or even replace your day job. However, there are some not-so-great aspects of tutoring that you should be aware of and prepared for.

1. Your Schedule Needs to Be Accommodating

Many of your clients will be school students that are unavailable during the day. If you’re tutoring college students, their availability can be even more limited. A study by the National Center for Education Statistics shows that many college students held jobs while in school in 2017—43% for full-time students and 81% of part-time students. Your schedule can often be erratic as you do your best to accommodate each client’s availability. Often, you will need to sacrifice your evenings and weekends for your clients.

2. Tutoring Will Test Your Patience

Some clients will struggle more than others with the subject matter. Coaching your students and being mindful of their learning speeds requires practice and patience. Do your best to learn different teaching styles to better gel with your clients learning styles. Though you may find it easier to teach in a certain fashion, it’s your responsibility as the tutor to meet students half-way and figure out what works for them. 

3. You Need to Appease the Parents

As a tutor, you’ll not only be working with students but you’ll also be working with their parents. You’ll likely be selling your services to parents rather than students and it’s important to keep them happy while creating a comfortable learning environment for your students. At Teacher Tutors, their tutors use regular progress reports to keep parents updated on their children’s progress. You also might want to build some customer service skills to keep your clients happy.

4. Zoning Issues

If you plan on tutoring in your home, you need to ensure you’re complying with any zoning regulations. Zoning requirements would vary depending on where you live—both your state and county. New York City, for example, allows businesses to be run out of homes, but limits the percentage of space in your home you can dedicate to your business. If you’re confused about whether any zoning laws might apply to you, check with your county clerk office and possibly consult a business attorney.

How to Start a Tutoring Business: Final Thoughts

Tutoring doesn’t just have to be a side hustle while working full time. You can grow your tutoring services into a real business. We hope this guide inspired the confidence you need to get started. Now it’s your turn to take action. It’s time to stand up, get moving, and start working. Your tutoring business is waiting for you to take the next step.

Sally Lauckner

Editor-in-Chief at Fundera
Sally Lauckner is the editor-in-chief of the Fundera Ledger. Over the past decade she has held various editorial roles at SmartAsset—a Y Combinator-backed personal finance startup—the Huffington Post, AOL.com, and Glamour magazine. Her work has also appeared in Marie Claire, Teen Vogue, and Cosmopolitan. Sally has a master's degree in journalism from New York University and a bachelor's degree in English from Columbia University.  Email: sally@fundera.com.

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