How to Start an Online Tutoring Business

Detailed guide with helpful information on costs, requirements, licenses, formation, and marketing. Also includes tips, FAQs, and checklist.

Updated on March 31st, 2020

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Starting an online tutoring business has never been easier. More people have access to the internet and it has become cheaper to have a stable connection. There is a huge demand for online tutorship amongst businesspeople wanting to learn English, and students needing extra lessons for school subjects.

There is a relatively low start-up cost. The basic equipment needed is a laptop and a fast internet connection. This service is also an ongoing one, with most tutees paying for multiple classes rather than a one-off lesson.

No prior experience is needed. Whether you are a student, graduate, or qualified teacher, you can tutor subjects that you are adequately competent at.

If the idea of starting your own online tutoring business appeals to you, read our steps on how to begin.

1. Choose a subject.

Decide on a subject or subjects that you are qualified to tutor, as well as subjects that are in demand. Generally, tutors are qualified to teach students that are 2 grades below the tutor's highest grade. This means that a college student in their second year of studies can teach a high school student in tenth grade.

The most popular online tutoring subjects are Mathematics, English, and Science. WAHM.com reports that many people are looking to learn English as an additional language, so online English lessons are in high demand.

Essentials for Online Tutoring:

  • Laptop or desktop computer.
  • Webcam.
  • Headset with microphone.
  • Fast and reliable internet connection.
  • Quiet space to host lessons.
  • Video conferencing platform that allows dual screening.
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2. Decide on class sizes.

You may prefer to do one-on-one classes or work with groups of varying sizes. If you have limited teaching experience, it may be best to start with one-on-one lessons while you gain more experience and confidence.

The size of your class affects the price of lessons. If you choose to have a group lesson, you may want to consider lowering your rate so that you compensate for less individual attention. While you may be charging less for group lessons, you will still be able to make a profit due to the number of students.

For example, if you reduce group lesson costs from $25.00 an hour to $10.00 an hour, having 5 students will result in earning $50.00 an hour. This is double the rate of one-on-one lessons.

This may yield more profit, but it will be a challenge to find a time that suits the whole class due to factors such as time zone differences and conflicting schedules. The marketing required to find students who can meet for a group lesson will decrease your profit.

3. Write a Business Plan.

You may not need to approach investors for funding, but a business plan will help you with market research, a plan for launching, and ideas for expansion.

Your business plan should include:

  • Executive summary.
  • Business description.
  • Marketing plan.
  • Competition analysis.
  • Future goals.
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Decide on how you would like to register your business.

  • Sole proprietorship: This makes you the only operator and investor, with no employees.
  • Partnership: Two or more individuals share the expenses and income from the business. No income tax is paid, but an annual return must be filed.
  • Corporation: A corporation has shareholders but remains as a standalone entity.
  • S Corporation: S corporations forward all income and expenses to shareholders for tax purposes.
  • LLC: A Limited Liability Company is more flexible in how ownership is placed, as it can be owned by an individual, more than one person or a corporation. An LLC can be treated as a corporation or a partnership depending on the state.

Any income from tutoring is business income, and you should, therefore, pay income tax.

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4. Purchase equipment.

You may already have a laptop with a webcam, but you will also need a high-quality headset with a microphone.

Your audio quality must be professional. If your student cannot hear you, they will not benefit from your classes.

You may want to invest in a camera. Most laptops come with built-in webcams, but quality can vary vastly depending on the make and age of your machine. Test out your video quality and gauge whether an external camera is needed. This may also be useful as a means to display your writing if the camera is attached to a tripod.

5. Set up a professional website.

Your website is essential for connecting with clients and providing information like rates, availability, and contact information.

Website builder services:

6. Use software to manage your bookings.

Google Calendar is a cloud-based application that you can use across devices to make a note of lesson times.

If your business begins to grow, it may be a good idea to have a booking system like Appointy so that clients can view your availability and schedule a lesson without having to email you. This will ensure that no human error of double-booking occurs. If you employ more tutors, this will also streamline the booking system for students to choose their preferred tutor.

Software like Appointy allow users to accept prepayments as well as booking information, streamlining the payment process. There is also Google Calendar integration available to sync all of your appointments.

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7. Set up online payment facilities.

Online payment options are important for international clients. Your website should have either a direct or external gateway for payments, depending on what your payment provider offers. A direct gateway allows clients to make a payment without leaving your site, while external gateways redirect clients to another site.

Leading small business payment providers
Leading small business payment providers:

Compare options before choosing a payment provider. The service provider you choose should meet your needs, but you should not pay for too many additional services that you won't benefit from.

Questions to consider when researching payment providers:

  • Are there any monthly fees?
  • How much does the service cost per transaction?
  • Do I need an annual plan, or can I pay month-to-month?
  • Can I cancel at any time?
  • Does this system process multiple currencies?
  • Are there any other fees?

8. Market your business.

Since your target market will be students looking for online tutorship, advertising online will most likely be the best avenue for marketing.

Approach relevant groups. If your target market is high school students, for example, you can ask local schools for ad space in their newsletter. For adults wanting to learn a new language, you can perform market research and find out which industries these individuals work for, and advertise on platforms or forums relevant to these professions.

Create social media accounts.

Smart Insights reports that 63% of consumers expect companies to offer customer service through their social media accounts. This shows the importance of a social media presence to maintain customer loyalty and satisfaction.

Social media management tools are a must-have. If you plan to have multiple social media accounts, a social media management tool will help with scheduling posts and formatting these posts correctly for each platform. Unless you have a dedicated staff member to manage your social media, the task can be incredibly time-consuming. Hootsuite is an excellent tool for social media management.

Tips for Advertising on Social Media:

Identify the platforms that your target market uses. You may find that your target market predominantly uses Facebook and Twitter, providing insight into which platforms you should focus your advertising on.

Post useful content. If your business is aimed at students who are in school, you could post content that relates to their studies or examinations. You could also post useful tips relating to the content you teach, like pneumonic devices or instructional videos.

Engage with clients online. Respond to questions about your business by commenting on tagged posts, and congratulate successful students on their progress. This boosts your reputation and creates a positive relationship with clients. These clients may share your content, providing free marketing.

Use PPC marketing to appear first on Google searches. Google Ads allows advertisers to have promoted ads on search results pages. When people search for online tutors, it would be beneficial to have your company come up early on the results page. PPC (pay per click) marketing works by having companies pay Google whenever their promoted website gets clicked from search results.

Create posts using SEO strategies. Using trending keywords in posts on your website will make your site more visible on search results. Google offers analytics tools that can help you track how successful your posts are.

Customer Lifetime Value Example:

Your tutoring business has a total revenue of $400,000 for the current year. During the same time period, clients made 5,000 lesson purchases. First, let's find the average purchase value:

$400,000/5,000 = $80

This means that the average purchase value was $80.00.

During the same year, 800 clients made purchases. To find the purchase frequency rate, we can divide the number of purchases by the number of clients:

5,000/800 = 6.25

Multiply the average purchase value and the purchase frequency rate to find the client value:

$80 x 6.25 = $500

The average client value is $500.

Now, we will assume for the sake of this example that the average client lifespan is 4.5 years.

Finally, we can find the customer lifetime value by multiplying the average client value by the average client lifespan:

$500 x 4.5 = $2,250

Therefore, the customer lifetime value for your company is $2,250.

Final Thoughts:

With the steps provided above, you will have the necessary tools to begin building your online tutoring business. For more information, you can read our article on How to Start a Business.

More Resources:

FAQs:

Do you need a license to start a tutoring business?

You need to register your online tutoring business for tax purposes. You do not need a business license, but if you plan to hire employees, you will need an Employer Identification Number.

How do you start a tutoring business?

You can start an online tutoring business by identifying expertise you may have, and researching whether there is a market for the lessons you would provide. From there, you can create a business plan and advertise your services online.

How much does a tutoring business make?

Your profit is dependent on your rate as well as the number of lessons you provide. The average rate for online tutors is $25.00 per hour. If you provide 10 lessons per week, you could earn $250.00.

Do you need a license to tutor?

No, you do not need a teaching license to tutor online.

How much does it cost to start a tutoring business?

Website builders offer free and paid services, ranging from $4.50 to $29.95 per month. Business Internet services can be purchased for between $34.99 and $129.95 per month. Domain registration can cost between $0.95 to $16.99 per year depending on which company you use.

If you choose to advertise on social media, LinkedIn and Facebook may be the best platforms to reach working professionals and students. The cost per click for LinkedIn advertisements averages around $2.00-$7.00, while Facebook advertising should cost about $0.51 per click. It is, however, free to create a page for your business and share your information in groups.

How much should I charge for tutoring?

This depends on your level of education, as well as the level of tutoring that the student requires. If you are a qualified teacher, you may charge around $40.00 per hour, while a college graduate may charge around $25.00 per hour.

If the subject matter is at an advanced level, like University, you may charge more than your standard fee.

How do I become a certified tutor?

Becoming a certified tutor will allow you to charge more for your services. You can become certified if you complete high school, and then pursue Tutor Training in your state.

How do I market myself as a tutor?

You can market your online tutoring business by posting advertisements in school newsletters, on online forums, or on social media.

How long should a tutoring session last?

Tutoring sessions usually last one hour but may run longer depending on the needs of specific students.