Why Coaches Struggle to Raise Their Prices

Chances are if you've just started out coaching, or maybe you've been coaching for a while, that one of the things you'll be struggling with is how much to charge for your coaching services. This is a really common question which I get asked about when I'm working with clients, so in this video I'm going to explore 3 different ways that you can price your coaching products. It's worthwhile me going into the reasons why sometimes coaches struggle to understand how much to charge. So quite often the coaches which come into my world have come out of maybe a corporate environment or a job and they're looking to start up their coaching practice, so they don't have a great deal of business experience, and they don't understand the mechanics of things like supply and demand, or profit and loss, or things like that within their business. And so you only have to know some really basic fundamentals around how businesses work in order to understand how to charge for your products or services, but it can be quite daunting. And don't forget as well, there's quite a lot of mindset monkeys at play as well when it comes to pricing your products, because A lot of people, when they're trying to figure out how much to charge for their products or service, they base it on their own self-worth or their own money relationship which they developed as they've been growing up or through parts of their adult life. And unfortunately, some of these could be slightly misguided representations around how much value you can actually deliver to clients as a coach. So the first way is a really simple way to start to figure out how much it is that you want to set out in terms of charging for your clients. It's called goal-focused pricing. And the idea behind this is exactly like it says on the tin. You want to start with the goal in mind. So let's say, for example, in your first year of coaching, or maybe your next 12 months of coaching, you want to earn $60,000 as a coach, which if you use some simple math, that's only $5,000 a month. And if we were to figure out how much you're charging for your coaching at the moment, let's say, for example, you're charging $50 an hour. Well, all we've got to do is we've gotta take the goal and divide it by the amount we're currently charging. And then let's see if that's a realistic figure in terms of the capacity that we have. So 5,000 divided by 50, simple maths, is 100. Now if your coaching sessions are typically an hour long, well that's only 100 hours that you've got to serve over the year. You've probably got capacity to deliver that. The typical month has somewhere between 160 to 200 working hours during the day if you're working on a basis of 9 to 5, Monday to Friday. But that's 100 out of potentially 160 hours. That's a lot of time spent coaching, and it means that you've constantly got to be selling more and more hours in order to increase and elevate your earnings potential. So that's a clue that that's possibly not the best way to charge. Now what you want to think about is how could you go about packaging that up. So we're going to fast forward a little bit. Imagine that if actually you're charging, say, $2,500 per client for your packages, however you structure that, that's something that we can go into for another video. But now all of a sudden, if we were to take $5,000, divide it by $2,500 as a package, that means you only need to enroll 2 clients per month in order to achieve and meet your financial goal. That's more than achievable, more than realistic for most coaches. And if, say for example, your typical coaching programme lasts for 6 months, well, the most number of clients you're gonna have working concurrently at any one particular point in time is going to be 12, unless of course some of those clients choose to go into what we call a continuation, in which case you might have more than 12 clients. But my recommendation is you never really want to work with any more than 20 clients concurrently. Otherwise, your coaching practice starts to feel really frenetic, really busy, And it can get quite exhausting even managing just 20 clients. So if we're working on the basis of, say, $1,000 per package that you're selling at the moment, well, now all of a sudden you need 5 clients per month in order to achieve your financial goal. First of all, do you have the capacity to work with 5 clients per month? And imagine then all of a sudden we're at, you know, 6 months program, you've got 30 clients working together concurrently. That's a lot. And also, so that's on the capacity side of things. But on the demand side of things, are you doing enough marketing in order to be able to attract enough consultations to enroll 5 clients per month. And a lot of coaches just starting out probably aren't— don't have that luxury of being able to turn up the marketing flywheel and attract that many people into their coaching practice. So at this point, we can make an assumption that maybe $1,000 per client is just too low. And really, the optimal amount, if you've got it— if you can create enough demand in the marketplace to attract 2 to 3 clients per month, well, probably you've got to be selling your packages somewhere between $2,000 and $6,000 roughly in order to achieve your financial goal for your business. And what that does is it creates a little bit of buffer for you. You almost want to be overcharging when you're looking at goal-focused pricing, just in case you have a couple of months where there's a dip and you're not able to stimulate as much demand for consultations with prospects, or perhaps you just want to have a bit of time out. So you want to make sure that, let's say for example, if you were going to take 8 weeks holiday per year, well, you need to have enough clients and demand coming in to make up for that downtime when you're not enrolling clients. So goal-focused pricing gives us a really simple measure as to how much capacity we've got versus how much demand we can create out there in the marketplace for our coaching services and whether or not we're gonna be able to achieve our goals or not. Obviously, as things start to scale, if you then want to move into $100K per year or $200K per year, you're gonna have to start looking at, do I have the capacity to be able to do as many consultations to enrol all of these clients? Potentially face the prospect of gradually increasing your prices so that it makes it easier for you to achieve your financial goals. Now this can be quite an ethical line which a lot of coaches feel uncomfortable crossing because one, they might not feel that they're worth that much money, and I can guarantee though the changes which a lot of coaches create for their clients is more than tantamount. It's— I can pretty much guarantee right now that you're underselling yourself as it stands at the moment. And what's going on there is that you're basing your prices on your own money mindset, your, your own internal value system, which might not be directly reflected by all of the people out there who could become prospective clients within your coaching practice. So it's really dangerous to make assumptions like that. And the best thing you can possibly do when you're focusing on goal-focused pricing is to just get out there and test it in the marketplace. The ideal business in my mind is to have double the income with half the clients. So you want to be elevating your prices so that it feels like it's easy and effortless to really serve those clients at a high level. The second way to think about pricing your coaching packages is what I call productizing a service. So I touched on this earlier on, so there's a lot of coaches when they first start out, and therapists and consultants and freelancers, who will start out by charging an hourly rate or a day rate, and unfortunately the dangers with that are that most coaches or consultants don't typically tend to work for 20 days each and every month because there's other things which you've got to do within your business. They include admin and finance and sales and marketing and networking meetings, running your kids to school, Christmas shows at school, kids getting ill, you getting ill, holidays, and the works. And the reality is, in terms of paid work, days where you actually are focused on client fulfillment, it's typically only about 3, 4, maybe 5 days per month where you can get paid for the amazing coaching work which you do. So if you're only charging $50 an hour and you can only work, you know, 8 hours a day for 4 or 5 days of the month, well, the maximum earnings potential there which you can get is going to be somewhere in the order of about $2,000 to $3,000, which, let's face it, in this day and age, it doesn't go particularly far unless you've got some other investments or business interests or other— are your partners earning money and, and you kind of need a bit more of a hobby-based business, a lifestyle-based business, which is absolutely fine. It's got to be something which is fulfilling for you. Then really you've got to think about it slightly differently. So hourly rates don't typically tend to serve you as a coach because if you want to earn more money, you've got to figure out how to sell more hours. And that's where you then have to spin up the marketing flywheel, and you can lose a lot of energy spinning that flywheel up and not make up a lot of ground. So a better way to think of it is, imagine if a client typically has, let's say, they stay with you for 6 months, they do a 2-hour session with you once a month. So what we're talking about here is 12 hours worth of coaching time over the course of that 6 months. And you might deliver some wraparound support, whether that's maybe WhatsApp support or doing what I call turbo calls, little catch-ups with clients in between sessions. So if we were just to do some basic maths and take those 12 hours, times it by $50 an hour, Well, the basic package there is actually $600. So what I encourage new coaches to do is to, first of all, just get out there and start selling a package of coaching for the same price as effectively what they're selling it at, at an hourly rate. And the idea here is that we're thinking about 3 mechanisms. So the first mechanism is, what is the dream outcome which you're delivering for your client? So for me as a business coach, my goal is to help make my clients more profitable. Part of that might be to generate more revenue, but Like I said, the, the ultimate goal is if you can have a business that provides you with double the income with half the clients, it might mean you can keep the same revenue but make it much more profitable by having fewer clients within that business to service. So, but we want to think about what the dream outcome is for your clients. So if you're a fitness professional, it might be to lose some weight. If you're a therapist, it might be to increase somebody's confidence. If you're a business coach, obviously it's to increase turnover or profit. Think about what that dream outcome is. The second thing is, can that be delivered over a fixed period of time. Rich Litvin talks about this a lot in his book The Prosperous Coach. I have a copy of it which sits over my shoulder on a very hallowed part of my library behind me. But Rich Litvin says that coaches starting out should probably do a 3 or 6 month program, keep it really simple. So can you deliver that dream outcome for a client within 3 or 6 months? If the words it depends crop up, that's something which we need to have a conversation about, because where it depends creeps in, it means that there's too many variables within your business. It could be that you work with too wide a variety of different types of clients, or maybe you're doing too many different things for those clients, which starts to add confusion. It means that results are erratic and hard to get. You can't really systematise the process of your— from your coaching to deliver predictable results for clients. But in a dream world, you're able to deliver a dream outcome within 3 to 6 months. And again, ideally, the third thing is then it needs to be delivered for a fixed fee. So in this instance, what I'm suggesting is whatever coaching you're already doing, we'll package it up, charge the similar amount, but get comfortable saying that big number. So if that's $600, just get comfortable pitching $600. Now again, dipping into Rich Litvin's archive in The Prosperous Coach, he talks about professional coaches selling a 6-month program for anywhere between $3K to $6K when they're first starting out, and that is more than achievable. You only need then 10 clients per year year to earn somewhere between $30,000 and $60,000, which is a great first year for a coach just starting out or somebody who's maybe in the early formative years of their coaching, running their coaching practice. So where were we at? Dream outcome over a clearly delineated period of time and for a fixed fee. Now what you can do is if you start at $600, say, the next 10 prospects that come into your world and who you have a consultation with, a powerful coaching conversation, you can pitch them $600 and Let's see how many of them say yes. Now, from my experience, I've been coaching for 8 years, I've been in business for 20 years, I've worked with hundreds of clients now over the last 8 years in my coaching practice, and what we've discovered is that a typical good conversion rate for coaches is somewhere between 1 in 5 and 1 in 3. So let's round those numbers really badly, but 20% to 40% is a good conversion rate. So with those first 10, if you're closing somewhere between, you know, 2, 3, or 4 of those into clients, or maybe even more, it means that actually there's good product-market fit and you've got bandwidth there as your confidence starts to grow to gradually increment that price. What the mistake a lot of people make is that they just ramp their prices up straight away with little experience from a business perspective or a sales perspective, and they don't understand how to communicate and articulate their value to their customers. And, and so then they go out and do their first 10 pitches at $6K, and it's 10 pitches, no sales, and And they think that they're doing something wrong. It's just that they haven't learned how to communicate the value of a $6K coaching program. So what I normally recommend is pick a price point that pushes you ever so slightly outside your comfort zone. So what you might choose to do is get your first couple of pitches under your belt selling a package. Doesn't matter, forget about the effective hourly rate for now, but get comfortable selling packages. And then what you might do is jump to $900 or $1,200 or $1,500 for the next 10 to 20 pitches. Pitches. Gradually then, as you start to find that that's easier and you're better able to articulate your value, then what you might do is increment it again. So we'll jump from $1,500 to $1,800, or maybe $2,500, or hopefully we'll get somewhere close to $3,000 to $6,000 sooner rather than later. But pitch 10 clients, raise your prices, pitch 10 clients, raise your prices, and keep going through that process. Again, one of the mistakes a lot of people make is they feel that they can only increment their prices once a year and maybe by 5 or 10%. That's bullshit, quite frankly. You can raise your prices a dozen times a year if you want to. If Sarah Jane said yes to your package yesterday and Dave says yes to your package at a higher price tomorrow, that doesn't matter because that's 2 separate agreements, um, to get product-market fit. And you can gradually increment your prices to a point whereby economically it starts to match up with the goals that you set out for your coaching practice when you first started out. So there we go. What have we done? We've done goal-focused pricing and we've done productizing your service. The 3rd methodology, and this requires quite a lot of confidence, is around value-based pricing. So how value-based pricing works is that essentially when you're working with a client, depending on the result which they want to get, and typically value-based pricing is attached to some financial or monetary benefit that the client receives from your coaching, you might then want to get paid a commensurate percentage of the upside. So let's say, for example, as a— if you work in startup businesses as a coach and you're helping them to get their first round of investment, well, what might you might choose to do is charge for a percentage, a fixed percentage, based on how much of an investment you get. So let's say, for example, if you choose to do 10% of the investment and their first invest round investment raises $1 million, well, then you would get paid $100,000 almost as like a commission based on the work which you do with that client. Now, there might be quite an element of work involved with that. It might require you to dip into your black book and make some introductions. You might have to give people pitch deck templates, a lot of training when it comes to pitching investors and various things like that, understanding how the financial world works when it comes to SaaS startups and so forth. But what it means is at that point as a coach, you've got skin in the game. You want to see that client have that positive outcome and to receive that investment, otherwise you don't get paid. So the, the more work which you do and the less friction you introduce into things for the client, then the, the better the chances are that they're going to get that positive result. And it might be you might just be playing the numbers. It might be that you only expect maybe 1, 2, or 3 of those deals to come off every year. Maybe you work with 15, 20, 30 startups. It could be whether that's on a one-to-one or a group front. Framework. Maybe that's something I can talk about in another video, but it could be just playing a bit of a numbers game that you work with lots of clients essentially for free, knowing that a vast majority of them may not get their Series A funding. But over the course of a year, 1, 2, or 3 of those deals are going to come off and you're then going to get paid your commission. You'll then have those as case studies, testimonials, and reviews, those success stories, which hopefully you can then use to leverage attracting more prospects into your world as you're spinning up your marketing flywheel. The value-based pricing is a very difficult one, again, for a lot of coaches to comprehend because it means that they have to work with very similar clients, get very predictable outcomes, and have everything very systemised and process-driven. Otherwise, the chances of the deals coming off is going to start to reduce. There are some coaches out there who work almost on a pay-as-you-feel type basis. They work with a variety of different clients, for example, perhaps in different countries. So a client in Ghana may not be able to afford the same level of coaching as a client in the US, for example. So they may have even different rates depending on which countries they're working with. That's also another variation on value-based pricing depending on who it is that you serve. I find that confuses things. I think there's a successful, a mighty small coaching practice that only requires 20, 30, or 40 clients a year typically can have one very clearly identifiable niche in a specific country or types of countries in order to run a successful coaching practice. And then the clients which you want to work with elsewhere, for example, you may create other resources to help them such as books, free courses, YouTube videos, and podcasts. And that's a neat way to be able to give back into those communities that otherwise you might not be able to serve. I think there's a danger when you're coaching to want to help absolutely everyone. And the challenge with that is it means that you spread yourself very thinly and you're not able, able to serve the clients that you've got at a really high level so that they get exceptional results. It's the clients that get exceptional results that are the ones that go out there and beat the drum in terms of promoting you from a referral perspective. They're out there telling everybody how amazing their coach is and sharing your content when you post it out there and tagging you into things of note. So, you know, almost because they're just so proud to call you their coach. And I would rather have far fewer clients and get much better results and serve them at a really high level. And then other people in my world, I can still serve them, but using some of the other resources, marketing assets, you know, to make your coaching and your whatever advice you're giving people that much more accessible. So those are the 3 ways. Just to summarize, we've got goal-focused pricing is the first way to price price up your coaching packages. We've got productizing a service and then gradually incrementing your prices once you've packaged everything up. And then the final way is value-based pricing. If you're interested to know more, please do go and hit the link in the description where you can book a free coaching session with me. Be more than happy to discuss your coaching practice and your goals for your practice and where you would like to take it. And if there's anything we can do to increase your prices and help you get a bit more confident at sales, that's the way to get in touch with me. And also, you can request a free copy of my book, Take Your Shot, which I outline some of these principles in as well. The best place to get that— and we'll share a link below in the description as well— but head on over to fearless.biz/TYS for Take Your Shot, and that's on me. We'll send you out a free signed copy of the book, and that's a great way for you to get started around all of the pricing principles which we teach at Fearless Business.