Do you want to start tutoring business?

Are you thinking about opening a tutoring business? Well, if you love to interact with people and have the passion as well as the skill of transferring knowledge then it is definitely the best profession for you. Tutoring may seem like a simple service business where you just have to share your knowledge with a group of individuals in return for a fee but, in order to excel in this business, you must love to teach otherwise you will find it a difficult and stressful task.
The biggest benefit of starting your own tutoring business is that this business can be started on any scale. You can even start it from a small rented location or your home with a little to no investment. In such cases, all you possess is the sound knowledge of what you will be teaching to your students. On the other hand, if you want to start a proper tutoring center where students with different age groups and educational backgrounds will be helped with their education, you will first have to prepare a comprehensive business plan. The business plan will not only establish the basis of your company’s future operations and decisions but will also help you with startup. So, if you are wondering how to write an effective business plan, here we are providing you the business plan of a startup named ‘Katie’s Tutoring Service’.

Executive Summary

2.1 The Business

Katie’s Tutoring Service will be a tutoring center that will provide high school tutoring, college admission test preparation, undergraduate tutoring and individual tutoring to the students. The business will be started in a small rented location in downtown Manhattan.

2.2 Management

Katie’s Tutoring Service will be a sole proprietorship owned by Katie Gill who has recently completed her bachelors in Mathematics from Michigan State University. Katie loves tutoring and decided to start a tutoring service only because of her passion to teach. She has been tutoring students for the last 3 years and due to her academic background and the experience gained during these years, Katie knows everything about how to open a tutoring business.

2.3 Customers

Our customers include the high school students, high school graduates and the undergraduate students based in Manhattan. At our tutoring center, we will focus on building skills in our students rather than to provide them with knowledge only.

2.4 Target of the Company

Our target is to become the best tutoring center in Manhattan within next five years of startup and to balance the cost of the startup with earned profits within next one year. The company’s three years target is outlined as follows:

Tutoring Company Business Plan - 3 Years Profit Forecast

Company Summary

3.1 Company Owner

Katie’s Tutoring Service will be a sole proprietorship owned by Katie Gill. Katie has recently completed her bachelors in Mathematics from Michigan State University and has been tutoring students for the last 3 years.

3.2 Why the Business is being started

Katie began tutoring when she was in the second year of her studies. At first, she tutored a couple of juniors but in the process, she discovered how well can she convey her knowledge to others. Soon, something which was started just to help a couple of juniors, turned into her passion ultimately leading her to starting a tutoring business.

3.3 How the Business will be started

The first thing to do before you start thinking about how to start your own tutoring business is to develop a detailed business plan for your startup. After this phase, you can start executing the planned steps.
Katie will start her tutoring company in a small rented location in downtown Manhattan. The facility comprises of 6 rooms which will be converted into classrooms. Other than chairs, desks and the usual inventory, the company will procure 6 whiteboards, 6 projectors, and 7 computers. The costs for the startup are as follows:

Tutoring Company Business Plan - Startup Cost

The detailed startup requirements are given below:

Start-up Expenses 
Legal$55,300
Consultants$0
Insurance$32,750
Rent$32,500
Research and Development$32,750
Expensed Equipment$32,750
Signs$1,250
TOTAL START-UP EXPENSES$187,300
Start-up Assets$220,875
Cash Required$332,500
Start-up Inventory$32,625
Other Current Assets$232,500
Long-term Assets$235,000
TOTAL ASSETS$121,875
Total Requirements$245,000
START-UP FUNDING
START-UP FUNDING$273,125
Start-up Expenses to Fund$151,875
Start-up Assets to Fund$123,000
TOTAL FUNDING REQUIRED$0
Assets$23,125
Non-cash Assets from Start-up$18,750
Cash Requirements from Start-up$0
Additional Cash Raised$18,750
Cash Balance on Starting Date$21,875
TOTAL ASSETS$373,125
Liabilities and Capital$0
Liabilities$0
Current Borrowing$0
Long-term Liabilities$0
Accounts Payable (Outstanding Bills)$0
Other Current Liabilities (interest-free)$0
TOTAL LIABILITIES$0
Capital$620,125
Planned Investment$620,125
Investor 1$0
Investor 2$0
Other$0
Additional Investment Requirement$0
TOTAL PLANNED INVESTMENT$620,125
Loss at Start-up (Start-up Expenses)$313,125
TOTAL CAPITAL$251,875
TOTAL CAPITAL AND LIABILITIES$251,875
Total Funding$255,000

Services for customers

After you have planned how to build a tutoring business, the next step is to plan what types of tutoring services will you provide to your students. This step is extremely important because all the subsequent things will depend on your services so make sure to plan it before starting a tutoring business or even before thinking about how to start a tutoring service.
Katie’s Tutoring Service will provide following tutoring services to its students:

  • High School tutoring: We will provide tutoring services to the high school students who are lagging behind in one or more subjects due to any reason. Our system of tutoring high school students is based on building problem-solving skills in the students for future applications as compared to the usual system of answering the students’ immediate questions.
  • Admission tests preparation: Most colleges and universities in the United States require that students applying for admission in them take one or more standardized admission tests like SAT and ACT. We will provide tutoring to high school graduates so as to prepare them for undertaking these entrance tests required for getting admission in their desired college/university.
  • Undergrad tutoring: Undergraduate students from different colleges or universities often need help with one or more courses, and at our tutoring center, they will get the guidance they need to go through these courses. Initially, we will only be offering Mathematics related courses including Algebra, Calculus, Statistics, and Finance.
  • Individual tutoring: We will also offer individual tutoring services to the students who either join us between our ongoing sessions or are in need of special attention due to their poor academic background.

Marketing Analysis of tutoring business

The most important component of an effective tutoring business plan is its accurate marketing analysis that’s why Katie acquired the services of marketing experts to help her through this phase. It is only after this stage that a good tutoring service business plan could have been developed. If you are going to start a tutoring business on a smaller scale then you can carry out the marketing analysis of your business yourself by taking help from this tutoring business plan sample. On the other hand, if you are planning a large-scale tutoring business model, you should seek help from marketing experts. Doing so, you can get a lot of tutoring business ideas and will also be able to make an effective marketing plan for tutoring business.
In any case, pay special attention to the marketing plan of your tutor business plan before thinking about how to start a tutoring business. The four main steps to carry out an accurate marketing analysis of a tutoring center business planare to identify the current market trends, identify your target audience and potential clients, set out the business targets to achieve, and finally set the prices of your services.

5.1 Market and Industry Trends

According to IBISWorld, US tutoring industry generates around 1 billion dollars in revenue every year. There are more than 3,500 tutoring businesses in the United States responsible for employing nearly 39,000 people. Moreover, the industry is growing steadily at a rate of 3.5% and the number of tutoring and test preparation centers are on the rise in the United States. Considering these stats, it will not be wrong to establish that this industry presents a lot of opportunities.
Another important thing that you should consider before you start your own tutoring business is ensuring that you are based in the right location. Location is one of the most important factors that decide the success of this business. Residential areas are ideally the best regions to start a tutoring center because the tutoring center will then be easily accessible to most of the students it will be targeting.

5.2 Marketing Segmentation

Katie’s Tutoring Service is located at a 5 minutes’ walk from the main residential zone of Manhattan and is therefore fairly accessible to the residential community which is our primary target market. The location was also selected because there are no tutoring centers which provide admission test preparation services to the students in a 5 km radius around us. The residential community consists of all types of people from varying backgrounds. As per the financial position, nearly half of the community has a monthly income ranging from $40k to $50k while nearly 10% people have incomes even around $100,000.
There are currently more than 738,000 households in Manhattan out of which 17.1% have children under the age of 18 living with them. In addition to that, 59.1% are non-families, out of which 48.0% population comprises of individuals living alone. A successful and efficient marketing strategy can only be developed after we completely know our potential clients. Our experts have identified the following type of target audience which can become our future consumers:

Tutoring Company Business Plan - Marketing Segmentation

The detailed marketing segmentation of our target audience is as follows:

5.2.1 High School students:

Our first target group comprises of the students who are studying in high schools. Most of the high school students in the United States face difficulty with Mathematics and Sciences like Physics, Chemistry, and Biology. Moreover, sometimes students miss their classes due to absences caused by illnesses, family issues or other engagements. Our tutoring service will be the perfect place for these students to make up their deficiencies in one or more subjects.

5.2.2 High School graduates:

This group comprises of those students who are about to graduate or have recently graduated from high schools and are trying to secure admission to a university/college of good standing. This group will not only be given a conceptual overview of particular courses but will also be subjected to regular practice tests. This group will contribute the biggest chunk of our revenue and hence our marketing strategy will be specifically built to target them.

5.2.3 Undergrad students:

This group includes the students who are studying in colleges or universities and are finding it difficult to grasp one or more courses. However, initially, we are only offering a limited number of courses to this group since the tutors required for teaching undergrad students must be specialized in their field of study. This group will be directly taught by Katie herself along with one of her friends who is a business graduate from Harvard University.
The detailed market analysis of our potential clients is given in the following table:

Market Analysis
Potential CustomersGrowthYear 1Year 2Year 3Year 4Year 5CAGR
High School students37%11,43313,34416,55318,74520,54513.43%
High School graduates45%22,33432,34443,66552,54466,43210.00%
Undergrad students18%12,86714,43315,99917,56519,13115.32%
Total100%46,63460,12176,21788,854106,1089.54%

5.3 Business Target

We aim to become the best tutoring center in Manhattan within next five years of our startup. Our main business targets to be achieved as milestones over the course of next three years are as follows:

  • To achieve the net profit margin of $10k per month by the end of the first year, $15k per month by the end of the second year, and $25k per month by the end of the third year
  • To balance the initial cost of the startup with earned profits by the end of the first year
  • To get all high school and undergrad students cleared up in their respective courses

5.4 Product Pricing

After considering the market demands and the current competition, we have priced our tutoring services in the similar ranges as of our competitors. The fee for individual tutoring will be $20/hour for high school students and $40/hour for undergraduate students.

Strategy

Like marketing analysis, sales strategy is also an important component of a business plan so it must be given proper attention before you think about how to start tutoring business. Marketing analysis describes which individuals are you supposed to target and sales strategy describes how you are going to target them. A good sales strategy is based on an accurate competitive analysis which enables you to present yourself to your customers in the best way possible.

6.1 Competitive Analysis

As mentioned earlier, there are more than 3,500 tutoring businesses located across the United States. To survive and excel in such competitive environment, it is essential for a startup to work on its competitive aspects which will give it an advantage over the rest of the similar businesses in the locality. Our biggest competitive advantage will be our high-quality and unparalleled services provided at suitable rates. We will address the issues of every student individually and work with them to improve their problem identification and problem-solving skills.

6.2 Sales Strategy

After carrying out a detailed analysis, our experts came up with the following brilliant ideas to advertise and sell ourselves.

  • We will carry out a large-scale social media campaign for our advertisement.
  • We will establish a strong online presence by using SEM/SEO techniques.
  • We will arrange seminars and sessions for providing information about college admission procedure/tests.
  • We will partner with local high schools and will provide our services to them for tutoring their low-performing students.

6.3 Sales Monthly

Our monthly sales, as forecasted by our experts, are as follows:

Tutoring Company Business Plan - Sales Monthly

6.4 Sales Yearly

Our yearly sales, as forecasted by our experts, are as follows:

Tutoring Company Business Plan - Sales Yearly

6.5 Sales Forecast

Considering the quality of our services and our unparalleled client service, our sales pattern is expected to increase with years. By analyzing our market segmentation strategy, our experts have forecasted in detailed the following sales on a yearly basis which are summarized in the column charts.

Tutoring Company Business Plan - Unit Sales

The detailed information about sales forecast, total unit sales, total sales is given in the following table:

Sales Forecast   
Unit SalesYear 1Year 2Year 3
Admission tests preparation1,887,0302,680,3202,588,240
High School tutoring802,370815,430823,540
Undergrad tutoring539,3207702301,002,310
Individual tutoring265,450322,390393,320
TOTAL UNIT SALES3,494,1704,588,3704,807,410
Unit PricesYear 1Year 2Year 3
Admission tests preparation$140.00$150.00$160.00
High School tutoring$600.00$800.00$1,000.00
Undergrad tutoring$700.00$800.00$900.00
Individual tutoring$650.00$750.00$850.00
Sales
Admission tests preparation$2,149,800$2,784,000$3,383,200
High School tutoring$120,050$194,500$268,500
Undergrad tutoring$50,110$71,600$93,000
Individual tutoring$139,350$194,600$249,850
TOTAL SALES
Direct Unit CostsYear 1Year 2Year 3
Admission tests preparation$0.70$0.80$0.90
High School tutoring$0.40$0.45$0.50
Undergrad tutoring$0.30$0.35$0.40
Individual tutoring$3.00$3.50$4.00
Direct Cost of Sales
Admission tests preparation$989,300$1,839,000$2,679,700
High School tutoring$66,600$119,900$173,200
Undergrad tutoring$17,900$35,000$52,100
Individual tutoring$19,400$67,600$115,800
Subtotal Direct Cost of Sales$1,294,100$1,699,400$2,104,700

Personnel plan

Personnel plan is important since the success of any business significantly depends upon its employees. It is never easy to estimate the number and type of staff needed for a company before it is even launched therefore it is better to seek the help of HR experts to get through this phase. However, you can also have a rough idea yourself before you decide on how to start your own tutoring service. Katie has developed the following personnel plan for starting a tutoring company.

7.1 Company Staff

Katie will act as the General Manager of the company and will manage its overall operations while the following people will be hired initially:

  • 1 Accountant for maintaining financial records of the center
  • 2 Sales Executives responsible for marketing and discovering new ventures
  • 10 Tutors for tutoring different subjects and courses
  • 4 Assistants for undertaking various day-to-day tasks in the center
  • 1 Technical Assistant for managing company’s web pages and social media accounts
  • 1 Front Desk Officer for acting as a Receptionist and receiving calls

All the employees needed to start a tutoring company will be hired by following strict testing procedures and will also be trained before onboarding.

7.2 Average Salary of Employees

The following table shows the forecasted data about the salaries of the employees for the next three years. These salaries are just an estimate and are also expected to deviate but the overall expenses will be more or less the same.

 Personnel Plan   
Year 1Year 2Year 3
Accountant$85,000$95,000$105,000
Sales Executives$45,000$50,000$55,000
Tutors$550,000$650,000$750,000
Assistants$152,000$159,000$166,000
Technical Assistant$87,000$94,000$101,000
Front Desk Officer$42,000$45,000$48,000
Total Salaries$152,000$159,000$166,000

Financial Plan

Just like the other plans, you must also prepare a detailed financial plan covering all financial aspects of your startup before you move on to starting a tutoring center. The financial plan should craft a detailed map about the costs of startup, inventory, payroll, equipment, rent, utilities and how these costs will be covered by the earned profits. Also, make sure to carry out a detailed profit and loss analysis before getting to think about how to start a tutoring company. The financial plan of Katie’s Tutoring Service outlines the development of the company over the next three years and is specifically developed to achieve the company’s short-term as well as the long-term objectives.

8.1 Important Assumptions

 General Assumptions   
Year 1Year 2Year 3
Plan Month123
Current Interest Rate10.00%11.00%12.00%
Long-term Interest Rate10.00%10.00%10.00%
Tax Rate26.42%27.76%28.12%
Other000

8.2 Brake-even Analysis

Tutoring Company Business Plan - Brake-even Analysis

 Brake-Even Analysis 
Monthly Units Break-even5530
Monthly Revenue Break-even$159,740
Assumptions:
Average Per-Unit Revenue$260.87
Average Per-Unit Variable Cost$0.89
Estimated Monthly Fixed Cost$196,410

8.3 Projected Profit and Loss

 Pro Forma Profit And Loss   
Year 1Year 2Year 3
Sales$309,069$385,934$462,799
Direct Cost of Sales$15,100$19,153$23,206
Other$0$0$0
TOTAL COST OF SALES$15,100 $19,153 $23,206
Gross Margin$293,969$366,781$439,593
Gross Margin %94.98%94.72%94.46%
Expenses
Payroll$138,036$162,898$187,760
Sales and Marketing and Other Expenses$1,850$2,000$2,150
Depreciation$2,070$2,070$2,070
Leased Equipment$0$0$0
Utilities$4,000$4,250$4,500
Insurance$1,800$1,800$1,800
Rent$6,500$7,000$7,500
Payroll Taxes$34,510$40,726$46,942
Other$0$0$0
Total Operating Expenses$188,766$220,744$252,722
Profit Before Interest and Taxes$105,205$146,040$186,875
EBITDA$107,275$148,110$188,945
Interest Expense$0$0$0
Taxes Incurred$26,838$37,315$47,792
Net Profit$78,367$108,725$139,083
Net Profit/Sales30.00%39.32%48.64%

8.3.1 Profit Monthly

Tutoring Company Business Plan - Profit Monthly

8.3.2 Profit Yearly

Tutoring Company Business Plan - Profit Yearly

8.3.3 Gross Margin Monthly

Tutoring Company Business Plan - Gross Margin Monthly

8.3.4 Gross Margin Yearly

Tutoring Company Business Plan - Gross Margin Yearly

8.4 Projected Cash Flow

Tutoring Company Business Plan - Projected Cash Flow

 Pro Forma Cash Flow   
Cash ReceivedYear 1Year 2Year 3
Cash from Operations
Cash Sales$40,124$45,046$50,068
Cash from Receivables$7,023$8,610$9,297
SUBTOTAL CASH FROM OPERATIONS$47,143 $53,651 $59,359
Additional Cash Received
Sales Tax, VAT, HST/GST Received$0$0$0
New Current Borrowing$0$0$0
New Other Liabilities (interest-free)$0$0$0
New Long-term Liabilities$0$0$0
Sales of Other Current Assets$0$0$0
Sales of Long-term Assets$0$0$0
New Investment Received$0$0$0
SUBTOTAL CASH RECEIVED$47,143 $53,651 $55,359
ExpendituresYear 1Year 2Year 3
Expenditures from Operations
Cash Spending$21,647$24,204$26,951
Bill Payments$13,539$15,385$170,631
SUBTOTAL SPENT ON OPERATIONS$35,296 $39,549 $43,582
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out$0$0$0
Principal Repayment of Current Borrowing$0$0$0
Other Liabilities Principal Repayment$0$0$0
Long-term Liabilities Principal Repayment$0$0$0
Purchase Other Current Assets$0$0$0
Purchase Long-term Assets$0$0$0
Dividends$0$0$0
SUBTOTAL CASH SPENT$35,296 $35,489 $43,882
Net Cash Flow$11,551$13,167$15,683
Cash Balance$21,823$22,381$28,239

8.5 Projected Balance Sheet

 Pro Forma Balance Sheet   
AssetsYear 1Year 2Year 3
Current Assets
Cash$184,666$218,525$252,384
Accounts Receivable$12,613$14,493$16,373
Inventory$2,980$3,450$3,920
Other Current Assets$1,000$1,000$1,000
TOTAL CURRENT ASSETS$201,259 $237,468 $273,677
Long-term Assets
Long-term Assets$10,000$10,000$10,000
Accumulated Depreciation$12,420$14,490$16,560
TOTAL LONG-TERM ASSETS$980 $610 $240
TOTAL ASSETS$198,839 $232,978 $267,117
Liabilities and CapitalYear 1Year 2Year 3
Current Liabilities
Accounts Payable$9,482$10,792$12,102
Current Borrowing$0$0$0
Other Current Liabilities$0$0$0
SUBTOTAL CURRENT LIABILITIES$9,482 $10,792 $12,102
Long-term Liabilities$0$0$0
TOTAL LIABILITIES$9,482 $10,792 $12,102
Paid-in Capital$30,000$30,000$30,000
Retained Earnings$48,651$72,636$96,621
Earnings$100,709$119,555$138,401
TOTAL CAPITAL$189,360 $222,190 $255,020
TOTAL LIABILITIES AND CAPITAL$198,839 $232,978 $267,117
Net Worth$182,060$226,240$270,420

8.6 Business Ratios

 Ratio Analysis    
Year 1Year 2Year 3Industry Profile
Sales Growth4.35%30.82%63.29%4.00%
Percent of Total Assets
Accounts Receivable5.61%4.71%3.81%9.70%
Inventory1.85%1.82%1.79%9.80%
Other Current Assets1.75%2.02%2.29%27.40%
Total Current Assets138.53%150.99%163.45%54.60%
Long-term Assets-9.47%-21.01%-32.55%58.40%
TOTAL ASSETS100.00%100.00%100.00%100.00%
Current Liabilities4.68%3.04%2.76%27.30%
Long-term Liabilities0.00%0.00%0.00%25.80%
Total Liabilities4.68%3.04%2.76%54.10%
NET WORTH99.32%101.04%102.76%44.90%
Percent of Sales
Sales100.00%100.00%100.00%100.00%
Gross Margin94.18%93.85%93.52%0.00%
Selling, General & Administrative Expenses74.29%71.83%69.37%65.20%
Advertising Expenses2.06%1.11%0.28%1.40%
Profit Before Interest and Taxes26.47%29.30%32.13%2.86%
Main Ratios
Current25.8629.3932.921.63
Quick25.428.8832.360.84
Total Debt to Total Assets2.68%1.04%0.76%67.10%
Pre-tax Return on Net Worth66.83%71.26%75.69%4.40%
Pre-tax Return on Assets64.88%69.75%74.62%9.00%
Additional RatiosYear 1Year 2Year 3
Net Profit Margin19.20%21.16%23.12%N.A.
Return on Equity47.79%50.53%53.27%N.A.
Activity Ratios
Accounts Receivable Turnover4.564.564.56N.A.
Collection Days9299106N.A.
Inventory Turnover19.722.5525.4N.A.
Accounts Payable Turnover14.1714.6715.17N.A.
Payment Days272727N.A.
Total Asset Turnover1.841.551.26N.A.
Debt Ratios
Debt to Net Worth0-0.02-0.04N.A.
Current Liab. to Liab.111N.A.
Liquidity Ratios
Net Working Capital$120,943$140,664$160,385N.A.
Interest Coverage000N.A.
Additional Ratios
Assets to Sales0.450.480.51N.A.
Current Debt/Total Assets4%3%2%N.A.
Acid Test23.6627.0130.36N.A.
Sales/Net Worth1.681.290.9N.A.
Dividend Payout000N.A.