How to price your coaching program for maximum profit & value
How much you charge for your #coaching is a tricky challenge that everyone must face if they ever want to be able to make a living out of their coaching business. As we all know: charge too little and you will be working hard and not making enough to justify it (often referred to as ‘leaving money on the table’); charge too much and you won’t find any customers. So what is the answer?
Having worked with #coachingcompanies and coaches of all sizes, we know that pricing is a common challenge for many coaches.In software, pricing is a big component of the success or otherwise of the business. As a result, a lot of research has been done and a lot of theory exists around how to approach your #pricingstrategy . We actually think that some of these learnings can be applied beyond the confines of software sales and so we wanted to share some of that thinking with you to see if it resonates with where you are with your coaching business.
This article explains the different approaches to setting your prices and hopefully gives you some things to think about. It also ends with some benchmarks based on our own survey. A small caveat before we begin: none of this is set in stone - and whatever the conventional wisdom is, there are always going to be those who can successfully push against it.
What stage are you at?
To begin with, a key consideration will be what stage you are at in your coaching #career . For example, if you are new and your main focus is winning clients, either to get some experience or get some references, then it may be that you are OK with keeping the prices low. At least for a little bit. If you are experienced and already have a track record in being able to charge a rate that you’re happy with, then you definitely won’t want to experiment with dropping your prices. But you may still be under-charging… read on for more.
Pricing strategies
There are broadly three different approaches to setting your pricing strategy. Let’s have a look at them.?
This is perhaps what most of us tend towards, especially in the early days. We work out a day-rate or an hourly rate that covers our costs, plus what we would ideally like to make for each hour of contact time and then we apply some sort of a buffer to allow for things going wrong (such as a customer not paying or an unexpected bill). This approach doesn’t consider what your customers are willing to pay or what your competition is charging, but it does give you a level of reassurance that, so long as you have enough clients, you should make enough money.?
How do you get to the per hour rate? Well, the best way to do this might be to work out how much you think you want to earn per month in total. Then look at what you might expect to achieve in actual face-time coaching sessions. Let’s say that you expect to be able to do 60 hours a month once you are at full-tilt. That equates to about 3 hours a day. You have to assume that the rest of the time is spent prepping, doing admin and #salesandmarketing including any ‘free’ discovery calls you do. This time has to paid for out of your business otherwise you are doing all of the other stuff for free. (incidentally, using Delenta for your #administration will give you some time back that you could spend earning money!).?
All of this means that your hourly rate really has to be the amount you expect to earn divided by your billable hours.?
If you think you can charge for whole days and you are doing 12 days a month, then your day-rate needs to be $850. ($10,200/12)
Pros
The pros to this are that it’s very easy to quote and very easy to check whether it’s worth your while. Quoting is just a case of multiplying your hourly rate/day rate by the number of hours or days they are buying. Working out whether it’s worth your while comes down to the equation we went through above. If you get these two things right, then once you get to the right level of work, you’re all set. If you need to earn a bit more, you can start to increase your prices for new customers. If you aren’t getting enough customers you might need to either decrease your prices to see if that is what is causing the problem, or, actually raise your prices and see if you can make the same amount of money from less work.?
Cons
The biggest problem with this approach is that you are charging for your time, not the value you are creating. It also means that you are accountable for your time to your clients. If there is a lot of prep work or ongoing conversations outside of the ‘billable’ time,? you may need to charge them for that. Being constantly accountable for time may also mean there is more chance that people argue about what they want to pay for. It’s like selling a meal in a restaurant and specifying exactly how many potatoes, peas and carrots are going to be on the plate. What happens if there are less potatoes than specified? Does the diner haggle on the price because it’s less than they were sold? The ‘value’ that a customer gets in a restaurant isn’t that they are hungry and they are given the right amount of food to satiate their hunger, it’s the wider experience of the ambience, the clientele, the quality of the ingredients, the service, the view, the decor… you name it. That’s why you might end up paying $50 for a meal in a restaurant for food that might cost $5 in a supermarket.
The theory here is that you look at what your competition is doing and you match or get close to the same. So, if someone you think is offering a similar service to similar clients to you and they are charging $2,000 for a #coachingpackage , then you do the same. The assumption here is that there is a market price, above which you can’t really go as the competition will win all of your customers. Again, a pretty simple strategy really. The hardest part is knowing what your competitors are charging. This might not always be obvious. But if you ask around, you should get a sense of where it’s being pitched.?
Pros
If you’re just starting out, this might seem particularly appealing because you can possibly undercut your competitors a little bit, just to gain some traction. It may also be helpful just to see whether you think you can earn enough before leaving your full-time job and jumping in with both feet. And it gives you an idea what the market currently ‘expects’ so you won’t run the risk of either underselling yourself or pricing yourself out of the market. Or at least that’s what you might believe to be the case (hint: it’s not always right).
Cons
The flipside of you undercutting your competition is your competition undercutting you. And the big problem with #competitivepricing is that it can be a race to the bottom. It also misses the point of what you are doing. You shouldn’t be thinking about what you do as something that is a utility, like a gallon of fuel, but rather something that creates value for the recipient.?
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I’ve mentioned the word ‘value’ a few times in this article. But think about it. If you help me solve a problem I’ve been wrestling with unsuccessfully for a while because of who you are and what you know, how is that related to the amount of time you spent helping me solve it? The answer is, it isn’t. What it’s actually related to is the value I derive from being able to do something I couldn’t previously work out for myself.?
In some instances, you could create a calculation to arrive at a price. For example, if your efforts directly helped a CEO grow her business by an additional $1m in revenue, you could reasonably expect to charge 10% of that. I mean, if someone asked “if I give you $1m in profit, will you pay me $100k?”, then most rational people would say ‘yes’. The problem of course is that, as a coach, you’re not always able to make that direct connection. But, if you start to think about the value you are creating and what that might be worth to someone, suddenly your approach to pricing can shift.?
A coach I know works with technology companies to help them with a specific challenge many of them have in terms of the way they present themselves to the outside world. In a previous life, I used her services which consisted of an hour-long discovery session, three afternoons of workshops, plus writing up notes in between sessions and then producing a final 7 or 8 page summary of the findings. So, all in all, possibly a week’s worth of work. For this she charged $30,000. When I spoke to her recently she had upped her price to $45,000. Why? Because if a technology company who was doing, say, $10m in revenue could see an improvement of only 0.5% by applying her strategy, then it will have already paid for itself. Her case studies showed that applying her methodology could have a much bigger impact on the bottom line.??
But what if your coaching was less about money and more about less tangible benefits? Can you still apply similar thinking? Well yes. What if your guidance stopped them from being fired, or got them a promotion? What if you helped someone overcome their fear of public speaking? What if you helped them over some trauma that had been preventing them from living a normal life? What if you helped save a marriage? Think about it. What value are you delivering?
I’ll give you a less heady example than the $45k/week coach:I recently worked with two coaches who both did the same thing, more or less - both executive coaches. One charged an hourly rate of $180. Her approach was to start off with say a weekly session of 2 hours, moving to once a month more as a health check. So, at the start, each client would pay $1,440 for a couple of months, moving to $360/month over time.?
The other one offered a package: a 6 month #engagement where you went through a process of identifying the priorities you wanted to address and then a plan. It consisted of 3 x 2 hourly sessions per month, plus various exercises to complete and documents to read. For this she charged about $12,000.
So over a 6 month period, the first coach may have charged about $2,880 for 16 hours consultancy. The second coach worked out at an hourly rate of $333 (if you just calculate face-to-face time of 36 hours in total) and overall would have generated more than 4x as much from the client than the first coach in that 6 month period.?
The main difference was the first coach was charging by the hour and the second was providing a package that had a specific outcome and didn’t refer to an hourly rate. “I can get you from a to z in 6 months for a cost of $12,000” is about the value you as the client are going to derive from no longer being at point a, but instead being at point z. As opposed to ‘my hourly rate is $180’, which is really just the cost of doing business with someone. I’m not saying that the per hour fee doesn’t have a place for some clients, but I just wanted to point out how going down the value route reframes things.?
Of course applying a monetary value to saving a marriage will never be an exact science (unless someone does a calculation based entirely on legal fees and divorce settlements, which is not really the point in this case), but being happy or unhappy in a marriage is a massive deal. Getting a promotion at work is a massive deal. Being able to overcome some crippling social phobia is a massive deal. You don’t want to take advantage of people, but by the same token, you can see how none of this relates to an hourly rate if you can genuinely make a difference in someone’s life.
Pros
The biggest pro is that you can charge much more. But you have to be very clear what it is people are getting. The key is more about the outcomes that the client will get, not about the time you will put into speaking to them. Remember, they are not just paying for the hour they are sat opposite you, but the lifetime of experience and knowledge and skills that you have spent a lot of time and money acquiring.
Cons
In some ways you may be going against the grain. If everyone else is charging an hourly rate and you come in with a single price, it may be harder to justify. A key thing here is to sell something as a package rather than a collection of time. So, although you may talk about scheduled sessions, you might also want to give people other resources, be available for more ad hoc questions via email, write up a report, set tasks, review and comment on those tasks. Specifically, be clear about what you hope they will be able to have/do/accomplish with each package of coaching.
Some Benchmarks
In spite of everything I’ve said about ‘value’, whether you charge by the hour or by results, ultimately you will probably want to tot up exactly how much you earn by unit of time, so understanding how your billable time is charged is never a bad thing. We thought it might be helpful to see how others are valuing their time.
We’ve surveyed the thousands of users on Delenta’s platform to get some very ballpark figures. We’ve tried to filter out anything that seemed suspect, which gave us a total of 1,478 results that have been analyzed. But we are relying on what people have told us and have not verified to what extent they are accurate. These numbers aren’t a recommendation and it should be remembered that coaches on Delenta range from just starting out to long established. They also cover different types of coaching. Nevertheless, we thought the answers might be interesting. All rates have been converted to US$ to allow us to compare like with like.
According to some research by Practice on a much smaller sample size of 153, the median 1:1 coaching rate is between $150 and $300, although it doesn’t say how long the average 1:1 session is. But assuming it is somewhere between 1 and 2 hours, this number seems to be in a similar ballpark to our results.
We’re going to run a more detailed survey in the coming months where we can find out answers to more specific questions. If you have anything you would love us to ask, please get in touch.
Conclusion
Which pricing strategy is best for you? As you may have gleaned from the above, I would always lean towards Value Pricing as a direction. But I also recognise that this is easier said than done and will depend on what type of coaching you offer. But even if you don’t feel as if you can go down that route entirely, maybe at least think about the value you create for your clients and whether there would be a willingness to pay more if it was presented as something tangible they will get at the end, rather than something they turn up to and pay for your time.
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