With a market size of $14.4 billion in 2023, the US tutoring industry (incl. driving schools) has been growing at a CAGR of +0.4% over the past 5 years. But with over 197,000 tutoring centers and driving schools vying for a piece of the pie, what does this mean for tutoring businesses? How much can a tutoring business expect to earn, and what are the costs involved in setting one up?
In this article, we’ll break down the market segments, average revenues, startup costs, and profitability metrics for tutoring centers and driving school industry.
Using data from industry sources and insights from over 950 franchised tutoring businesses, we provide a comprehensive financial overview of the tutoring industry in 2023. Dive in to discover the potential of running a tutoring center and the factors that influence its profitability.
Tutoring Business Financial Model
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US tutoring centers and driving schools Industry Overview
As per IBIS, the tutoring centers and driving schools industry in the US represented revenue of $14.4 billion in 2023 and is expected to grow to $14.8 billion over the next five years.
Tutoring represents the largest share ($6.4 billion), followed by Exam preparation ($2.6 billion), driving schools ($1.8 billion), and other schools ($3.7 billion).
Yet, with over 950 franchised tutoring centers and driving schools’ providers across the country, the competition is also fierce.
What is the average turnover of US tutoring centers and driving schools?
Using the data from more than 950 franchised tutoring centers and driving schools, a tutoring business earns $337,000 in gross revenue per year on average.
Students under age 21 make up half of the industry revenue ($7.8 billion), followed by students aged 21 to 30 ($4.0 billion) and students aged over 30 ($2.6 billion).
While the trend towards offering flexible methods of instruction has existed for years, the COVID-19 pandemic forced tutoring centers or driving schools to adapt or face lowered attendance. Virtual driving simulations allow students to safely experience what it is like to be on the road, but most states still require at least 50 hours of supervised real-life driving as the student is learning.
Yet, not all US tutoring centers have the same yearly revenue. Logically, some will earn more than others because of many factors like per capita disposable income, government funding for primary and secondary education, number of college students, number of K-12 students, number of employees, and local and state government investment.
The average salary for a tutor is $24.09 per hour in the United States. Salary ranges can vary widely depending on many important factors, including education, certifications, and the number of years you have spent in the profession.
How much does it cost to start US tutoring centers and driving schools?
On average, it costs between $91,000 and $272,000 to start a tutoring center (or a driving school).
This includes various costs such as paint, carpet, tenant improvements, rent, furniture, signs, equipment and supplies, insurance, business license, name registration, professional services, phone and utilities, video surveillance, and related equipment, etc.
- Paint, Carpet and tenant improvements (12%): construction and / or remodelling costs to build or renovate the facilities.
- Rent and utilities (13%)
- Furniture, signs, Equipment, and supplies (18%): Video surveillance and related equipment
- Business Licenses, insurance (3%)
- Professional services (2%)
- Pre-open Marketing (5%): grand opening marketing expenses as well as local advertising.
- Working capital (3%): expenses while training, technology fees, etc.
- Additional Funds (44%): additional funds for the first 3-months is required (working capital)
How profitable are the US tutoring centers and driving schools?
There are various recurring costs involved in running a tutoring center and driving schools. The major expenses include wages and payroll including administrative and staff payroll costs. Brief details of expenses are as below:
- Payroll Cost (35%-40% sales): wages for office staff employees, wages, worker compensation insurance. In spite of the trends towards tutoring methods that are less labor intensive, wages have risen as a share of revenue as a result of weak growth and volatile per-employee day.
- Facility lease (10%-15%): includes rent.
- Other expenses (25%-30%): These include administrative expenses, licensing fees, maintenance costs, and other costs associated with running an office. Driving schools need strong insurance policies which are included in other costs.
| Profit and loss | Amount ($) | As % of Sales |
|---|---|---|
| Sales | $1,798,771 | 100% |
| Payroll | $(680,493) | 38% |
| Occupancy | $(267,854) | 15% |
| Other costs | $(476,582) | 26% |
| EBITDA | $373,842 | 21% |
Tutoring Business Financial Model
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