Do I Need To Be Talked Out Of This?

[dr_pretentious]

A friend has suggested that we might start a tutoring business together. She's got the math and science chops, and an almost-finished dissertation in an Ed.D. program, so we could be full-service shop. With the right office space in, say, Highland Park, I wouldn't have to drive all over the place to make house calls. Highland Park is full of grad students who are used be being paid starvation wages to tutor at the university, and the university budget cuts are leaving some of those folks with no way to pay the rent at all, so it would be easy to cherry pick experienced hourly employees at a significantly better wage than they're used to getting. Highland Park is also full of prosperous parents who are ambitious for their children, parents who are falling all over themselves trying to find a way to fill the gap between what the schools can do and what their kids need.

Could it possibly take more time to run a tutoring business in one spot than I'm currently spending driving from client household to client household? Am I delusional to think this could be a good plan?

Anyhow, S and I aren't going to do anything rash about this. She's waiting to find out if the university will reappoint her on a budget line with health insurance, which she should know around April, and I'm still neck-deep in the March Writer's Weekend event. Oh, and I expect to be significantly under the weather for at least another week. Meanwhile there are plenty of brass tacks questions to investigate. How much does a square foot of non-storefront office space a block off the main drag in Highland Park cost per month? What kind of insurance do you need for a business that involves having other people's minor children on premises without their parents? That kind of thing.

Comments

[doverider.livejournal.com]

Sounds like an Awesome idea! I just wish you guys were doing this when my Sarah was little!! I'dve been your first customer!!

Go for it!

BTW - Sarah is connected with lots of HP folks and could probably help connect you to a space, a realtor, or connections thereto.

[travelingtim.livejournal.com]

A friend of mine created one last year in Philadelphia and it was her only source of income for most of the year. If you want to chat with her about lessons learned and such, I can give you her LJ names.

[shellyinseattle.livejournal.com]

Sounds like a good idea to look into at least. If your fixed costs aren't too high, then you might as well try it.

[rednikki.livejournal.com]

My other half will comment on this shortly. He's both driven around tutoring and sorta-run a tutoring business, so he'll have more to say on it.

[harlequinaide.livejournal.com]

I don't want this to be discouraging, although it may sound that way. I think it's a wonderful idea, and I've considered going into business like this for myself. There are some things that I want to warn you about, especially since I've been up close and personal with this business for the last four years, as a tutor and as a manager.

I've done in-home tutoring and on-site. For the past year, I've watched someone try to run a tutoring business in a reasonably wealthy small city (Kevin Costner lives down the street from the tutoring center; our clients tended to be Investment Bankers to the Stars). She had twenty employees, and the tutoring center was open for four-six hours a day, Monday Through Saturday (2-8 M-F, 10-2 Sat).

The woman who ran it didn't tutor. All she did was run the business, so that those of us who were tutors could focus entirely on teaching. She didn't have much help, just an office manager. She did all the billing and marketing herself. She worked twelve hour days and never seemed to have everything done. And, remember, she didn't tutor.

This place did homework help, all ages and grades. There were usually five to ten students at any given time, and she charged $60 an hour. Tutors were paid $20. She barely broke even. I know, because I watched her lay people off and beg her ex-husband for his child support. Her sons were both in high school, and would often call at 7pm asking where she was, because they never saw her.

At the place I worked before, they did only SAT prep (other tests too, but mostly SATs). They started as a door-to-door business, and were still that way when I worked there. They employeed about 200 tutors and had made the owner reasonably wealthy. However, they also wrote their own text book, which is where I think a lot of that came from. The tutoring was only about half their business. They charged $49 an hour and paid $18.

There are insurance issues (your local insurance agent will know more about that), and you may also have to get background checks for your employees. There is, honestly, a lot more that I could say about this, but I feel like this is coming out really negative.

If you love marketing and running a business, go for it. If you love teaching, I wouldn't recommend it. I have a number of friends who have done it, though, including one who runs a tutoring business out of a storefront in Boston. If you want some more hands-on advice, instead of my second-hand observations, I'd be happy to put you in touch.

[sligoe.livejournal.com]

It's a great idea. You will need someone to deal with the garbage that doesn't involve teaching. Were I closer, I'd offer to assist with that---it seems to be my forte. I think you would also need to have an accountant or finacial advisor---someone to deal with the issues of taxes, benefits being paid to employees (medicare, health insurance, etc) unless you're running a completely 1099-driven shop, then you might not need someone with years of experience (and of course, wanting the commensurate remuneration!)

Sounds like you may benefit from a small-business consult with the local agency that handles that in your area. Business plans are also a good idea to investigae---the web has lots of information about lots of that sort of thing.

Whatever you decide, good luck. I think it's a worthwhile endeavor. Schools nowadays don't seem to be meeting half of the kids' needs, and parents are out working their butts off to support the kids, so it's a niche that is just waiting to be filled.

[citabria]

Wow. I can't help wondering -- from what you can see -- how efficient are the office administrator's 12-hour days?

As someone who helps run a small business (law), I can attest that dealing with the administrative parts is a huge time drain, or at least it feels like it. Then again, I'm not particularly fond of dealing with mail and such at home, so it's no surprise that I'm not loving it in the office (and Steve is even worse).

Granted, I don't do marketing, but 12 hours of administrative tasks a day sounds ... off. I can see 1-2 hour mail/bills, 1-2 hours employee-related stuff, 1-2 hours billing ... but more than 4 hours of marketing and/or other stuff a day? I'm having trouble seeing where her time was going. This isn't a criticism -- I'm just really curious where the rest of her time went, because there may be an area that I'm not seeing.

Jumping a level back to the main question, I can give you a bit of info about insurance. You'll undoubtedly need Commercial General Liability (CGL), which is basically business property coverage: if someone slips and falls while walking through your office, GGL will cover it. You might or might not need to buy Workers' Compensation Insurance for your employees, even if you're paying them as consultants (1099s) instead of on payroll. Whether tutors working out of a central office would be considered "employees" under the Workers' Compensation Law is a question that I'd rather not start hypothesizing about, especially since NJ law may be different than NY in that regard (and I'm not even sure how they'd make out in NY).

There may be additional insurance -- or levels of insurance (i.e., additional coverage added to your CGL) that you'd need because of the minors issue, but I've never seen a case involving that type of business, so am totally unfamiliar with it.

Please feel free to use me as a sounding board. Having basically co-run a small business for over 10 years now, I have some experience with this stuff. On top of that, I'm just great at doing cost/benefit analyses. ;)

[harlequinaide.livejournal.com]

Wow. I can't help wondering -- from what you can see -- how efficient are the office administrator's 12-hour days?

Sorry, that was confusing. The OA works from 1-8pm, primarily doing scheduling, which involves putting students with every tutor (a total of thirty-four one hour slots, every week), calling every student to remind them to show up and calling every tutor to tell them their hours for the next day. He also handles the phones, which ring constantly with new clients or last minute schedule changes; oversees the students who are there but aren't being tutored (because they're waiting to start or to be picked up), which means he's constantly baby-sitting; writes correspondence; scores disgnostic tests; and keeps the daily life of the office running.

The person who works 12 hours days is the woman who owns the company. She does the billing (including the parents who don't want to pay or want to fight over their bill), hires new tutors constantly due to turnover (part time businesses all have this kind of turnover), handles marketing (considering how seasonal the work is, marketing is never-ending), manages payroll (for twenty employees, all working different part-time schedules and whose hours need to be balanced against whether or not their students have paid for those hours), maintains relationships with the local school districts and holds discipline meetings with parents, students and tutors. There are more things she does that I'm not remembering right now.

It's not just bills and marketing, sadly, and it's far more than 1-2 hours of employee related stuff. I hope this helps; I think its that a part-time tutoring firm is different than a full-time business with a regular schedule. There is a lot more hands-on work.

[dr-pretentious.livejournal.com]

You have put your finger on the very things I'm least experienced with.

A friend who runs a small business recommended his accountant and spent an afternoon talking to me about how he handles the tax/payroll/accounting stuff. I'm quite certain that we'd need an accountant. I know I'm not up to that part of the job.

There's an organization of women entrepreneurs in New Jersey that offers free seminars on business plans, marketing, keeping books, etc. Since we'd need a business plan to get any kind of loan, I'll probably end up going to some of those seminars while S and I try to figure out what our option are.

Thanks for your kind wishes!

[dr-pretentious.livejournal.com]

That would be great. Thank you!

[catpaw67.livejournal.com]

I have a lot of insight into partnerships and entrepreneurial stuff. If you want, we could talk more about this in person or in e-mail. Or even on the phone. Let me know if you want to talk! If I have time, I'll post some of it here.

[dr-pretentious.livejournal.com]

Thank you for laying out such a comprehensive breakdown of what it would take. When S and I next meet to make lists and charts and doodles in our quest for a decision, I'm going to have hard copy of your replies in my hand, so we can figure out how we would get all those tasks done.

I worked briefly for a tutoring company of about the same size as the one you're describing, and the proprietor there was approximately as harried. But then, my boss was so problematic as a teacher and as a human being (she was an habitual, unrepentant liar who was verbally abusive with the students and her office manager), I figured most of her management problems were results of her personal folly. In light of your description of your boss's work, it sounds like the position accounts for more of my boss's stress than I had imagined.

After talking to a local friend who has a small photography business, I'm pretty sure I would hire an accountant who would handle payroll as well as taxes, which would add to the overhead but, hopefully, reduce stress a bit.

As a freelancer, I've seen how the student turnover is high--a kid who comes to prepare for the SAT then takes the SAT and moves on, a kid who needs help figuring out his college applications gets into college and moves on. And summers, winter holidays, and final exam weeks can be pretty lean. Would you say those fluctuations are better or worse when you have several people working in the same shop? The tutoring business where I used to work handled the summer slump by offering intensive courses. Their grammar crash course raked in the bucks. What does your employer do during summers?

My old boss charged $120/hour and paid the teachers $21, and that in a town much less prosperous than the one where you work. Somehow, the market bore it. She always had more students than she could retain enough employees to teach. Right now, I'm charging $60/hour for face time, but when I add up the driving, the wear on the car, the gas, etc., for all practical purposes I'm making half that. It's still better than the going rate for copyediting, but not by much.

When you've considered starting a business like this yourself, what were the benefits in your cost/benefit analysis?

[dr-pretentious.livejournal.com]

I would love to pick your brain about this stuff. My recollection is that your work arrangement was flexible enough to allow you to spend a lot of time with your mom while she was ill, and the flexibility to trade off who has the helm at work when family demands spike is one of the things S and I find attractive about the idea of going into business together. Is that flexibility real, or is it just an illusion of greener grass?

[dr-pretentious.livejournal.com]

That would be great. You were one of the first people I thought of to ask.

It could be an excuse to meet for dinner. Weekday evenings, I'm always teaching late enough that getting out to your neck of the woods is hard, but we don't have any travel planned on weekends for a while. Phone is also good. I usually have a slow patch between my adult students, who tend to finish up at noon, and my younger students, who don't get out of school until 2:30.

I've been thinking a lot about something Penn Gillette said in an interview--that no matter how much you love what you do, if you go into business with someone else to do it, you should handle that partnership just as if you were opening a dry cleaning storefront together. You and your partner will be close friends, inevitably, even if you didn't start out that way, but if you go into business with someone because you're idealizing the person or the work, the partnership will break. Quite apart from how much I like picturing Penn & Teller ringing up people's shirts, I think my friend S is someone I could do a lot of dry cleaning with.

[harlequinaide.livejournal.com]

Thank you for laying out such a comprehensive breakdown of what it would take.

It's my pleasure; I'm enjoying thinking deeply about this. I think you'd be great at this, fwiw.

$120/hour seems excessive. It's interesting that the market bore it, but still... my college students aren't paying that much per course! (To be fair, they pay $60 and I make about that, but 1:1 is different.) It does sound like your boss was abusive, regardless of the pressure. My own boss was more like a mother: instead of yelling she would say, "I've very disappointed in you," and shake her head sadly.

For me, the cost/benefit was all about not driving all over creation. If rental spaces are cheap and you don't have too many employees, I think this could be fine. Hiring an acountant would help a lot (my boss has been burned, once by a former office manager and once by a former business partner whom she bought out, and doesn't trust other people to handle the money). Also, being my own boss was attractive, for a few minutes. I decided not to do it because I have no interest in running a business; it's teaching that I love.

The summers were awful. We did week long intensive camps, offerered "Buy 2 hours get 1 free" deals (the free one happened on Friday, because Friday was always dead, anyway) and ran chess clubs. One thing that I wanted to do but we never got off the ground was to run courses targeted at the reading lists of local high schools. A class of three football players who otherwise aren't going to read their summer reading would have been something of a cash cow, I think.

The value of staying in one place for five hours and having the students come to you can not be over-stated. If you're in this because you love tutoring (and not because you want to run a business), my advice is this:

1) Keep it small. Don't hire too many employees, or you'll end up spending all your time on them and none on teaching.

2) Establish relationships with local high schools. They can't recommend one tutoring place over another, but the guidance office can (and does) maintain a list of local facilities, and if parents ask they provide it. Also, one of our biggest programs was a yearly HSPT prep class at a local high school, geared towards people who wanted to get in there. It worked for them and built our customer base. Also, if you have a relationship with the school they will often give you the reading lists. This is a huge help in planning out curriculum.

3) Prepare to do test prep. About half our business was test prep, and that's only going to get bigger. People need it year round, and parents will tell their friends, so that even when one student is gone, her younger brother and best friend will sign up.

4) Any new business loses money for the first three years (according to what I've read), and they eat up pretty much all of the owners' time, especially in the beginning.

That's it. Like I said, I could see you being great at this, and I don't want to be all doom and gloom. If my boss didn't love it, she would have shut the place down years ago.

[reynaud.livejournal.com]

It sounds like there are others out there with much more business experience than I, so most of those issues can be dealt with by them. I would only add that from what I can tell of beginning businesses, they take up a lot of time. As in, for several years at least, it might just take up most if not all your time. Of course, others would be better able to address that.

One other thing to think of if you hire others to help with the actual tutoring: quality control. How do you ensure that the tutors you hire are going to being giving your customers the quality of tutoring you would find acceptable.

Alternatively, maybe you and your friend just want to rent an office for the two of you to tutor in, which might make all the business stuff go easier.

In any case, good luck on whatever your final decision is. I figure that if you actually stuck through to get a phud (Ph.D.), then you have the stubborness to succeed at setting up a business. :)

My .02

[rianders.livejournal.com]

My brother's family runs a tutoring center and it's not always been easy. However, the demand is usually high, and since "no child left behind" is leaving children behind there has been an up tick in demand. The following are the toughest moments the business has weathered:


The original owner was my brother's father in law. He died tragically, and all the business and financial accounts were in his name. So no one had access to the money to run the business for a while.

They lost there location due to increased rent and at the last minute found a new place for instance. One of their students parents got them help at the last second.

The three months of summer almost bankrupt them one year. There were less students and many of the patrons decided not to pay until fall. They didn't budget from the excess of the normal year to cover the lack of income for summer.

Even with these problems the business has continued on and they maintain a good reputation.

My experience from continuing education has shown don't lose money on each student and then make up for the loss by having more students. This has doomed many good ideas and programs.

.02

Flexibility

[(Anonymous)]

As a small service-oriented business owner I can tell you that the flexibility is real but it comes at a price.

The up-side is that sick-leave and family leave (and vacation time) are all at your own discretion and as short or as long as you deem necessary. The down-side is that you are not getting a paycheck while you are gone unless you have enough employees to keep the office running. And as a business owner you are typically the last person to get a "paycheck". First you have to pay the business and your employees (if you have any), and then if there is enough money you can pay yourself; it's one of the key points that gets hidden in the phrase, "Most new businesses lose money for the first two to three years". A good resource for planning a new business is SCORE (Service Core of Retired Executives). They can offer you a personal mentor, a business resource library, and classes for everything from how to write a business plan to basic bookkeeping. They can also often help you work your way through the various licensing/permitting processes that are usually a combination of local, state, and federal bureaucracies revolving around different business types.

Starting your own business can be an adventure or a slog depending on your personality and preparedness level, so as you and your friend explore your idea take your Selves into account. As the gentleman above asked... how much time do you want to spend teaching and how much of your time do you want to spend managing your business?