Starting a Tutoring Business – How Much Will it Cost?
Perhaps the most common question I am asked by my fledgling entrepreneur customers is ‘How much does it cost to start a tutoring business?’ There is no short answer to this vague question, nor is there a right or a wrong answer. You may as well ask… “How many angels can dance on the head of a pin”.
The short answer to this question is… “Probably somewhere between $0 and $250,000. If you think this is a flippant, meaningless answer then you would probably be right. Let me explain further.
The cost to start a tutoring business is mainly dependent on several aspects of the business you envision including i) the scope of your business, ii) where the tutoring will take place, iii) how many tutors you plan to employ, iv) how fast you want to grow, iv) how you pay your tutors and many other questions. Let’s look at these aspects one at a time to see how they impact our costs.
Scope: For the purposes of this article I will define scope as the size of the potential market that you targeting, both geographically and population-wise. For instance if you are a grade twelve student planning to offer Math tutoring to your fellow students at your high school, then your business scope will be small and so will your start up costs. In fact, you could probably launch your business for next to nothing. You could market via word-of-mouth and do your tutoring at home, in the school library or even online via Skype. If on the other hand, you plan to expand your scope to tutoring Math, Science and English to any students within your city, then your costs will begin to grow significantly. You will probably want to rent dedicated space, hire tutors, purchase textbooks and launch an advertising campaign just to get started, and this will quickly add up to thousands of dollars.
Location: Where the tutoring will take place may be the biggest single cost of your business. If you plan to send your tutors to student’s homes, then you will avoid all the costs associated with having a dedicated tutoring space, or what I like to call ‘Bricks and Mortar’ costs. Opening a dedicated tutoring centre will result in a variety of costs including rent, renovation, heating, electric and water and insurance, to mention only a few. And significantly, most of these expenses are recurring every month! Another way you can avoid bricks and mortar costs is to launch an online tutoring business, although that comes with a different set of costs, both up-front and recurring.
Tutors: Your start-up costs will be affected by the number and type of tutors you plan to employ as well. For instance, if your tutoring business is just you and a friend, then you can keep your payroll costs to a minimum, perhaps forgoing any pay for the first month in order to cover your other start up costs. This is often referred to as ‘Bootstrap Financing’ or simply using your own money to start a business instead of relying on outside sources of capital. On the other hand, if you want to open a dedicated tutoring center and hire a dozen employees, then your costs will pile up quickly. You may have to pay for things like employment contracts, background checks, training, computers, textbooks, not to mention salaries and benefits. While you may be willing to forgo wages while your business is growing, your employees definitely will not.
Type of Employees: The type of tutors your hire and how you pay them will also affect costs. For instance, senior high school and college students can become excellent tutors and will have much lower pay expectations than certified teachers. A college student might be satisfied with $10 – $15 per hour while a certified teacher might demand twice as much.
The way you hire your tutors is important as well. For instance, if you hire your tutors as employees, you will have to pay them wages for a specified number of hours each month and perhaps benefits as well, even if they aren’t generating revenue for all of those hours. If you hire your tutors as independent contractors, on the other hand, then you will only have to pay them for the hours that they work without committing to a minimum number of hours.
Rate of Growth: How fast you want to grow will affect your start-up costs as well. For instance, if you want to grow fast, you could easily spend $5,000 on a website, business cards, brochures, and advertising just in the first couple of months. On the other hand you could probably keep your budget to less than a quarter of this if you are content to grow more slowly, through word of mouth and more creative marketing channels.
Now that you know the major cost factors of starting-up your tutoring business, you simply need to sit down and decide what type of business you want to start, who your target market is, where the tutoring will take place, and identify all the other relevant costs. Separate these costs into recurring vs. non-recurring, add them up and presto, you have your budget!
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