Is Life Coaching a Pyramid Scheme?

This morning I got an email from my mom, of all people, and it was an article from the New York Times. And the title was, they Spent Their Life Savings on Life Coaching. Which, by the way, is a great headline. So congratulations to whoever wrote that headline. I've been coaching for 10 years now, and I sold over a million dollars worth of life coaching, fitness coaching, and business coaching before I turned 30. Part of what I do is teaching, marketing and sales to other coaches. And I've spent hundreds of thousands of dollars on my own training to become a better coach and to become a better business person. So when I saw this article, my stomach immediately. Dr. And I was like, okay, what is this article gonna say? And in this video, I want to dive into this article, the claims that it makes, because I actually think that it's a well written article and it exposes some important things about the coaching industry, but I don't think it shows the whole picture. So let's dive into three of the main points that are made in the article, and I'm gonna partially debunk them, but also partially share the aspects of them that are really true. Okay, so let's dive in. So the first section of this piece is called An Expensive Dream, and each of the documents a different person's story. So this person was named Ms. Mullet, and she said she spent thousands of dollars on her certification. And she says, I wasn't making money, I was just spending money. So the first point we need to look at is this idea that you can't make money as a coach, because if you can't make money as a coach in the industry, then this is problematic because there's people charging for certifications to go become a coach, and then it's essentially a pipe dream. And so I first want to look at the partial truth here, which is there are more people that want to become coaches than there is demand for people who want to hire coaches. So the icf, which is basically the governing body, the certifying body of coaching, they have the most data within the industry to offer, and they say there was a 33% increase in coaches and a 21% increase in total revenue generated from coaching between 2015 and 2019. Okay. And at first glance, this actually seems good. It's like, all right, there's more people becoming coaches and there's more overall revenue, but you'll notice there's more people becoming coaches, 33%. Then there is an increase of revenue, 21%. So what this tells us, if there's some sort of Mismatch between supply and demand, meaning the supply of coaches is greater in some cases than the demand for coaching. And this is why you have some people saying it's hard to make money in this industry. And you have people like Ms. Mullet saying, I ended up spending a lot of money on certifications and my own coaches. I didn't make it back. And part of this is because people will invest a lot of money in becoming a coach, but if they don't have the sales and marketing skills they need to actually get clients, it becomes a losing proposition. The kind of brutal truth is that a lot of these coach certification programs that can be 10k, 15k, like 20k US, these programs might say they have a module on sales and marketing. The vast majority of them are not going to teach you or go deep enough on how do you actually build a business. They've kind of just checked the box on that part of the certification. And ultimately a huge part of your job. If you end up being a solo practitioner, a coach is getting clients and it's sales and it's marketing. So I would say coaching is not a get rich quick opportunity. It's not the best way to make money to make an income. And most coaches know that they're getting into coaching because they want to help people or because they're passionate about self improvement or because they have some expertise from their career that they want to go solo with and they want to give it more as a consultant. So what, what I'll say is business is inherently risky, right? It's true that you're going to probably have a lot of coaches who don't make it, who aren't successful. Most businesses fail after five years. So it's no different with coaching. But it is true that there's a mismatch in terms of the demand for coaching, especially life coaching, which is sort of this vague promise. It doesn't really mean anything to most people. And most people think, well, life coaching, that's sort of like a silly idea. Which is why when I advise coaches, I hit don't market yourself as a life coach. Because that's basically meaningless. And it's kind of a joke of a phrase. Phrase. So that's the small truth in this article, the false part, the myth is that you can't make money as a coach. And one of the problems with this article is that it profiles three different people, three case studies, instead of looking at the big picture and looking at the numbers. And so when we look at the numbers, we can see that on Average, the coaching revenue for someone in North America is $62,500. And if you're an executive coach with 10 to 15 years of experience, you're going to make 122,000 on average. Okay, so this is not the highest earning career you could ever take part in, but it's also, we're not seeing that the average is, you know, people are making $1,000 a year. Right. Part of the issue with these numbers, too, that I'll just say, is if you have someone making a million dollars a year, that'll really skew the average up. Like I said, the majority of businesses fail. But when I look at that, you know, 62,500 as average revenue for someone in North America, like that's good for. If you love the job, that's a good salary to make. Okay. The second section of this article is called Vulnerable to Exploitation. It profiles someone named Sunny Richards. Essentially, what is proposed here, and this is the main point of the whole article that I wanted to bunk, is that coaching is a pyramid scheme. And it's mentioned several times in the article, including in the sub headline and by the people they interviewed. But I don't really see specific evidence that's offered up to say that it actually is a pyramid scheme. So before I go into that, let's look at the part of this that has some truth to it. So it's true that there is a portion of the industry that's dedicated to supporting coaches and building their business or getting clients or building a skillset to help clients more to become a better coach. That's absolutely true. And if you're a coach, it's going to seem like that's a big part of the industry. That's partially due to something called the availability heuristic, which is a psychological principle which basically says what we see, we extrapolate and kind of make into our whole universe. So if you're a coach looking to build your business, obviously you're going to get targeted by ads to help you build your business. Right. In the same way that if you were having a struggling marriage, you might get targeted for ads for relationship coaches. Right. If you're actively looking for information on how to get clients, you're going to find people who help coaches get clients. And so that partially skews it if you're within the industry. But there is something to this idea that, you know, you can make money helping coaches, you know, and that's why there are coaches who coach other coaches, right? And it becomes this meta thing that can start to feel like, is this sort of like a pyramid scheme type deal. The other thing that's true is, and I heard this phrase early on in business is this idea in a gold rush, sell shovels. And if you've never heard this, it's the idea that in the California gold rush, all these people moved west in hopes that they would strike it rich and find gold, because a few people had, and they'd become very wealthy. So you're going, you know, after this dream of striking gold, where only a minority of people are actually going to find the gold. And the people who made the most money during the gold rush weren't the miners. They weren't looking for gold. That was like Levi Strauss, the jean company, which came up around that time to give miners, you know, jeans that would not rip, pants that were durable, or selling shovels, right. To go look for the gold. And this is kind of a piece of business wisdom that it's not the only people who make money are selling shovels. But in general, if there's an opportunity that a lot of people are attracted to, so there's a lot of people going after a small amount of reward, then sometimes it's best for you to get yourself out of that game and just supply the people who are actively, you know, searching for the gold. So I would say that part is a little bit true. And it's good to recognize that people make a lot of money supporting coaches. But this is not the only industry that sells shovels, right? So my wife recently left her job at a nonprofit to become a massage therapist and also to become a doula. Right? And so she went to a massage therapy studio, and they serviced normal clients at the studio. But they also had this certification program that they made a lot of money on, right? Because they can charge more helping someone become a massage therapist, which is a whole new career path, something that that person's gonna eventually get a return on investment by doing, make their own money doing, versus just giving a massage to clients. And it makes total sense to do that. And that's actually a really important service, is to help people become massage therapists. So coaching is not the only industry that does this, Where a portion of the industry is dedicated to helping more coaches start their business or helping coaches make more money. So that is the kind of kernel of truth in the article. But I think this is where the article really starts to fall apart, because the idea that coaching as an industry or coaching as a pyramid scheme is simply not true. And the only thing we have to do to debunk that is just look at the numbers. So if we look at the definition of a pyramid scheme. A pyramid scheme is a form of investment in which each paying participant recruits two further participants, with returns being given to early participants using money contributed by later ones. So the only thing you're selling in a pyramid scheme is being part of the pyramid scheme. You're making money by recruiting the next person into it. There's no product or service that you're delivering except to enroll other people into the scheme. So in order for life coaching to be a pyramid scheme, then we'd have to say the vast majority of coaches, they're only making money by recruiting more coaches into some sort of scheme where they get a cut of what those coaches make. And that's simply not true. The vast majority of coaches don't work with other coaches. So again, if we look at this report by the ICF, this was a 2020 report. They said 52% of coach practitioners said that their clients are mostly managers or executives, and 19% said they worked with mostly personal clients. Okay, so that means that coaching fails the pyramid scheme test if most people that are coaches are just working with executives or managers or personal clients. I guess personal clients could be a coach. Right, that 19%, we're not looking at the majority of clients being other coaches. And even if they were, which they're not, we're actually supplying a service. We're helping them become certified or grow their skill set or helping them get clients. Right. Those are the main things that are offered to coaches. And so you can contrast this with something like an mlm, many of which are pyramid schemes. Even if they have sort of a product that they have to buy and allegedly sell, the real money is made by recruiting people into your downline. And then you're getting a cut of the people they recruit or the products that they sell. But that's not happening with coaching because you're actually coaching the person. That's the only way that money is going to change hands. I have kind of a unique window on this because part of what I've done over the last 10 years is support coaches in their marketing and sales. So I'm one of these people who coaches coaches, Right. And I've been able to see how many of my clients actually work with other coaches. Is that how they make their money? So if we look at, for example, this is a page of my case studies. Valerie is an executive coach. She works with large organizations. She used to be in change management, and now she helps other executives to navigate change in the organization, not with other coaches. Nikki helps professional speakers with their branding and with their websites. Megan is an executive coach for climate startups. She works with those leaders. Andrew was ahead of growth at a couple different startups and then now he supports other people who are transitioning into that leadership positioning as a head of growth. And he says, hey, here's the playbook, here's how you succeed in that role. Those people are not coaches, so you can keep going. There's a health coach here. You know, Grace is a procrastination coach. Ryan supports tattoo artists in having better financial systems to save money and invest money. So this is typically what we see, which is very different from saying every coach only makes money working with other coaches. And to me, that's, that's the definition of a pyramid scheme. I didn't see anything in the article besides references to a pyramid scheme that would say, yes, there's no product or service here. You're just recruiting people into a downline. So the third point we have to address is this idea that the industry, regardless of whether it's a pyramid scheme, is kind of a scammy industry, that it's predatory, that it's manipulative. And this is the third section of the article. It's called an industry with two sides. And the person they profile here is named Eva Collins, who interestingly is a business coach. Like, she does teach business and marketing and sales. But I think what she's noticed, she used to work for larger coaching organizations and she's noticed that inside the leadership can be manipulative or the sales and marketing practices can be manipulative. And there is a definite kernel of truth. I don't think coaching is the only industry where we have this, but there are manipulative marketing and sales practices. And when it comes to something like life coaching, it's even dicier because you're not just using manipulation to sell like a car, you're using manipulation with someone's hopes and dreams and pain and things that they really want to work through in life. And so the truth is that there are manipulative sales and marketing practices that are taught to coaches or that are used in these certification programs or business building programs. So that's true. And that's the reason why you need to choose your mentors carefully. Like you want to be learning from someone who, you know their way of selling and doing business is in alignment with you. And the last thing I'll say on this is that life coaching is actually still a pretty new industry. So I think the industry is still finding its footing. And over time the bad, bad actors I think are going to continue to be churned out and replaced with businesses that are selling with more integrity, that have a better product and the cream will ultimately rise to the top. So it's true that there's lots of shadiness that goes on within the industry, but it's not true that the majority of people who sell coaching are inherently scammy or manipulative. The colleagues, the clients I have, the people I know in the industry, the majority of them are good people who got into coaching because they want to support others. They're not usually in it to make money. They just know that they need to make money to have it be sustainable in order to keep doing that work. But I think there is an issue that goes on where sometimes people will get into coaching who really shouldn't be coaching. And actually one of the people in this article I think could be a good example. She mentioned like she was unhappy with her life, she was feeling depressed, that's what encouraged her to do her first life coaching experience and then to try to get certified. That person I don't know personally, but may or may not have been a good fit to support other people as a coach. The truth is, if you really want credibility and you want persuasive sales and marketing, you need to choose a niche. Not general life coaching, but choose a niche that you are undeniably credible in because you've gotten those results for yourself, you've lived that transformation and then develop a skillset that you can combine with that expertise. Right? That overall coaching skill set of listening, asking questions, setting goals with people in order to help other people in an area that you've already been successful in. And the results you get from those engagements are your best form of marketing. It's not, for example, like, you know, something that's taught that I find really manipulative in sales is like a fast action discount. So you'll be like, you know, if you join the program on the call Today it's only 8,000, but if you don't join today, it goes up to 15,000. Right. And there's no real reason for the scarcity. The program's going to continue to be sold. There's not an actual deadline that they're referencing. So those are like the little tricks that you could be taught that I agree are manipulative. But real marketing and sales is basically just about like developing a good product or service, showing that it's good because other people have used it and showcasing those success stories, that is undeniable proof. So don't call yourself a life coach because the industry in general has terrible pr and articles like this may continue to come out poking fun at life coaching, where, for example, it might not do that for therapy because therapists go through a long schooling process. So even though there are some manipulative therapists and there are people who have really bad experiences with therapists, it's armored and it's covered by the fact that there's built in credibility because of the schooling. So. So if you don't have some built in credibility with your career, with things you've achieved, with the other people that you've helped, and you think a certification is going to give you that credibility, that's not necessarily the case. So if you're a coach, what do you do when you see articles like this? The first thing I'd say is invest relative to your income. Don't go into massive debt when you're not making any money yet as a coach. The fundamentals of marketing and sales and even the fundamentals of coaching, they're all available for free and you can start putting them into practice now or work with some free clients or some clients that are heavily discounted in order to start creating those case studies and getting those results. And at that point you can start to invest more. But in some ways, like this article, I think partially argues for more certification and more regulation. But in some ways that's the issue that the people profiled in the article had, is they spent 18k on a certification when they weren't even making any money as a coach. They didn't know sales and marketing and they couldn't dig themselves back out of that hole because they were never taught sales and marketing. So be careful how much you invest up front before you validated the model to yourself, proven that you're good at coaching, you have something that you can help people with and you know how to make money and get clients. The second thing I'd say is choose a niche that you're going to be credible in. Combine your previous expertise with coaching skills. Don't expect that general life coaching is going to sell well or that you're going to be able to help people with it. Use something like I mentioned in my case studies, a part of your career. Like, you know, my client Ryan, who was a tattoo artist and then got his finances together and could help other tattoo artists do this same thing. That's when coaching becomes really powerful, is when you're able to combine it with some inherent credibility that you already have from earlier in your life or career. Don't make crazy promises. Don't use manipulative marketing. Just go create case studies and then showcase those case studies and testimonials from people that you've actually helped. And if you're looking to hire a coach, you're not a coach, but you're scared away by an article like this, then do the same thing. Go look at case studies. Go look for actual results that the person has helped other people achieve. And if those are the results that you want, go have a conversation with them. Don't be persuaded by unrealistic promises, by manipulative sales and marketing tactics. And obviously, we've got a lot to work on. Like, you know, if you're watching this and you're a coach, hopefully this inspires you to go and create a better service, right? Or to go and be more disciplined about your spending, or to surround yourself with other coaches and mentors who have the same values as you. I think that whenever an article like this comes out, I feel kind of embarrassed and kind of ashamed because this is part of the industry that I'm in and I'm like, damn, I wish that this was an industry that could be more respected and not have stories like this come out. Obviously, there's a grain of truth to all the things we mentioned today, otherwise the article wouldn't be written. But I wanted to create a video to sort of balance this out and provide a bigger perspective, actual statistics, and my own experience beyond just these three people who are profiled in the article. Because I really don't think that that's fair depiction of the industry as a whole. If you want to hear more about my journey as a coach and things that I've learned along the way, lessons that I've learned. I just published a video called 10 Years of Painful Business Lessons in 20 Minutes. So go check that video out and I'll do my best to share some of the other wisdom that I've learned along the way, the mistakes that I've made. So hopefully you don't have to make the same mistakes. Go check that out now.