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Are you interested in starting an online tutoring business? Our guide walks you through how to make your business a success.
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Are you an aspiring online tutor? Have you thought about being a small business owner? Let us teach you how to start an online tutoring business!
With a passion for education, a love of working with students, and specialized skills to share, you can go far as a tutor, especially with your own online tutoring business.
Read on to learn how to make an online tutoring business plan and eight simple steps to get you on your way to owning your own business!
Table of Contents
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 impact students’ lives and help guide them toward educational success. At the same time, tutoring allows you to manage your schedule and set your own rates. What’s more, when you set up an online tutor business, you can even work from home!
As an online tutor, you have the ability to work from home and expand your reach to communities that may typically be unable to commute to a physical tutoring center. This way, you can support both students and parents while accommodating ever-changing school and business pandemic safety protocols. You’re not only a source of hope to students, but you’re relieving pressure from parents in an increasingly stressful time for families.
In addition, over the past few years, online tutoring has been increasing in popularity. According to The Business Research Company, the online tutoring market is expected to grow by 15.9% through 2026. The rise in revenue is mostly due to COVID-19 and the online education movement. There will always be a need for educators, especially online ones, around standardized testing time and the end of semesters/quarters. When you become a tutor, you are helping fill that crucial need.
If you want to join a growing market, now is a great time to open your own online tutoring business!
If you’re trying to decide whether you should start your own online tutoring business or join a tutoring service instead, we have a couple of factors you should consider. There are plenty of existing online tutoring networks for you to consider joining if you don’t want to start your own independent online tutoring business.
The main factors to take into account when making this decision are your available resources, your timeline, and your intentions for your business.
You should skip starting your own business and sign up with a tutoring service if:
Here are a few tutoring sites you might consider: Care.com, VIPKid, and Varsity Tutors.
You should start your own tutoring business if:
No, you do not need a license to start a tutoring business. You do, however, need to have decided on a business structure. You can operate your online tutoring business as a corporation, sole trader/proprietor, or limited liability company (LLC). Sole traders/proprietorships and LLCs are the most common choice for tutors.
Education is a major requirement for starting for own tutoring business. At the very least, tutors should have a GED or high school diploma. Most online tutoring sites will require proof of this before allowing you to begin tutoring. Your level of education will determine what grade level you are able to tutor.
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 demonstrates to parents that you are safe around their students. These certifications are available from the National Tutoring Association or your state’s Department of Education.
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 it’s worth it for the amount of credibility you gain.
While there aren’t any other “official” requirements for starting a tutoring business, there are some things we would recommend.
The first is deciding what business structure you will use for your online tutoring business. Your business will remain a sole proprietorship until you file official paperwork to become another entity. Read our complete guide to the different types of business structures before you officially decide which one to establish.
You might also want to consider carrying several kinds of insurance policies for your small business.
You’ll should especially consider getting professional indemnity insurance, commonly referred to as errors and omissions or E&O insurance. This kind of policy protects you from lawsuits directly related to bad advice that causes financial or personal damages to a client. This is ideal for a business like online tutoring because a lot of the work you do could be considered giving advice to your clients.
Learn more about the types of business insurance you may need.
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.
A typical business plan includes:
Since your business is just getting started (and 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.
Read our article on how to write a one-page business plan for more in-depth information.
Now that you have an idea of some of the things to consider when starting your own online tutoring business, let’s get into the eight steps we recommend taking to get your dream off the ground!
Some may seem self-explanatory, but there’s nothing worse than skipping a crucial step and having to backtrack. It’s better to start slow and take your time to avoid delays in getting your business started.
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 buy any hardware or software?
We’ll get into funding options more in-depth later in this article, but you’ll need to start making a basic budget to know what kind of funds you will require to get started. Make sure to account for certifications, site/domain fees, business insurance payments, and marketing costs.
Your classroom setup is going to be crucial to your success. Find a place in your home to hold your online tutoring sessions. It should be a location that’s away from the noise of the rest of your house, has plenty of light, and has a clean, neutral background.
Along with your physical classroom, you’ll need to have your online classroom prepared before you begin tutoring.
Make sure you have all of the technology you need to be successful. You must have a computer and a strong internet connection. A webcam and a functioning microphone (even if it’s the one built into your laptop) are two other important pieces of equipment.
We also recommend purchasing some form of tablet or digital drawing pad and stylus. This will make it easier for you to use a virtual whiteboard software to illustrate and share concepts with your students.
Once you’ve acquired the necessary hardware, you should select your software. These are the types of software we suggest for your online tutoring business:
As your own boss, you get to decide on the rate you charge for your services. Rates vary dramatically from tutor to tutor and typically depend upon your education level, the subjects you teach, and your students’ specific learning needs.
Typically, tutoring rates fall somewhere between $20 to $80 an hour.
Tutors who charge the highest rates teach in-demand subjects requiring significant experience and familiarity, such as SAT prep and high school and college-level math and science. Tutors with training and experience working with students who need accommodations also 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.
As you think through your pricing, you should research the rates of your competitors within your niche. 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.
In many cases, registering your business is technically optional.
Online 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, 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 each has advantages and disadvantages.
Aside from setting up a sole proprietorship, many tutors find that establishing a Limited Liability Corporations (LLC) is their next best option. LLCs offer limited liability protection for their owners and 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 a sole proprietorship, LLC owners report their business earnings and losses on their personal taxes.
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 a business checking and savings account. 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.
Need more information? We have it in our article on how to register your business.
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:
Another important piece of software we haven’t yet discussed is payment processing software. Depending on what website builder you choose, you may not even need to search for and integrate with a payment processing system, but we’ll touch on that more later.
It’s important to have a good payment processor and both the software and hardware you may need to use it. If you plan on running a truly 100% online tutoring business, you’ll need to be able to take cards and/or send invoices to your clients.
If you have some clients you will be meeting with in person, you’ll need to make sure you have a card reader, whether that’s a physical POS system or a QR code that links to your payment processing software.
Payment processors such as Square also include appointment scheduling features so you can handle all aspects of appointments and payments within the same platform. Square also allows you to send invoices to your clients to collect payment. This is a great way to ensure that you get paid for your tutoring in a timely manner.
There are a lot of different credit card processing companies that you can choose from. Read more about our favorite providers and how to choose which is best for your online tutoring business in our article on the best payment processing companies for small businesses.
This might be the most important step in this entire list. To have a business, you need clients; to have clients, you need to identify your niche. Where can you add value to a student’s academic journey? Consider what experience you already have under your belt and what you’re passionate about.
The most common subjects for tutors are English, math, science, standardized test prep, and general study skills. Test prep can be the most lucrative for tutors, though the market does ebb and flow with the time of year. Parents will pay good money for long-term prep sessions for their high school students looking for good scores for college admissions. You can even specialize in certain portions of these tests depending on your education and skill set.
Once you’ve identified your niche (one or two specializations, typically, though you can always offer more), it’s time to start marketing your business!
This is where the business plan you made earlier will come in handy in a big way. Your strategy does not have to be set in stone, but it needs to take into account your current network and your intended audience. We have a few methods you can try to market yourself.
Before you try any of these, make sure you have walked yourself through whether or not they are relevant to your intended audience.
Once you’re an established tutor, there’s a chance you may want to grow your business to include more subjects and help even more students. Maybe you consider opening a physical tutoring center or working certain hours at schools on a contract/free-trial basis. Regardless of what direction you plan to go in, we have the resources you need!
If you’ve taken on as many clients as you can handle but want to help more students in your community, or you see a need for tutoring in a subject you aren’t qualified for, it may be time to consider hiring your first employee. It may sound daunting, but this process can be as formal or informal as you prefer! There are several things you must do to help you successfully and legally hire and pay your first employee.
Read our article on how to hire your first employee for some easy steps to take!
It’s important for you to have a web presence, a payment processor, and an easy way for clients to schedule appointments with you. The good news is you don’t need to find three different kinds of software/platforms for you to meet these requirements. A good web platform can accomplish all three things with as little stress as possible.
Read on to learn more about some of our favorite web platforms!
Shopify’s online store is an easy-to-use platform that offers a free trial, advanced design tools, and six different plans that allow you to choose the right one for your business size and needs. We consider Shopify to be one of the best options for getting started with selling online. Monthly rates start as low as $5.
As a web platform, Shopify offers a fully customizable website builder that requires no coding! There are thousands of themes, apps, and integrations for you to choose from. Shopify offers a free three-day trial and the ability to purchase your custom domain name directly through them.
Square Online is a cost-effective eCommerce solution that integrates directly with Square POS. Square offers a free plan, free web hosting, and, like Shopify, you don’t need coding knowledge to use their website builder to make your online store.
If you wish to get rid of the Square ads on your site, need more than 500MB of storage, or want to use a custom domain, you will need to upgrade to a paid plan. Plans start at $12/month billed annually.
While the other vendors on this list are payment processors first with added website-building capabilities, Wix is a true cloud-based website builder with eCommerce capabilities. Wix has an easy learning curve, beautiful free templates, and a flexible drag-and-drop builder. They offer both website plans and business plans for their users.
The Business Basic plan starts at $27/month billed annually. You can even get a custom domain name free for a year! Wix allows you to accept payments through Wix Payments (in-house payment processor). You can take payments from major credit card companies, Apple Pay, recurring payments, third-party payment providers, buy now, pay later apps, and in-person payments with Wix POS.
Lightspeed is the priciest option on this list, but it offers some unique features for small business owners. The most interesting of these features is the Customer Loyalty Program function. Lightspeed Loyalty allows you to reward your returning clients with a point-based loyalty program.
Lightspeed is definitely more tailored for retailers, but it has plenty of useful features for online tutoring businesses, including gift certificates and receipts. Lightspeed eCommerce allows your clients to schedule their own appointments and send confirmations and reminders, offers reports you can run to determine the health of your business, and marketing features that can help with your SEO score and social media presence. Plans start at $69/month billed annually.
Cash flow is something your business is unlikely to see for a while when you’re just getting started. To cover all of your startup costs until you have reliable and stable revenue, you’re going to have to get creative and have access to ample funds. We have some recommendations for you to consider as you get started.
If you have some liquid assets saved up, now might be a good time to use them. Using the money you’ve already saved eliminates the risk associated with debt and ensures 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.
An easier and riskier way to bankroll your online tutoring business is with a personal or business credit card. Credit cards allow you to access credit quickly and apply it to virtually any kind of purchase. Check out our most recommended business credit cards for startups and small businesses.
If you choose this funding option, keep in mind 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.
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.
There are many other kinds of startup loans you can consider applying for as well.
Grants might be the closest thing to “free money” we have in the real world. Grants are often highly competitive and 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.
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 startup costs and very few steps to getting started, you can 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 toward 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!
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