Do you want to start a driving school? If YES, here is a complete guide to starting a driving school business with NO money and no experience plus a sample driving school business plan template. Before you can be given a driver’s license which permits you to drive legally in the united states, you have to be able to show a certain level of proficiency in driving. Many people have had their driver’s licenses unapproved, delayed or revoked due to poor driving skills.
This is why driving schools have become a very important part of the American society as they help intending drivers to learn all the basics of driving so that they can get their drivers licenses easily. If you are looking to set up a driving school business in the United States, this article is a complete guide with details on how to go about it.
14 Steps to Starting a Driving School Business
Table of Content
- 2. Conduct Market Research and Feasibility Studies
- 3. Decide Which Niche to Concentrate On
- 4. Know Your Major Competitors in the Industry
- 5. Decide Whether to Buy a Franchise or Start from Scratch
- 8. Discuss with an Agent to Know the Best Insurance Policies for You
- 9. Get the Necessary Professional Certification
- 10. Get the Necessary Legal Documents You Need to Operate
- 11. Raise the Needed Startup Capital
- 12. Choose a Suitable Location for your Business
- 13. Hire Employees for your Technical and Manpower Needs
- 14. Write a Marketing Plan Packed with ideas & Strategies
1. Understand the Industry
According to a research carried out by IBIS World, the driving school industry in the United States generates an annual revenue of about $10 billion US dollars and employs about 322,809 people. The research also revealed that there are about 167,255 businesses in the industry.
Although the industry witnessed a negative growth of -1.4% in the last five years (2011-2016), industry forecasts have shown that the driving school industry is expected to witness a continuous growth between 2016 and 2022 especially in its tutoring and test preparation segment. This is due to an increase in per capita disposable income which has led to a growth in the number of students enrolling in discretionary services.
The driving school business is a very lucrative one to start because it requires only minimal initial capital. The most important equipment required for the business are a few good vehicles, some trained and experienced drivers and the necessary business licenses and insurance for the business. Investors who are unable to afford brand new vehicles can make do with second-handed vehicles which can be bought at cheaper rates. If you have good credit, you can also get credit facilities to fund the purchase of vehicles to start your driving school business.
It is also possible to start a driving school business on a small scale (with 1-2 vehicles) and gradually scale up as you get more clients.
2. Conduct Market Research and Feasibility Studies
- Demographics and Psychographics
Teenagers between the ages of 16 and 18 who are learning to drive for the first time make up about 50% of people who require the services of driving school tutors. Adult drivers make up about 10% while commercial drivers account for another 30%.
The rest of the 10% is made up of immigrants from other countries who are looking to obtain the United States driver’s license so that they can be allowed to drive in the country, and drivers who are under court order to attend extra driving lessons usually due to reckless driving.
Each of these groups of people have different needs based on their lifestyles, driving history and level of experience. Most of the adult drivers have jobs and usually have very tight work schedules. This category of drivers are mostly only able to attend driving lessons during lunch hours or in the evenings after work.
Teenage drivers mostly attend driving schools during summer holidays or after school. Some high schools also offer driving education courses to students as part of their extra-curricular activities. The commercial drivers usually require a structured and more detailed course. This category of drivers are usually able to take driving courses during working hours.
3. Decide Which Niche to Concentrate On
The United States driving school business industry is one that encompasses a couple of niche businesses. If you are able to afford the start-up capital, you can offer all the services but if you are starting your driving school business on a budget, you can simply choose one or two niches to specialize in. Some of the niche areas within the industry that you can specialize in include:
This business involves preparing clients for driving tests. The aim of this business is to ensure that clients pass driving tests and get their licenses successfully.
Commercial Driving School
Commercial driving schools are for people who are looking to become professional drivers such as truck drivers, bus drivers and sometimes, mechanical equipment drivers.
This type of driving school focuses on training busy professionals with strict work schedules.
Private Driving Classes
Private driving classes are for clients who prefer personalized training services. This category of clients are willing to pay more to take classes when it is convenient for them.
Disabled Drivers Training School
This type of driving school focuses on rehabilitation and training of people living with disabilities.
Teenage Driving School
You may set up an independent driving school that focuses on training mostly high school students and teenagers or partner with high schools to offer driving lessons to their students.
Court Approved Driving Schools
Driving schools in this niche are specifically for training and rehabilitation of traffic offenders.
The Level of Competition in the Industry
Although the business is very lucrative but the United States driving school business is highly competitive. However, driving school operators have devised means to beat the competition by subcontracting the training services to trained professionals who would use their own cars, gas and insurance to train students in exchange for a percentage of the fees paid by the students. Revenue split rates are usually 60% for the instructors and 40% for the driving school.
4. Know Your Major Competitors in the Industry
There are a few well-known brands in the driving school business industry that have been able to stand out due to the excellent services they offer, their Pricing Strategy and their consumer relationships. Some of the brand names that stand out in the industry include:
- Success Driving School
- America Driving School
- Professional Driving School of the Americas
- Top Driver Driving School
- US One Driving School
- America Truck Driving School
- West Point Driving School
- Economic Driving School
- Olympic Driving School
- City Freeway Driving School
- Tustin Driving School
- AOC Driving School
- Drivers ED Direct
- Top Notch Driving School
- Allstate Driving School
- Harlem Driving School
- Gold Success Driving School
- Ride On Driving School
- Westwood Driving School
- Varsity Driving Academy
The driving school business industry in the United States has remained a substantial industry in the country with a lot of growth trends especially in recent years.
Recently, there has been a rise in the number of private, deep-pocketed companies investing in the industry. Some vehicle manufacturing industries are also coming up with their own drivers’ training school to ensure a more proficient and safer use of their brands. Some popular examples of well-known companies that have invested in the driving school business include Metlife (an automotive insurance company), General Motors and Ford Motor Company.
There have also been an improvement in service delivery and instructional methods in recent times. In the past, driving schools only used face-to-face interactional techniques along with film and video training. A few of them used simulators too. However, in recent times, the use of computer-based instruction, web-based instruction and the use of simulators are trending.
The increase in trends in the industry has led to improvement in service delivery no doubt but employment rate in the industry especially for driving instructors is expected to continue to reduce because as more computer-based instructional techniques are introduced, there would be less need for face-to-face interactional training and subsequently, less need for instructors.
5. Decide Whether to Buy a Franchise or Start from Scratch
One of the most important decisions you would need to make when starting your driving school business is whether you want to join an already established business or start yours from the scratch.
The good thing about joining an already established business is that you can ride on the existing goodwill and reputation of the business to get clients easily. You would also be able to receive extensive training and promotional materials from the franchise, which makes it easier for you to conduct your business.
However, buying a franchise might not be the best option for starting a driving school because it is not cost effective. You would have to pay some fees to the franchise regularly and you may have no control over the fees you would charge your students. You may also have very little or no control over some very important factors that may drive sales such as promotions, sales strategies and style service delivery.
If you want to be in control of your driving school business, it is much better to start from the scratch as you wouldn’t need to pay for the franchise and as such, you would be able to introduce strategies that you believe to be capable of bringing desired improvement to your business.
Buying a franchise is only a better option when you are trying to start your business in a very competitive market as you would be able gain competitive edge much more easily when you are operating as a well-known brand.
6. Know the Possible Threats and Challenges You Will Face
One of the major challenges of starting a driving school business in the United States is passing the driving tests that would qualify you as a driving instructor. There are three stages of examinations you would be required to undertake and pass and this would require a lot of study time, hard work and financial input. Acquisition of equipment and tools can also be a challenge especially when you want to offer training for truck drivers.
You may also need to be computer-savvy to be able to cope with the growing trend in the industry where driver training services are now web/computer based.
7. Choose the Most Suitable Legal Entity (LLC, C Corp, S Corp)
There are at least four business entity types that you can use for starting a driving school in the United States but your choice would largely depend on capital available.
If you are looking to start really small, the most suitable legal entity to use is Sole Proprietorship because you would be able to avoid excess startup fees that are required for other legal entity types.
Partnership is best for when you have minimal capital but can find someone who can join their resources together with yours to create the business. It is however important for you to have a prior agreement as to how decisions would be made and how equity, profits, loses and risks would be shared before you start the business.
Corporations and Limited Liability Company (LLC) is a good option for when you want to set up a large driving school possibly with branches all over the country. You will be able to sell shares of the business to the public and as such raise more capital and you would be able to separate business liabilities from personal liabilities.
8. Discuss with an Agent to Know the Best Insurance Policies for You
Insurance is very important for a driving school business because teaching inexperienced drivers how to drive a car may sometimes result in damages. Having the necessary insurance covers can help you protect your clients and also protect your business from huge liabilities which may affect the smooth running of your business or even lead to business bankruptcy.
Some of the insurance policies which are often legally required for starting a driving school business in the United States include:
Motor Vehicle Insurance
This type of insurance is designed to cover for damages or theft of the vehicles used in running your driving school business. In cases where your business also offers private driving lessons to clients, the insurance may also cover for potential damages to your client’s vehicles.
Approved Driving Instructor Insurance(ADI)
Driving instructor insurance covers for a number of things including off-road tuition, negligent tuition, loss of earnings and personal liability in case your business ever gets sued for compensation. Basically, it covers for anything that poses a threat to your means of livelihood as a driving instructor.
Public Liability Insurance
This covers your business in the eventuality that a member of the public is harmed or suffers a loss due to the activities of your business. Sometimes, accidents and damages are inevitable when training inexperienced drivers so this type of insurance is very essential for your business.
Employer’s Liability Insurance
If you are considering employing other people to help manage or run your business, it is also helpful to procure employers liability insurance to cover for possible negligence on their part.
Driving School GAP insurance helps to cover for the difference between the valuation amount and the amount outstanding on finance of the vehicles used to run your driving school business. This type of insurance is very helpful when buying vehicles for your business on hire purchase.
When running a driving school business, your vehicle is a very important business tool but your vehicle can sometimes breakdown and that may pose a threat to your business income. This type of insurance helps to ensure that your vehicle is fixed quickly whenever there is a breakdown. Some insurance companies may even provide an alternative vehicle to use for your business pending when your vehicle would be fixed.
9. Get the Necessary Professional Certification
Before you get a license to start a driving school in the United States, you would need to attend an approved driving instructor training program from an accredited training institution. The program would teach you more about traffic laws and would also help you to learn how to teach other people to drive.
Many states would require you to pass some examinations after the training program before you can be awarded a driving instruction license that permits you to teach driving independently.
There are also a few certification programs that you can undergo as a driving instructor. These programs are not mandatory but they can help you network with other driving instructors. One of the most popular certification programs for driving instructors is the certification program offered by the Commercial Vehicle Training Association for truck drivers training instructors.
10. Get the Necessary Legal Documents You Need to Operate
First, you have to be licensed by the Department of Motor Vehicles (DMV) before you can operate a driving school business in the United States of America. To qualify for a license, you would be required to meet the following requirements:
- You must be at least 21 years of age
- You must have a valid driver’s license for the state in which you wish to operate. The license must cover for the type of vehicle you intend to teach in and the license must not have been revoked in the last 2 years. You must also be able to display acceptable driving record.
- A high school diploma or equivalent of a high school diploma.
- You would also be required to take and pass a vision test and a road sign test.
Other legal documents required to run a driving school business in the United States include:
- Business Plan
- Certificate of Incorporation
- Insurance Policy
- Business License
- Federal Tax Identification Number
- Employer Identification Number(EIN)
- Sales Tax Registration Certification
- Sales Tax License
- Income Tax Withholding Certificate
- Unemployment Insurance Tax
- Zoning Variances
- Environmental and Safety Laws
11. Raise the Needed Startup Capital
Raising capital for any type of business is one of the toughest aspects of starting the business. If you are able to raise capital for the business successfully, you are halfway through the process of setting up your business.
There are a few ways to secure external funding for your driving school business but before you explore any of the funding options, you must ensure that you have a carefully written business plan that highlights the strength and earning potentials of your business. Some of the funding options that you can employ for this business include:
- Partnership- Bringing in a partner to contribute a portion of the capital in exchange for a share of equity or profit.
- Personal loan from friends and family.
- Vehicle hire purchase from car dealers.
- Business loans from your bank.
- Small Business Loans from the Small Business Association.
- Raising capital from private investors.
12. Choose a Suitable Location for your Business
Most locations in the United States already have driving schools due to the large number of people willing to learn how to drive therefore, before you choose a location for your driving school business; make sure you have a clear idea of who the competition(s) is, the type of services and incentives they offer and at what price.
You should also go for areas with a large number of high schools, community colleges, churches and community organizations that you can offer your service to or partner with to offer driving education services to their clients.
13. Hire Employees for your Technical and Manpower Needs
The most important tool needed for a driving school business is a vehicle that you would use to teach the students. You may start with a single vehicle or multiple vehicles if you can afford it. Vehicles used for driving school businesses are specially designed to allow the instructor take over from any point during the lesson so you should bear this in mind when purchasing vehicles for your business.
Apart from motor vehicles, you would also need a suitable office space, simulation equipment, computers, office desks and chairs, internet subscription, stationery, mobile phones and promotional materials.
You can start your business as a one-man operation with you operating as both the business manager and the instructor but if you want to set up a larger establishment, you would need to employ a few more hands including certified drivers, training instructors, secretary or receptionist, marketing officials, a bookkeeper and a social media manager to help improve your social media presence.
14. Write a Marketing Plan Packed with ideas & Strategies
Advertising is the soul of business and this saying holds true for driving schools. To be able to get the attention of potential clients, you must engage in aggressive advertisement especially in the first few years of commencement. You should start with having a website designed for your business with informational content. These contents when search engine optimized can bring the needed attention for your business.
The next thing to do is to have a strong social media presence. Social media can help you connect better with your clients and also make customer referrals easy because customers who have had good experience with your business can easily refer their friends to your business or put in a good word for you on their social media pages.
Testimonies and reviews are also very helpful so make sure you always ask your clients to leave testimonies so that you can use them in your promotional materials. Lastly, ensure that you adopt a competitive pricing strategy and continue to offer discounts and incentives to your clients so that they can recommend your business to other people.