How to Start an Education Business

Conduct a feasibility study to evaluate the viability of your idea -- is there demand for a prep school (online or brick-and-mortar), tutorial service, private school, branded kindergarten franchise, e-learning institute, language school or vocational training institute? The study must contain your business model; target market in terms of student enrollment; input cost per student, including tutors and study material; education software and secure connectivity tools; information on competitors; and estimated fee, revenue and profit per student.

Expand your feasibility study and develop a business plan. If you cannot afford a private consultant, the U.S. Small Business Development Center provides this service free of cost. File legal, registration and tax documents. The sale of services, such as education, is taxable in some states. Contact your local secretary of state's office for details and regional application forms. A complete list of forms required to start a small business is available online for a fee from such providers as Hoover's.

Register with the U.S. Department of Labor if your firm has employees and obtain an employer identification number from the Internal Revenue Service. If you are the sole provider, your Social Security number should suffice. Occupational licenses are required for teachers and child-care operators. For details, contact the U.S. Department of Education. Refer to the "Guides for Private Vocational and Distance Education Schools" from the Federal Trade Commission Web site about accreditation and approval criteria for your education service.
Obtain compliance under the Children's Online Privacy Protection Act if you operate a commercial Web site or online service targeting children under 13 that collects personal information from them/about them.
Pitch your business plan to venture capitalists or private-equity investors that specialize in funding education businesses. These include Sequoia Capital, Matrix Partners, Intel Capital and Benchmark Capital. Your education startup is exempt from registration with the Securities and Exchange Commission if you privately raise funds. You also are exempt if you intend to raise public funds not exceeding $5 million in a one-year period.

Lease/purchase office space. Enter into contracts with vendors. Recruit a high-performance team that includes a lawyer, an accountant, IT and marketing professionals, and administrative staff. Hire curriculum developers and tutors with a proven track record of success. Develop solid evaluation techniques to measure teaching effectiveness on a regular basis. If you do not own the tutorial content, you must enter into a licensing agreement for the transfer of intellectual property from an educational institution.

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