Initial capital: from 300,000 (leasing an office with 4-6 rooms for two months, purchase of furniture, setting up website, promotion, printing business cards and leaflets).
Monthly costs: 150,000.
Income per month: from 300,000 less tax at from 6% under simplified tax system.
Recoupment: from six months.
Clear profit in subsequent months: from 100,000.
I decided to begin with these quite average figures (in Russian roubles) for a typical business plan for opening a small private foreign language school (they are a dime a dozen today on the Internet). These figures may of course turn out larger or smaller, depending on where the school is located, its closeness to the main transport junctions and main roads, way-bills (or the absence of them) and so on and so forth. In any case, I can confirm that Russians have a tremendous interest in studying foreign languages. And a business in this field, if you take it seriously, has good prospects. Are you interested?
Individual Entrepreneur is one of the most preferable forms of organization for business men starting up. It does away with the need for authorized capital, does not require accounting reports or an address for legal purposes. An entrepreneur can fill in his IE registration himself, for which he will need:
*To select OKVED codes. Codes of the All-Russian Classifier of Forms of Economic Activity should be stated in the registration application.
*To fill in an application for state registration as an individual, specifically as an IE (on Form P21001)
*To pay the state duty (800 roubles). The receipt should be included with the application.
*To prepare a notification of transition to the simplified tax system (USN), if necessary. The simplified taxation system (6%) makes the tax payment procedure simpler and quicker.
Further useful information can be found in SBU (State Budget Institution) “Small Business in Moscow”: http://www.mbm.ru/
Then your starting point for organizing a business in Russia should be to register with the tax authorities. This is obligatory. And for this, you must decide on the form of property of your future business: whether it will operate as a legal entity or as an IE (individual entrepreneur).
The IE form is of course good for newcomers. It makes it possible to provide clients with services on a paid basis, to lease premises, hire staff, but... you cannot issue certificates to your own graduates, and your activities, from the point of view of the law, are only consultative, not educational. Corporate clients will not be available to you. And officially, you will only be a foreign language specialist, not a teacher.
In 2006, when I and my partner entered this market as hired teachers in a small private school, its legal form was IE. Then, virtually any teacher could become an IE with a licence.
Such favourable Russian law made it possible for a large number of private schools to be opened in Moscow and all over the country. But then it became more difficult even for teachers with diplomas to obtain a licence...
In spite of all that, in 2009 my colleague and I decided to open our own school. But there were two of us (two partners with equal rights), and we could not set up as an IE under one name. We trusted each other. But in matters of business, it is better to think through unfavourable scenarios too, from the beginning. Therefore we organized our firm in the form most common for small businesses at that time, as a limited liability company (OOO), with 50% of the shares for each of us. And we registered it as OOO STAR TALK and opened a clearing account in a bank. We did this ourselves, without outside help. But a month later, we realized a significant shortcoming of the OOO. Just like the IE, it did not enable us to obtain a licence for educational activities. We considered how we could change the legal form of the company (from OOO to a non-commercial organization) and still remain viable. We faced a high total cost to become an NOU (non-state educational establishment), accountancy services, obtaining the licence – taking us over the limit of our startup budget.
So if you want your school to be a fully-fledged educational establishment under current RF law from the start, you should register as an NOU (non-state educational establishment). Then you can obtain a licence to carry out educational activities. This document is recorded in the territorial educational authority. And to qualify for it, you must submit a specified selection of documents (you can find out the exact list from the authority in question). This usually means documents connected with the premises, the qualifications of the teachers, quality of teaching methods and plans, etc.).
Fortunately, at the end of 2013 the decision was taken in Russia to adopt amendments to the Federal law, with the effect that private schools of any legal form could obtain a license to conduct educational activities. This was splendid news! But unfortunately, the process of obtaining a licence did not become any simpler, and the requirements for the licensing of a small private school are still too high, in my view.
I think that today, to obtain a licence for educational activities in Russia today, it is best to make use of the assistance of specialist law firms. But it is not worth confusing the legal obtaining of a licence with its illegal “purchase” (the Internet is full of such offers nowadays). This will inevitably lead to rechecks and the discovery of the forgery.
In August 2015, we applied to a specialist law firm, and are now in the final stage of obtaining a licence (we already have 90% of the required permits). We believe that obtaining a licence will help us achieve a new level of trust among corporate and private clients.
A weighty argument in favour of obtaining a licence is that your clients are able to reclaim from their personal income tax (NDFL, tax on incomes of individuals, a direct Federal tax in Russia) the sum paid for education (which amounts to 13%). The state returns this money to people. Social tax deduction for educational expenses applies only if the educational establishment has a licence or other document confirming its status as an educational institution. And this is a considerable competitive advantage.
The Star Talk foreign language school was formed in 2009. In a little over six years, more than 9000 pupils have graduated from it. It has solved the problem of teaching foreign languages to staff for 45 corporate clients.
Today, the average monthly income of this school exceeds 1,500,000 roubles for monthly costs from 1,000,000 roubles. Net profit per month is from 400,000 roubles in “low” season to 1,200,000 roubles in “high” season.
There are now three Star Talk teaching centres in Moscow. Five languages (English, French, German, Italian and Spanish) are taught in them to all who want to learn. The age of the pupils is from three to 80 years (there are separate groups for pensioners).
The schools’ plans for the future include further expansion of the business by offering franchises.
Speaking of competitors and the educational services market as a whole, it can confidently be stated that in Russia it is saturated with offers, and is highly competitive. You can find a service provider to suit any taste, in any price category.
Price formation in each specific case depends on the region of the country, and also on the specific nature of the educational establishment (whether the teaching is by native speakers, for example).
Let us say that the cost of one academic hour, i.e. 45 minutes, of foreign language lessons in Moscow to day, in roubles, is as follows:
- Russian-language teachers: from 700 roubles (by teachers who are third and fourth year students on courses at colleges in this sector) to 3000 roubles (by experienced qualified teachers).
Foreign native speaker teachers: from 1500 roubles to 3000 roubles per academic hour.
- Lessons by Skype: from 300 to 1300 roubles per academic hour.
- Cost of instruction in online schools (lessons over the Internet): from 300 roubles to 2000 roubles per academic hour individually or in a group.
- Courses in colleges: from 800 to 2000 roubles per academic hour.
In order to survive in competitive circumstances and without dumping, the greatest possible attention must be paid to the quality of the services provided.
An attractive appearance of the teaching centres, an up-to-date website and professional promotion undoubtedly ensure a big influx of potential clients. Experienced sales managers will most likely make a plan for you and make sure the average cheque is for a large sum. But it is important to realize that this is only the first and least critical stage for the client. He has come to learn, after all. And if he remains contented, the well-known Russian “grapevine” (people passing on information by word of mouth), which inspires more trust than direct advertising, will come into play. What is more, even in the event of a temporary suspension of teaching, a contented client will return to it of his own accord at the first opportunity.
At the stage of establishing the brand, don’t forget the PR: publication, free events, lotteries with prizes from the partners. If the school has a free-of-charge scheme (for the disabled, veterans, the deprived sections of the population, etc.), this adds prestige to the brand. The free events don’t have to be connected to educational activities (open lessons, screening of foreign-language films and the like), they could be master classes (on beauty, travel or viticulture, for example). Try to find partners and exchange audiences. This is very useful.
In conclusion, I would like to say that the educational services market in Russia has good prospects and is developing dynamically, even in the current crisis conditions. After all, both optimists and pessimists recognize the need to study a foreign language: the optimists believe everything will stabilize and do not want to change the normal rhythm of life (fitness, cafés , foreign language courses) and the pessimists are thinking of leaving the country (and are urgently starting to brush up their language skills).
I wish you all success and healthy optimism!