MBA2119 Why Low-Ticket Coaching Doesn’t Work

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Hey O welcome to the $1 where your business gets better every single day with our daily 10 minute business lessons for the real world. I'm your host, your coach, your teacher Omar Zenholm. I'm also the co founder of Webinar Ninja, an independent software company I started with my co founder back in 2014 and in today's lesson you will learn why low ticket coaching does not work. Now many people will disagree with me on this topic, but I'm a firm believer from experience that low ticket coaching is not the best business model and this is becoming a trend these days where they're starting their coaching Funnel with a $99 a month type of coaching package where they throw them in this big group and it's basically a community forum with some group training calls here or there and they create this situation with the hopes that they can convert them into a high ticket coaching client. Low ticket coaching has several problems that I'll outline in today's episode and why it's a waste of your time and effort to even make this offer in the first place and why your coaching should be premium and also share in my experience what the bare minimum you should charge for your coaching and how to get over your fear of offering more expensive coaching. We got a lot to cover so let's get into it. Let's get down to business.

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It feels good to geico. I want to begin by saying that I totally understand why people sell low ticket coaching. They believe that if I can get them at a lower price, I lower the barrier of entry, I can qualify people, I can get them to earn my trust and then I can convert them into a higher paying client. And I've seen this over and over again, people charging $97 a month, even $37 a month for group coaching. And I want to stop here and just say this is causing you headaches and you're asking for trouble. You are asking for trouble when you charge this low for coaching. Why? Because it's nearly impossible for you to make enough money to bring in ideal clients and deliver an ideal coaching experience for your customers that gets results. Most people are coaching people to a certain outcome so they can be able to change their life, change their business, do something new, make a change in their life, right? This is equivalent to maybe even a college degree where you're going to pay 20, 30, even $40,000 a semester. And it's not even coaching, right? It's actually just courses. It's actually just live teaching. And you're paying ten grand a month for it. But why do you think people pay it? Well, it's because they believe it's worth it, right? They believe in the value. They believe that if they get this degree they'll have a better life, they'll have more options, right? They'll have a better future. All you gotta do is offer the same, offer a valuable outcome. So they're happy to pay. Money should not be the problem here. If the offer if what you give them, if what they get out of the situation is valuable, people, people will pay. People pay for things, right? They pay for homes, they pay for cars, pay for vacations because they see the value. So the problem here is not price. Stop kidding yourself and saying I want to lower the price because the price is the problem. No, the problem is that you probably don't believe in your product or service or you can't create enough value in your product or service to charge more. That's where you should start, is create more value, have a better outcome. Number two, people do not Correlate low price with quality. This is a proven fact. I can't remember exactly who did the study, but there was a study that was done where they gave a bunch of people a taste test of three different wines. And the wine bottles were right there, had different labels, they had a price on each wine. It was like the low cost wine, the medium wine and the expensive wine. And unanimously, people ranked those wines based on price. They said, you know, the highest priced one was the best and the median price one was the second best one and the last one was the cheapest one. The greatest thing about the study is that all three wines were exactly the same. They just changed the labels, changed the prices, and people actually had a different experience. They actually were swearing it tasted different. Because as human beings, we like to support our decisions. Once we make a decision, we like to support it, we like to rationalize it. We like to tell ourselves we made the right decision. If you invest more money, you will tell yourself this is a good investment and you're going to commit yourself to make sure you get more out of that investment. You have skin in the game versus somebody paying $97 a month. It's not a huge price. They may jump in there, they might get some things out of it, but they're not tending to take it as seriously. If they paid, let's say, $2,000 a month, that's the first argument. The second argument is that in order for you to get ideal clients, you need to do a lot of marketing, and you're going to need a lot of money for that. Whether you're running ads or you're doing sponsors or you're being part of events or whatever it is, you need to get more clients. And with coaching, you kind of have to cast your net to a lot of people and then filter to those who are serious about being coached. So you need to spend some money marketing and building your content and all that kind of stuff. Where's that money going to come from if you're barely scraping by at $97 a month? Let's put it this way. I'm going to give you a straight up easy math equation. Let's say one coach is running a program at $100 a month. They need to scrape and scrap and work hard and get 100 clients to make $10,000 a month. Now, we're not going to talk about churn for a moment here because that's another factor. We're going to get into it. But let's just say, for example, they maintain those Hundred clients every single month. But let's look at another coach. They're charging $2,000 a month for their coaching. They don't have a hundred clients. They don't have 80 clients. They don't have 50 clients. They have 25 clients, 25 coaching students. Right? They have a quarter of the students that the other coach has. And they're making $50,000 a month, charging $2,000 a month each person. They're making 5x of the other coach. This coach has pretty much an unlimited marketing budget, right? They can put $10,000 to expenses, $10,000 for profit. And now they have $30,000 they could dedicate to marketing to bring in more clients, to double their clients to go from 25 to 50. And now they're making $100,000 a month, still with half the clients. So this is why it's so important to charge more, so that you can get upfront cash so you can fuel your business. It becomes a flywheel. Don't shortchange yourself or you're not going to be sustainable. Too many people don't charge enough. Now, in my experience, on top of this, coaching is sort of a reoccurring business. It's like a SaaS product, right, where people pay monthly and that should be your model so that you have steady income or they can commit for the year. But the point is, is that it's reoccurring. People that pay a lower price are more likely to churn. This is just statistically true. I know it's different in different industries or different markets or products, but when it comes to coaching, this is true. So you're going to have to work extra hard every single month to make up for the clients that cancel. There are coaches that have 20 to 30. That means, let's say they have 100 coaching clients. By the end of the month, they have 70. They have to do everything they can to earn another 30 so they can just break even again. Then you have to have 40 more just to be growing again. People that are paying more are more committed. They see the value in coaching. They understand that this is something that's going to take some time. They see this as an investment. So you might be thinking, Omar, I'm new. I am new at coaching and this is my first coaching program. I have some experience, but I think I could help people. I don't know if I could charge that much. I don't know if I could charge 2,000, $3,000 a month. Let me just say that the premium coaches, the ones that are like the best in the game. Their entry level coaching program is like 2,000 to 2,500 to $3,000 a month. Right. Many of them have coaching programs that are five and $10,000 a month. You might be thinking, wow, five or $10,000 a month. Who's paying that? People are paying that. People that are making $10 million a year and trying to make $100 million a year are going to pay $10,000 a month. It's a no brainer for them. That means they're going to pay what, $120,000 for the year and they're going to help them 10x their business go from 10 to 100 million. This is a no brainer. This is not even a question. Right. It's a hell yeah investment. But if you're getting started and you don't feel comfortable charging that much, which I totally understand, I say don't go lower than $500. $500 should be the minimum of any kind of coaching. Now I'm talking about group coaching here and coaching programs. If you're doing one on one coaching with many sessions, that's a different story. That should be. But I'm talking about a group coaching program. Why do I save $500? Not because it's expensive enough or I think it's a good number. No, it's because of the math. Because you need to make enough money in the beginning so you can fuel your marketing and bring in clients. Because with $500 a month, even if you are able to get together 20 clients, that's $5,000 a month, that's a start the next month. If you can get another 20 clients, that's $10,000 a month. Now you might have some money to start investing in marketing. You could see even with 500, right. Versus the 2000, it gets kind of tight. Right. It's not as easy to be able to earn enough to market. So I'm saying bare minimum. I say don't go with the 500 and push yourself to charge more than you feel comfortable. Whether that's 1000 or 1500 or 2000. Because even if you don't get that many clients, it's going to be easier for you to be profitable and to let's say you charge 2,000. Even if you just have five clients in your group in your first month, you're making $10,000 that first month with just five clients, you take that to 10 clients, you're making 20,000. Now you're cooking with gas. You want a million dollar coaching business. All you need is 45 clients a month. You need 45 clients that pay you every single month because that's $90,000 a month. That's well over a million. There you go. I'm not done yet. I got more reasons why you should not have a low ticket coaching offer.

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To wrap up today's lesson, low ticket coaching is just simply not a good idea. Now if you want to have a low ticket offer, that's something different. Maybe you want to do a course which is kind of like do it yourself, learn on your own. Maybe you want to do a one off webinar and charge for it or a live seven day challenge. The point here is that that's okay and as long as it's not part of your core flagship product that requires your time and effort to build, to grow, to maintain, to deliver. You can automate these sales and use it as sort of like a way to earn trust with your customers. All good. Thanks so much for listening to the $100 MBA show. Do you agree with my take? Disagree. Let me know on Twitter. Go ahead and follow me over at theomarzenholm over on Twitter I want to hear from you. If you love the show, hit subscribe and share it with your friends on social. Pop the link100mba.net so they can hit the subscribe buttons right on the site. Before I go on, I'll leave you with this. When you charge more, it's going to take longer to build trust and to make the sale. That means you're going to have to grow your email list a little bit. You're going to have to nurture that email list. You might have to do some webinars and some workshops and give them content. Invite them maybe to an event that you're doing online. Make them the offer to join your coaching program. You have to understand the more the investment, the more trust you have to build. But it's worth it because as you can see, that reoccurring revenue at that price is really, really profitable. Thanks so much for listening and I'll check you in tomorrow's episode. I'll see you then.

Take care.

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