Identifying Your Tutoring Market Niche

When starting a tutoring business it’s important to find an attractive niche to establish your company. Finding the right niche is important for your new business because it allows you to avoid competing head on with more established tutoring companies and will allow your tutoring business to earn higher profit margins in the early stages.  These higher profit margins are essential for funding the expansion of your tutoring business.

Tutoring is a competitive business where word-of-mouth and reputation play an important role in attracting students. For a brand new business to compete directly with established tutoring companies it would likely need to spend more on advertising to get the same number of students since established businesses can rely on word of mouth for attracting new students. As a result, if a new tutoring business charges the same rate as established tutoring companies it will likely generate less profit because advertising expenses are higher on a relative basis. This puts the new business at a disadvantage right from the start.

The solution is to find market niches that can give your tutoring business higher profit margins.  The great thing about the tutoring business is that you can start with a small business in a highly profitable niche and then expand into other more competitive market segments. Higher profit margins allow you to invest more money into growing your business which will allow you to earn more profits down the road. The path to higher profit margins is to find an under-served niche in your market and once established expand into adjacent markets.

How do you find an attractive niche? Basically you want to identify tutoring segments where demand exceeds supply. Excess demand will allow you to charge customers higher rates and will help you maximize your profit margins. Here are a few ways to identify market niches where demand exceeds supply:

  1. Research tutoring companies in your area and look for types of tutoring that are offered by only a few or no tutoring companies. These are potentially under-served market segments.
  2. Look for customer segments that are under-served by tutoring companies in your market. Generally for new tutoring businesses you will want to focus on higher income customer segments since they can afford to pay higher rates.
  3. Look for age groups that are under-served in your market. Pay attention to school enrollments at elementary, high school and university in your area to determine which markets are growing and may be under-served.
  4. Look at tutoring directories for your area and see which types of tutoring charge the highest rates.

These suggestions above can help you spot some potentially attractive niches; however, you will never know for sure until you begin marketing your tutoring services. It’s important to pay attention to your initial results and be adaptable in case you need to shift your focus to a different tutoring segment.  If one segment doesn’t generate enough interest from customers or doesn’t generate high enough earnings you should continue looking for more profitable niches.  Once you’ve found a good niche and have begun generating profits, you can begin evaluating other niche markets to enter.

After your business has established a reputation and you have a good base of students that bring in new customers through word of mouth, you will be in a much better position to enter larger and more competitive market.

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