How to start a training company
Training is a growth area, and if you have a skill that people want to learn then you could it into a successful business venture
When starting a training company, these areas are essential to consider:
What is a training company and who is the business suited to?
As the internet and technological developments revolutionise the way we do business, employers are clamouring for new skills. And it isn’t just about IT – management and business skills are also in demand. Training has come to be seen as a way to boost business: in a survey conducted in 2014, the Chartered Institute of Personnel and Development found that two main changes anticipated by businesses over the next few years are more integration of learning and development activity with business strategy, and increased importance placed on monitoring, and on evaluating training and effectiveness.
The government has also set its sights on raising skills, with a focus on building on the skills of employees in small and medium enterprises. Also in a bid to help decrease the levels of unemployment and skills gaps, and to help small business invest in its workers, the government offers various funding schemes to business owners or people, such the flexible training opportunities, where entrepreneurs can get up to £5,000 towards employee training costs.
So if you think you have a way with people, have a skill you want to share and fancy life on the other side of the classroom, life as a trainer could be just what you are looking for.
This is a very diverse industry that can be started in just about any way you want. It can cover anything and everything that can be learnt on a course. It is because the industry encompasses a wide range of activities that trainers tend to specialise.
In practice, this tends to happen in one of two ways. Firstly, specialising in a particular skill, such as management training, or secondly, focusing on all skills but within a particular industry, such as travel or catering.
It may be worth considering seeing if you can get a Start Up Loan (external partner site, link opens in a new tab) to help you with financing, and mentoring to start this business idea. You'll also need to think about registering your business, either as a sole trader or as a company - if a company, then Smarta Formations (external partner site, link opens in a new tab) are an organisation that can help you set up.
If you are coming straight out of a job where you have worked in one industry for a long time, it may be tempting to become the training maestro for that sector. But before you take the plunge as an industry guru make sure that you have thought it through carefully, warns Jasper Gilder, who runs his own management training company Jasper Gilder Limited.
“There are two things with that business. First, you need to be constantly updating your skills base and, second, there is a finite market. If you are doing something like travel that is a big market. But what if you are in the film processing chemicals industry? You probably have 10 potential clients in the whole of the UK.”
This decision is likely to be dictated by your own skills and experience. It is also worth bearing in mind that this is an industry undergoing a huge rennaissance at the moment, so if you want to tailor your business to take advantage of this – take a look at our recommendations for the hot spots.
Who is a training and development company suited to?
At a glance it would seem that almost anyone and everyone has some knowledge or expertise to share and some experience of presenting. But this is not about talking in front of a room of people, it is about interpersonal and coaching skills.
It helps if you really believe in the benefit of training and empowering others through knowledge. If you are starting out on your own, your business is likely to be based on a few key clients coming back for repeat business and them referring you to others. This is particularly important as you are likely to be spending most of your day uncontactable so you don’t have a lot of opportunity to chase new clients. But referrals won’t happen unless you really have a passion for what you are doing and offer good customer service.
And you still have to prove that your fees are worthwhile, explains Gilder, because at the end of the day you are selling yourself and your experience to the customer.
“Unless you can demonstrate 10 years experience in training and management development then it isn’t worth it and nobody works for me unless they have 10 years experience.”
Some areas of the business are growing rapidly and it’s recommended that you consider some of these areas if you want to set up a training and development business. In particular, the growth of the internet and technological changes are driving the need to gain IT skills and then keep them up to date.
Colin Steed, chief executive of the Institute of IT Training, says it goes without saying that millions is spent on external IT training by companies every year. And that is just the tip of the iceberg as it doesn’t include any government sponsored training, Steed says.
It is easy to see the IT training industry as one growth area, but it isn’t all growing at a rate of knots. The more lucrative, and faster growing, end of the market, is technical training. This is being driven by advances in technology – particularly the internet and as more people move online. There is a constant need for web design and other programming skills.
Also within this bracket are very specialised courses catering to a niche, but lucrative, market. For example, there are few trainers that can offer courses in CISCO router systems. Also in demand are social networking and database skills trainign courses.
Training locations, types and styles
There are basically three ways to train people – onsite or bespoke courses; public courses; or distance learning. Although distance learning is a very traditional form of learning, it is rapidly coming into favour as the internet offers a new and convenient way for people to learn through e-learning.
This is the easiest way to get into the business. Essentially you will be offering courses – within your area of expertise – tailored to the needs of the client at their premises. So you may be setting up a company offering basic computer skills. Your client might ask you to tailor a day’s training for its general admin staff and a second day more tailored for its book-keeping staff who might need to use more financial programmes.
This is a very cheap and very easy way to get started. You can also offer a more tailored service to the client which can be a big selling point. But remember that you will have to be more flexible and act more as a consultancy service – so relationships will be important. If you are targeting small companies, it may also be difficult if they don’t have the appropriate facilities.
This is where you set up a programme of events and make them available to anyone willing to pay the price. It is quite a popular method of training for smaller companies, which either don’t have the facilities or staff numbers to make in-house training viable. The courses are generally slighter cheaper but also a little less tailored.
Running the business this way does present some additional considerations. Firstly, you will need to secure premises – either daily or on a more long-term basis. If you choose to run the courses from your own premises, this clearly requires some careful planning and a bigger upfront investment.
In addition, you should also think carefully about location. If you are asking people to come to your course – they won’t travel to a training room that is in the middle of countryside. “The trick is to be close to the centre but not so close that the rents are astronomical,” explains Henry Stewart of Happy Computers. Aldgate was chosen as their base precisely because it is close to the City of London without being prohibitively expensive.
Running public courses will also alter your business plan. Typically, companies running public courses will produce a brochure regularly with all the details of the courses and send it out to as many potential clients as possible. It is more of a ‘bums on seats’ equation.
What used to be distance learning or correspondence courses is now increasingly being offered over the internet. As well as being flexible and cheap, e-learning courses can reach a much wider range of people.
According to a survey conducted in 2008 by the Chartered Institute of Personnel and Development e-learning, which was steadily increasing in popularity as a cheaper, less resource heavy way of learning, would make up 25% and 50% of all training within three years and continue to increase; and as technology and software has rapidly become more prominent and accessible more businesses such a Code Academy and Blackboard are making themselves dominant in the educational market.
Part of the attraction of e-learning is that it can be used in conjunction with other teaching methods to offer so-called blended learning. One company that has been set up to take advantage of this shift, is www.activeskills.com. It offers courses purely over the internet. Its founder, Christopher Lean, explains that the idea came from his previous experience as a trainer. “We noticed that generally the people attending those seminars were from large companies. Because of the costs involved it was quite expensive – you are talking about £300 plus per person plus travelling and subsistence costs.”
This made him realise that there was a gap in the market for training for small businesses that couldn’t afford that sort of cost. This is where the internet comes in. Credits buy a module of a training course for one month which the user can access at any time – useful for managers that need information fast but also at their own convenience, says Lean.
This all sounds great, so why aren’t there more people rushing to take advantage of the internet revolution? “The internet or intranets are a very exciting way of delivering certain kinds of training,” says Richard English, founder of ReTraining. “The problem is how do you get paid?” There is a lot of information being given away on the internet for free and some doubt whether customers will sign up in sufficient numbers to pay for training.
Success is also dependent upon the functionality of the site. So bandwidth hungry sites with fancy graphics and voiceovers will immediately cut your potential customer base.
And one of the biggest problems facing the sector is the issue of interactivity. Instead of blindly rushing in to take advantage of the internet revolution, you should think about your own skill set and whether you are suited to it.
E-learning is still a growing part of the business, and Colin Steed, chief executive of the Institute of IT training, anticipates that as time goes on most trainers will have to start adapting and offering some internet training if they have not already done so.
How much would a training company cost to start-up?
Cost is one of the big attractions of setting up a training company. Essentially, you can get started with a minimum of fuss and with relatively little outlay. It is the ultimate low entry business.
Many of the businesses that we spoke to got their enterprises started with just a few thousand pounds. The easiest way to get into the business is set up a freelance trainer and start offering bespoke courses to clients. Your biggest outlay is likely to be a car – if you don’t already have your own. You should also invest in a PC and printer but don’t try to scrimp on the cost here, warns English. There is no point trying to make do with a second hand dot matrix printer when you are producing training manuals to be given out to clients.
Otherwise your only cost will be your own time and any marketing costs. If you are starting out small, this is likely to be limited to the telephone and letters. It is worth investing in any conferences or trade shows relevant to your industry, as English explains, his biggest source of business is personal contacts.
You should also choose to invest in a website. If you have the ability to do the basic programming yourself, this needn’t cost a lot of money. However, if like activeskills.com, you are looking to make a splash in the world of e-training be prepared to invest a bit more. Hiring a good website designer will set you back several thousand pounds as a minimum and possibly much, much more.
Clearly, if you are looking to invest in a training centre you need to pay for premises. You might also need to pay for resources such as PCs if you are offering IT training.
If you are aiming just a bit higher you might need to hire staff. Wages will obviously depend upon the level of expertise and their experience, but salaries are likely to start from £14,000 for a junior but moving up rapidly for more experienced staff. As well as the basic salary, you should budget for at least a further £12,000 on top. This should cover resources, such as a PC and a car.
Training is also an industry that can dip into a large pool of freelance staff so you might choose to expand through associates. Trainers can command a fee of £150 upwards a day and if they have a skill that is in demand it can get a lot higher. While a freelance pool is very useful, relying entirely on a freelance staff might also jeopardise the consistency of your courses. So you need to balance the costs of hiring staff with the long-term relationships you are building.
How much can I earn as a training company owner?
Much of this depends on the industry that you work in and the network of contacts that you have. Course costs will vary from £195 per day for basic computing skills but could easily eclipse £1,000 for more customised in-house management training.
As an individual or even a partnership, you should be aiming to clock up 100 fee-paying days a year. As a small business, you should be looking to maximise the amount that you can earn from each client. So an ideal breakdown would be 10 days work with 10 different clients. And while you need to be updating your course content, you don’t want to spread yourself too thin.
“Trainers if they have to do a course cold and they have never done it before, I would say it takes 10 days to put together one days training. But if you had to do that with every course you wouldn’t make any money,” warns Richard English, founder of RETraining.
English explains that he calculates his business on the basis of absorption costs – that is how much he needs to charge per day before he has absorbed all of his costs. It might be called different names but it is very important concept.
As a one man band, you can earn a comfortable wage but you will always be limited by your own time and costs. So expect earnings of £20,000 upwards rather than millions.
And you should also be wary of building predictions of unlimited growth into your business. Despite all the money flowing into this industry, it is fiercely competitive – unless you cater to a specific niche. There are also control issues – particularly if your expansion is based on the use of freelance trainers. Short-term growth can often lead to problems later on if you don’t keep your customers happy.
But if you have a passion for teaching, you enjoy working with people and want a career that offers more than a payslip, setting up a training company is a class act.