How To Start An Online Tutoring Business: Prerequisites & 8 Steps To Success
Are you passionate about education? Do you love working with students? Do you have a specialized skill that you want to pass on? If so, you might be a good candidate for establishing your own tutoring business.
Becoming a tutor allows you incredible job flexibility, while also giving you an opportunity to do meaningful work in your community. When you tutor, you make an impact on students’ lives and help guide them toward educational success. And at the same time, tutoring allows you to manage your own schedule and set your own rates. What’s more, when you set up an online tutor business, you can even work from home!
Have you been considering starting a tutoring business, but you aren’t sure where to start? In this article, we’ll walk you through a step-by-step process for planning your tutoring business. And, we’ll also give you some ideas for where you can turn for the funding you might need to get set up.
Ready? Let’s go!
Table of Contents
Why Start An Online Tutoring Business?
Tutors start their own businesses for a number of reasons, but one of the primary reasons is the ability to be your own boss. When you operate an online tutoring business, you are able to set your own hours, determine your own hourly rates, and take on as many or as few clients as fit your schedule. The flexibility that comes with tutoring is one of its biggest advantages.
What’s more, becoming a tutor is an excellent way to support students and parents. When you step in as a tutor, you help students learn the skills they need to succeed in the classroom, and you relieve some stress on parents. For many students, a tutor can change the outcome of their educational career. So if you have a heart for students, and a desire to see them grow and succeed, tutoring could be your passion.
In addition, over the past few years, online tutoring has been increasing in popularity. According to IBIS world, the market size of online tutoring services in the US (as measured by revenue) is expected to increase by 4.1% in 2020. There is always a need for educators, especially during the school year and around standardized testing time, and when you become a tutor you help fill that need. If you want to join a growing market, now is a great time to open our own online tutoring business!
When To Sign Up With A Tutoring Service Instead Of Starting Your Own Business
There are a couple of routes you can take to begin tutoring online. You can choose to sign up with an existing online tutoring network (such as Care.com), or you can start your own independent online tutoring business. Your choice between these two options depends on your available resources, your timeline, and your intentions for your business.
In general, you should sign up with an existing tutoring network if the following applies to you:
- You Have A Limited Social Network: If you don’t already have a number of potential students in mind, it might be best to join a tutoring website. These sites help connect tutors with students, which can reduce some of the demand that comes with building an entire client base from scratch.
- You Need To Start Working Immediately: Finding clients and establishing a presence in the tutoring market can take significant time, energy, and money. If you want to skip over this process, signing up with a tutoring site is a great option. You’ll be able to find clients and get teaching much sooner.
- You Don’t Mind Paying A Fee: Most tutoring sites charge tutors a percentage of their earnings. You should have room in the budget for this expense in order for a tutoring site to be an advantage.
- You Don’t Want To Set Up The Technical Tools On Your Own: In order to successfully tutor across the internet, you need access to a variety of tools. At minimum, you need a video conferencing tool, a way to share your computer screen, and a virtual whiteboard. Many tutoring sites that specialize in online tutoring (such as Varsity Tutors) offer these tools built into their platforms.
Alternatively, you should consider building your own business if:
- You Already Have Potential Students: If you have a wide social network full of school-age children and college students, you may not need any help building a client base.
- You Want To Keep All Your Earnings: This is a huge factor. If you resent the amount that tutoring sites charge for their services, you should build your own business. You’ll have to cover other expenses, but you get to decide how much those other expenses cost.
- You Have The Time To Get Set Up: As I mentioned above, building your own business takes time. Make sure you have the time (and available income) to build your business before you begin.
Before You Start Your Tutoring Business: Essential Prereqs
As you might imagine, education is a major requirement for starting your own tutoring business. In general, most tutors need to have earned at least a high school diploma or a GED. This is especially true if you are signing up with an online tutoring site.
The level of education you have earned plays an important role in determining what content areas you can teach. Here are the grade levels and subjects you can tutor with each level of education:
- High School Diploma Or GED: At this education level, you are able to tutor elementary and middle school students. You are also able to tutor high school students, although you may need to demonstrate your knowledge in other ways (using transcripts or standardized test scores to demonstrate content area knowledge).
- Undergraduate Degree: With a Bachelor’s degree, you are able to tutor elementary, middle school, and high school students. You are also able to tutor college students in your area of specialization. This is especially true if you have work experience post-college that relates to your specialization.
- Post-Graduate Education: You can tutor elementary, middle school, high school, and college students. Depending on your area of specialization (if you have a degree in education or in teaching English for Speakers of Other Languages), you might also consider teaching adults who are finishing their GED or who are looking for a way to develop their English fluency.
As you look into tutoring, you should also consider working towards a Tutoring Certification. These certifications require you to go through a few hours of training, pass a background check, and submit a couple of letters of recommendation. Earning a Tutoring Certification enhances your credibility, and it also demonstrates to parents that you are safe around their students. Many tutors also benefit from the training included in earning a Tutoring Certification. These certifications are available from the National Tutoring Association and the American Tutoring Association. Depending on the certification, you may have to pay for training, membership fees, a background check, and application fees. These expenses total around $200-$250 for certification, but I think this expense is worth it for the amount of credibility you gain.
Finally, in order to begin tutoring, you need to identify your area of specialization. Think about where you can add value, and consider the experience that you have under your belt. Is there a particular grade level or content area that you are skilled in? As you look for your specialization, consider the subject areas in which tutors are in high demand: English, Math, Science, Test Prep, and Study Skills. And remember, each of these subjects can be broken down into sub-categories like Algebra, Chemistry, reading comprehension, SAT and ACT preparation, etc. Once you have identified one or two specializations, you’re ready for the next step.
8 Steps To Starting Your Own Tutoring Business Online
Step 1: Make A Business Plan
Strong businesses start with a strong plan. A business plan is a written description of your planned business and business strategy. It’s your vision of how your business will be organized, how it will operate, and how it will be profitable. You can find lots of information online about writing a business plan. Your local chamber of commerce and government economic development agencies likely also have resources you can use.
A typical business plan includes:
- Executive Summary
- Company Description
- Market Overview
- Sales & Marketing Strategy
- Operating Plan
- Organizations & Management Team
Once you have a basic idea of how your business will operate, it’s time to calculate your starting costs. Do you need to purchase materials or teaching aids? Will you be paying for website building software or a web host? Do you need to purchase any hardware or software, or perhaps buy business insurance?
Since your business is just getting started (and since you will probably be the only employee for a while), your business plan does not have to be incredibly in-depth. Mostly, you should use this plan as an opportunity to set goals, create your marketing strategy, and predict your business expenses.
Step 2: Perfect Your Computer Setup
Your next step is to set up your classroom. Find a place in your home to conduct your online tutoring. You should look for a location that’s away from the noise of the house and has plenty of light. Then, position yourself so that there is a clean, neutral background behind you in video calls.
You should also make sure that you have all of the technology you need to begin online tutoring. You, of course, need a computer and a strong internet connection. You should also have a webcam and a functional microphone (even if it’s just the microphone built into your laptop). In addition, we recommend purchasing a tablet or digital drawing pad and stylus that you can use with a virtual whiteboard software. These tools make it easier for you to illustrate and share concepts with your students from a distance.
Step 3: Find The Right Tutoring Software
Once you have your hardware figured out, you should select your software. You should consider purchasing the following types of software:
- Video Calling Software: Find a video calling software like Zoom or Google Hangouts that allows you to schedule meetings in advance and then send meeting links to your attendees via email. You should also look for the ability to share your screen as you will likely want to use this tool to make demonstrations in your tutoring.
- Virtual Whiteboard Software: Virtual whiteboard software allows you to draw, write, and diagram on a digital whiteboard. All you need to use the software is a mouse, but using a tablet or a digital drawing pad and stylus (like Wacom Intuos) gives you even better control. A few virtual whiteboards you should check out include Ziteboard, IDroo, and Scribblar.
- Document Sharing Software: Consider using the free tools that Google provides to your advantage. Google Docs is an excellent tool for sharing documents, editing simultaneously, and making comments on specific pieces of a document. Google Classroom further expands these tools. Using Google Classroom, you can create a central hub of information for your students. Here, you can add resources, assignments, and rubrics. You can use quiz features to help students assess their learning. Google Classroom stores students’ work indefinitely, making it a great way to keep track of student progress over time.
Step 4: Set Your Rates
As your own boss, you get to decide on the rate you charge for your services. Rates vary dramatically from tutor to tutor, and they typically depend upon your education level, the subject area that you teach, and your students’ specific learning needs.
Typically, tutoring rates fall somewhere between $20–$80 an hour.
Tutors who charge the highest rates are those who teach in-demand subjects that require significant experience and familiarity, like SAT prep, and high school and college-level math and science. Tutors who have training and experience working with students with special education needs also typically charge higher rates.
Unfortunately, hourly rates tend to drop when you tutor online instead of in-person. This is primarily because tutors are not limited by location, which makes the online tutoring market much larger with more available tutors. On the other hand, when you tutor online, you eliminate any expenses related to travel and you don’t have to rent out a space for tutoring.
I’ve seen information that suggests that the average rate for online tutoring is $20–$30 an hour, although you can certainly charge more based on your education level and experience.
As you think through your pricing rates, you should look into the rates that other tutors in your content area charge. Then, you should take into account your anticipated business expenses (pricing for any required software, self-employment taxes, and the time you spend preparing for each tutoring session). Using this information, you can set your own pricing range.
Step 5: Register Your Business
In many cases, registering your business is technically optional.
Tutors who decide to operate as a sole proprietorship or partnership do not need to do anything to register their business. Essentially, the business is an extension of its owner. Sole proprietorships are easy to set up, and typically in a sole proprietorship, taxes are simpler than they are with other forms of incorporation. In a sole proprietorship, when you go to file taxes, you file your business taxes and personal taxes together. You will have to pay self-employment taxes on your earnings. In addition, sole proprietorships do not come with the liability protection that is part of many other types of business structures. You are personally liable for any debts your business takes on.
Other forms of incorporation require more time to set up and come with their own advantages and disadvantages. Here are the most popular ways to incorporate:
- Limited Liability Corporations (LLCs): Aside from setting up a sole proprietorship, many tutors find that establishing an LLC is their next best option. LLCs offer limited liability protection for their owners, and they are not as complex as a corporation. Each state has its own rules for what it takes to start an LLC, and you don’t necessarily have to register your LLC in the state where you’re doing business (although you generally should). Like with a sole proprietorship, LLC owners report their business earnings and losses on their personal taxes.
- C-Corp: In a C-corp, shareholders are considered the owners of the company, and they receive limited liability protection. However, at the same time, business decisions are made by corporate officers who may or may not be shareholders. In a C-corp, taxed are filed separately from personal taxes, and shareholders pay income tax on dividends. In order to form a C-corp, you have to file articles of incorporation with your state.
- S-Corp: S-corps are very similar to C-corps, but with a few additional restrictions: You have to have fewer than 100 shareholders, and they have to all be U.S. citizens or residents. Profits and losses are reported on personal taxes. Finally, in addition to filing your articles of incorporation, you also have to file IRS Form 2553.
Even if you decide to operate your tutoring business as a sole proprietorship, we suggest setting up a plan for separating your business finances from your personal finances. The easiest way to keep your finances separate is to create separate business checking and savings accounts. These additional accounts make it easier to track your profits and losses, and they can save you a ton of headaches when it’s time to pay your taxes.
You should also consider filing a DBA (Doing Business As), Trademark, or Entity Name for your business. Filing a business name allows you to operate your business under its own name, instead of your legal name (Math Works as opposed to Sandy Davis, for example).
Step 6: Establish A Web Presence
As an online tutor, it’s crucial that you have a strong online presence. There are a few ways you can go about building your web presence:
- Create A Website: It never hurts to have a sleek, attractive website. Developing your own website adds credibility to your business and can help build hype for your services. Luckily there are user-friendly and cost-effective website builder tools that you can use to set up a site in a matter of days. Some of these tools (such as Wix) even provide appointment scheduling tools that you can use to allow your clients to book–and pay for–their tutoring sessions online.
- Set Up Social Media: Set up business accounts on the social media sites that your clients use most frequently (Facebook and Instagram are good places to start). Make sure you include important information like your subject areas and a link to your website. You should also encourage reviews on your Facebook page, so parents and students can leave testimonials, improving your credibility.
- Create A Yelp Page: If your business doesn’t already have a Yelp page, now is a good time to set one up. Adding a page on Yelp encourages more clients to leave reviews, and it can help direct new potential clients to your services.
Step 7: Choose A Payment Processing Solution
In order to accept payments online, you’ll have to integrate with a payment processing solution.
Payment solutions fall into two categories: Payments Service Providers (PSPs) and merchant accounts. PSPs are typically easier and faster to set up, but they are also known for having account stability issues. Many PSPs accept merchants almost immediately, and then upon review decide that certain merchants are too high-risk to use their platform and freeze their accounts. Merchant accounts, on the other hand, take longer to set up because there is an initial review process. This makes merchant accounts more stable (you are less likely to have your service revoked). Merchant accounts also allow you to negotiate the rates that you pay for payment processing. In order to process online payments with a merchant account, you need to find a payment gateway, which is an integration that allows you to connect your website and your merchant account.
Here are a few payment processing solutions that might work for you:
- Payment Service Providers: PayPal is one of the most widely accepted PSPs out there, and it is a familiar payment option for your clients. Another good PSP is Square. In fact, Square includes appointment scheduling features, so your clients can schedule sessions and pay for services at the same time.
- Built-In Payment Processors: Some website builders come with their own in-house payment solutions. One of these options is Wix Payments for Wix users. Built-in payment solutions are great options for quickly setting up a payment method.
- Merchant Accounts: Although merchant accounts often take longer to set up, for some merchants the initial investment is well worth it. We particularly like Fattmerchant and Payment Depot.
Step 8: Market Your Business
Once you have your website and payment method set up, it’s time to start marketing your tutoring business! Your marketing strategy should take into account your current network and your intended audience. Here are a few methods you can try:
- Email Marketing: If you already have a large personal network, make sure to notify them of your new business. Use email marketing software like Constant Contact or Mailchimp to reach out to family and friends with information about your tutoring services.
- Social Media Marketing: Use your personal and business social media accounts to announce your business. One great way of gaining new clients with social media is to put out free content that anyone can view or download. Upload or link your favorite learning resources, and create a few videos to show how you prepare for a tutoring session. Sharing these resources and videos demonstrates your personality and teaching style. It can help build your reputation and make you appear more approachable.
- Post In-Person Flyers: Place fliers with tear-off tags on bulletin boards in libraries, churches, schools, gyms, and daycare centers. Think about where parents of school-age children might be, and get your fliers out there! Be sure to always check with management before posting your fliers, of course.
- Offer Free Consultations: Consider giving new potential clients an opportunity to meet with you for a free initial consultation. It’s a good idea to include parents in this initial conversation.
- Share Customer Testimonials: Ask happy clients for a positive customer review, and then use that testimonial to your advantage. Word-of-mouth goes a long way. Make use of it in any way you can.
How To Fund Your New Online Tutoring Business
New businesses often find themselves in need of capital. If you’re facing startup costs and wondering how to address them, here are a few options:
If you have some liquid assets saved up, now might be a good time to use them. By using the money you’ve already saved, you eliminate the risk associated with debt and you ensure you won’t be losing additional money on interest. That said, you take a risk by using your personal money to finance your business. If your business fails, you lose that money.
One of the easier–and riskier–ways to fund your startup expenses is with personal or business credit cards. Credit cards allow you to access credit quickly and apply it to many different types of purchases.
You should keep in mind, however, that credit cards charge high-interest rates on any balances you carry from month to month. This makes credit cards a good option for purchases you can pay off quickly, and a potential problem for ones that you can’t.
Note: Avoid taking out cash advances on your cards unless absolutely necessary. They come at a very high cost.
Although traditional business loans are not an option for some new businesses, you can often use a personal loan to cover some of your startup expenses. These loans can be easier to get when you’re first starting out.
The downside of a personal loan is that you don’t get the liability protection you’d have if you applied as a business. You may also be more limited in terms of the amount of money you can take out. Still, if you need a little money to get started, it’s not a bad option.
Grants might be the closest thing to “free money” we have in the real world. Grants are often highly competitive, and they require businesses to complete a fairly involved application process. As you consider your options, you should factor in the amount of time you spend applying for a grant. And, you should take into account the likelihood that you will not be selected for that grant.
If you need some advice on where to look for grants, check out our feature on the topic.
ROBS stands for Rollovers as Business Startups, and they are extremely niche products for entrepreneurs with retirement accounts like 401(k)s.
For a fee, a ROBS provider allows you to use money from your retirement account to pay for startup costs without incurring any tax penalties for accessing retirement funds early. Like with personal savings, with ROBS, you are risking your own money. ROBS is probably overkill for most new tutoring businesses, but it is a good option to keep in mind.
Go Out & Start Your Online Tutoring Business
Does tutoring from the comfort of your own home sound like your dream job? Tutoring can be one of the most rewarding and profitable small businesses to start. And with minimal start-up costs and very few steps to getting started, you can get begin tutoring in very little time!
That said, as with all new business ventures, you should approach your online tutoring business with a strategic mindset. Take your time, decide on a niche, gather all the tools you need, and work towards building a positive reputation in your social network. Now is a great time to enter the tutoring market. So get out there, and get teaching!