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How to build a home-based business frugally

By Gary Foreman

The New Frugal You
New Frugal You columnist Gary Foreman
Gary Foreman is a former financial planner who currently edits The Dollar Stretcher website and newsletters. He writes "New Frugal You," a weekly Q&A column about frugal living, for CreditCards.com

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Question for the CreditCards.com expert Dear New Frugal You,
I'd like to start a home business, tutoring grade schoolers and high schoolers in math. I was a teacher's aide until this school year. I really enjoyed working with the kids, especially helping them learn math. I'm on a very limited budget and need to start this off on a shoestring. Can you help me create an extra source of income? -- Newly Retired Rita

Answer for the CreditCards.com expert Dear Rita,
That's an excellent idea. Often a small home-based business is a good way to provide some extra income, and usually you can do it without risking a lot of money. Let's examine some of the important steps of starting any home business and how they apply specifically to you.

You already meet the first criterion for home business success: You've chosen a business in a field you already know. The advantages are obvious. In your case you've been around a classroom, you know what teachers expect from students in math, you understand how kids learn and what can keep them from learning.

So instead of taking time learning these lessons for yourself, you can concentrate on the business questions you'll face.

That leads us to the second criterion. No business succeeds without customers. Finding customers may be the most important thing that you do as a new business. No matter how good your product or service is, you'll fail if you don't have sales and revenue.

Unlike a bigger business, a home-based startup can have a fairly simple marketing plan. But you do need to have a method for attracting customers.

Begin by looking at your product or service and the people who will be your buyers. In your case you'll need to impress parents who are concerned about their child's education. That's a decision that hits close to home, so you'll want to make your marketing approach as personal as possible. The key will be getting in front of parents and convincing them to believe in you.

Talk to teachers, especially those that know you well. Get a brief recommendation from as many as you can. Parents generally respect and trust teachers.

Attempt to get an audience with the assistant principals of schools near you and see if you can persuade them to become allies. Find out whether they ever refer students to tutors, and if they have a listing of approved tutors.

Learn about and contact home-schooling groups. You'll find parents who are concerned with their child's education, but who might not feel competent in some subjects. That's where you come in: filling in where a parent feels a need.

Use social media to announce your tutoring business. Ask your friends to tweet or post your new business on their Facebook pages and Twitter accounts. Social media tends to be more relational and personal, so it's a good medium for you.

Print some fliers with tear-off stubs containing your contact info. Think creatively in distributing them. In addition to the usual bulletin boards in stores and libraries, consider passing them out at Little League games and other events where students gather.

Highlight any credentials you have, any degrees or certifications you've earned and past work experience with kids or in the subjects you'll be tutoring.

You'll need to set your rates. Research what other tutors in the area are charging. Take into consideration their education and experience. Your rates will need to be competitive with other tutors.

One way to get up and running quickly is to charge a little less to start. But remember that you may be working with a student for years and it can be hard to raise a rate once it's set, so don't start too low. One way around that would be to offer the fourth session free if they'll prepay the first three. After that keep to your standard rate.

The final criterion is being able to control the business with a minimal investment of time, money and effort. Fortunately, this is easiest for a home business.

Your startup expenses should be minimal. It's not like you need to open an office. To start all you really need is a quiet place to tutor your students. Your living room or study will do.

When you get a new student find out what textbook is being used. Get a copy of it. Try the library first, but buy it if necessary -- even if it's a previous edition. That will allow you to do proper preparation for your sessions.

At the end of the school year contact the district about old books. Many sell or give away books that are worn or out of revision. Also check out online sources. Many used books are available online for reasonable prices.

Other tools such as flash cards or visual aids can usually be homemade fairly inexpensively.

Keep your accounting simple to start. Create one list of money coming in, another of any that's owed you but unpaid (keep this list very short). And a third list of money that you've spent for supplies, etc. That last one will be very valuable at tax time, which unfortunately will now roll around quarterly instead of annually. If you want, you can use one of the basic business software packages available. But resist getting bogged down with a fancy system.

Meet those simple criteria and your chances of success are fairly good. Even one regular student will bring in some income that you didn't have before. And just a handful each week could mean a nice steady home business. That's the frugal way to start a tutoring business.

See related: Tips for starting a tutoring business, Video: Small business owners become the new pawn stars

For more than 35 years, Gary Foreman has worked to help people get the most for their money. Prior to founding The Dollar Stretcher.com, he was a financial planner and purchasing manager. Gary began The Dollar Stretcher website and newsletters in April 1996. Today the website features more than 6,000 articles on different ways to live better for less. Gary has been interviewed by The Wall Street Journal, The Nightly Business Report, USA Today, Reader's Digest and other newspapers and magazines. Gary answers a question about a budgeting or saving issue from a CreditCards.com reader each week. Send your question to The New Frugal You.

Published: July 26, 2012



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