30 - Am I doing well? Unravelling financial success metrics!

Welcome to the business of Executive coaching. I'm Ellie Scarfe, an ex lawyer turned executive coach. Over the last 17 years I've coached in house, I've been an associate coach and I've run executive coaching businesses with teams of coaches around the world. My clients have ranged from global brand names to boutiques, startups and organizations doing good in the world. I now run the Impact Coach Collective, a global a community of executive coaches who want to level up their business skills and take action in a community of like minded peers. I'm a traveller, a reader, a mum, wife and dog parent and I know firsthand that our stories have a huge impact on our businesses. The executive coaching business is tough and I've learnt all the lessons through plenty of mistakes and also with some great mentors. This podcast is all about growing a thriving executive coaching business. You can build a coaching business that is profitable, sustainable and that supports your personal goals, whatever they are. I'll be sharing tips and ideas translated for your context as well as stories from the field with brilliant coaches and mentors. If you want to level up your executive coaching business skills, then this is the place for you. I wanted to talk today about how we measure success and particularly how we measure success in our businesses from a financial perspective because not all financial goals and not all financial metrics are created equally and so I want to talk about what really matters and what really doesn't matter or shouldn't matter from a success and goals and metrics perspective before I dive in. This episode is sponsored by a free masterclass that I have recently released that I want to share with you all. It is titled 5 Ways to Increase your prices as an executive coach and it is a very practical suggestion filled hands on masterclass where I share exactly how I increased my prices from the pro bono rates I was offering at the beginning of my career through to the premium prices that I'm able to charge now. And I've got a lot of suggestions on how you can do the same. So I have had a lot of people who have watched this masterclass let me know that they now feel much more confident about setting their prices that they discovered blockers that they weren't even aware were there. And I've also had feedback that many people have already increased their prices after going through the class. So if you would like to get access you can get it immediately and it is free. You can go to www.elliscarf.com class price and I will put that link in the show notes as well. Okay, so back to measuring our financial success. And firstly, the first thing I think is really important is a disclaimer, which is that financial success is just one part of what makes your business successful. Obviously we all have different definitions of success. And one thing that I get coaches who go through my various programs to do, particularly in the corporate to coach blueprint, is to define what I'm calling their 360 degree goals for their business. And what that means is being clear not just on your business metrics and goals. So things like financial metrics, sales targets, social media targets, etc. It is also being really clear how you want your business to support the other parts of your life. So things like your family life, your community, the impact you want to have. So we aren't just looking at our businesses in isolation, but we want to look at our business and our metrics and our goals in terms of how they interact with the whole of our life and all of our priorities. So obviously we can't, can't set them aside. And you know, it is really easy to get caught up in judging your success or otherwise based purely on financial metrics. I totally get that, but it is not the whole picture, right? So. So that is, I hope, a given. But that said, today I want to talk about financial metrics and financial goals and specifically I want to talk about the right and wrong financial metrics, the right and wrong financial goals to consider when you are assessing your business's performance and how well you are doing. So the reason that I want to have this conversation is that the wrong benchmarks and the wrong measurements and goals can leave you feeling really crap about the success you have already achieved. And that is not only not helpful, it's also not necessary. So firstly, what does matter when you are measuring your financial success? The first thing that matters when setting financial goals, I think is making sure it is personalised to you. So your financial success has to be considered relative to your personal financial goals. I think it makes sense when we think about it. So don't build your financial goals or your financial metrics in your business to hit a number that someone else has says makes a successful business. Right? You need to think about what it is for you. So for example, you might hear people say that we should all aim for a seven figure business and that's great, right? And that might be exactly what you're aiming for, but is it actually right for you? For you? You might want to do something different. Like your goal might be to replace your corporate salary. Your goal might be to have a certain monthly Income, your goal might be to earn enough to make certain investments. Your targets should be personal rather than arbitrary figures that just sound good or that someone else has suggested is a good target. So first thing is make sure that your financial goals and metrics are personal to you and not based on some sort of external suggestion. The second thing that is that that matters when we set our financial metrics is that we are measuring the right thing. And the right thing is not revenue, but is generally profit. And of course, revenue is an important and a significant measurement, but in isolation, it can be deceiving. So revenue does not factor in the costs of doing business. Sometimes it can be wildly different to what you can actually pay yourself. So of course, it makes sense that we should instead be looking at profit, which is our revenue minus our expenses and minus our costs. And one saying that I heard from a coach of mine, Tina Tower, who helps you out if you're building digital courses particularly, is that revenue is for vanity and profit is for sanity. And she also says cash flow is for reality. But I think that that idea that revenue is a vanity metric, I think is really important because we can tend to hang on to that. So, you know, in terms of what really matters, you know, it's, it's looking at revenue in the context of the margin that you can take home, because it's not impossible that after tax in certain jurisdictions and ask after your costs and expenses that your take home pay may only be 50 to 60% of the revenue you bring in the door. So, you know, in terms of your metrics, your goals, it probably should be an absolute profit figure, but it might also be a percentage or a margin, right? And, and work on increasing that percentage of margin through managing your expenses, et cetera. So in any event, you need to be measuring and tracking these things because profit actually is most closely related to how your business finances going to impact your personal finances and really how healthy your business is as a whole. Because, you know, I mean, you could, you could be bringing in a million dollars and be spending $999,000, right? So, so revenue is, is not the answer. Profit is, is the thing you need to be thinking about. So, you know, look at these all, all of these things. I think another thing that matters is not what you're bringing in, but what actually can you pay yourself. And so whether it's monthly or annually, a lot of the metrics you can capture for your finances are meaningless if they don't translate to being able to pay yourself. Right? So your goals should relate to the bottom line that is important to you. Now look, if your goal is to sell your business, then you, it may be that a revenue figure is more important. But for most coach as starting business, I think you know, what really matters is what can your business sustainably pay you that your take home can pay, can be, and that relies on having a really good profit margin and it relies on, you know, you knowing what it is that you're targeting. So what doesn't matter when it comes to financial metrics? Truthfully I feel a little bit ranty about this because I see a lot of coaches using some of these crappy metrics to promote themselves and they are really not very meaningful metrics. But if you don't think about it, you may not know that. So one thing that doesn't matter, doesn't have any true significance in the world of financial metrics and goals is revenue in isolation. So I've already spoken about that. But as, as I said, someone may be able to say to you, you know, I have a million dollar revenue business, but if that revenue has cost them 90% of that margin to acquire, then you wouldn't really be that impressed and it wouldn't be as significant. So you know, any revenue goal should have a profit margin attached to it. And when you see people saying things like make seven figures or anything like that, be wary because they could, they may have strategies about how do you construct that sort of a revenue figure in a way that, you know, is quite artificial and doesn't actually translate to you having a significantly higher take home pay. The other sorts of goals and metrics that I think are largely vanity based and I've been hearing more about this lately, lifetime revenue figures, right. So that might mean that like say I was trying to convince you that I have credibility as a mentor to executive coaches, right. Which, which I hope I do. But if I was trying to do that in a less than ethical fashion, I might tell you that I have eight figures in lifetime coaching revenue. Right. And you know, I've seen people who also do do the work that I do and they have taken this approach, but I don't like it for a few reasons. And it, and it speaks to how we measure our financial success because yes, I think that having very high lifetime revenue in anything says you are probably great at selling this, I think that's excellent. But it doesn't speak to profit margin, it doesn't speak to how much you actually took home and it also doesn't give a context of a time frame, right. Because you know, eight figures in lifetime coaching revenue over two years is a lot more impressive in some ways, depending on many things than, than over 50 years. Right. So the reason I don't like these is that it can be misleading if, if you are buying into someone's credibility based on that. But what I really don't like is that it can feel like a point of comparison, that you have to compare yourself to this. And, you know, there's, there's an, probably an ulterior motive in people sharing these metrics that you feel like you don't stack up against that. So you have therefore more, more aspiration to achieve what that person has achieved. And so, you know, comparison is, is not, is not great. And I don't think it's going to help you either achieve more in your business or feel good about it. Right? So, so it can be useful if you want to track your own lifetime revenue so that you can say, wow, you know, I've invoiced half a million dollars of coaching, right, As a milestone to celebrate. Like, I love that. But not as a way of assessing whether your business has been successful, because there are so many variables at play. Like I said, your cost base is not factored into that. The time frame is not factored into that. So overall, I would say when you hear financial metrics from people who are selling you things, and I include myself here, you should ask yourself what the truth of that metric could be and whether there could be some creative metricing that might be intended to make that figure look impressive and aspirational and take it with a grain of salt. I also think that any financial metric where there is a comparison to someone or something else is one that you should be wary of, because firstly, we know that comparisons don't make us feel great. But secondly, we can't really ever know whether what we're comparing ourselves to is accurate. So you might think, oh, wow, this successful executive coach is making 250 grand per year. And that is what success means if you're an executive coach. But who says so? I know successful coaches who are making a lot more than that. I know successful coaches who are making a lot less than that. But it is literally impossible to compare ourselves to other coaches because of different markets, different goals, different lifestyles, and different interests. So beware if you are constructing your financial goals or metrics based on a comparison or something that you have heard about what success success is in financial terms. Finally, I think we need to be wary of any financial metric if it comes at the expense of our other goals in life. And so for me, success in business. And that is any business, including coaching businesses, our businesses to be successful, need to support our goals other than our business goals. And in fact, if they are detrimental to those goals, I'm not sure we can call our businesses successful, particularly as solopreneurs when you know our we are as the owners so baked into what we're doing. And so an example of that might be achieving our financial metrics to the detriment of our health or to the detriment of our families or to the detriment of our mental health or things. You know, that might also be if we achieve those financial goals through working with clients that contravene our ethical boundaries. You know, I think good financial goals and metrics sit alongside and support our other goals rather than contradicting them. Okay, so that was a bit ranty. I know those last points about what doesn't make a successful business and what, sorry, what doesn't make a good metric or financial goal in a coaching business. So look, drop me a DM on LinkedIn or Instagram or Facebook if you have any thoughts or reflections on what I've shared today. I feel like I was a little bit. A little bit raw, a little bit out there. I'm curious to know what you think. Is this something you've struggled with? Because I've, I've seen coaches struggling with this, but I'm. I'm curious. Let me know where you sit. And finally, don't forget, if you want to dive into your pricing strategy and get some advice, you can sign up for my free Pricing Masterclass five ways to increase your prices as an executive coach at www.elliscarf.com class price and you can check out the show Notes for the L Straight to that. Have a great week and I look forward to speaking again with you next week. Thanks for listening to this episode of the Business of Executive Coaching. If you found it helpful, please share it with a colleague or friend on LinkedIn. And don't forget to tag me so I can say thanks. I would be tremendously grateful also if you would leave a review on Apple Podcasts. More reviews means more people can find us. This episode was brought to you by the Impact Coach Collective, where executive coaches grow their businesses in a community of peers with business education, mentoring, deal clinics and more. If you'd like to contact me or work with me further, all my free resources, courses and more info on the Impact Coach Collective can be found@elliscarfe.com have a brilliant week and I look forward to talking to you again soon. Significant.