Preparing Your Coaching Business For Sale.

The 11 Questions You Need To Ask Yourself.

At some point, as a Coaching or Training business owner, you will want to realise the fruits of many years of building up your coaching business, often when it comes to thinking about retirement or succession.?

Obviously, this is an expansive topic to cover in a blog post and in the webinar series we will be focusing on the mechanics and processes involved in preparing and executing a sale.

The process all begins with careful planning to put the business into the best state of preparedness and peak performance, sometimes several years before you’re actually ready to press the button.

I would suggest allocating specific days of the month to work on the project over many months, perhaps years. In going through this process, you will find that it will give you a critical view of the business and highlight what areas need to change to improve overall operations and processes, even if you never sell it is a good exercise and if you do, then you are prepared.

I have spent over ten years in venture capital, investing in early stage startups and in my experience, I have seen the best outcomes are combined with careful planning as well as relationship building with potential acquirers.

Think about it from the acquirers perspective and why they would want to buy your coaching business, when there are so many to choose from. Look at how acquiring your business will make the acquirer stronger.?

So what makes a coaching businesses different from other businesses when contemplating an exit strategy? The main factor is that coaching is based on? personal relationships, expertise and trust and this feeds into a number of specific challenges:?

1.Key Person Risk

Coaching businesses are often built around the personal brand, charisma, expertise and reputation of the owner coach, therefore buyers will be concerned that without you in place, the customers will be at risk of leaving.

Dilute this risk by building systems and processes and ideally a team of coaches and staff over time, that can operate independently of you.?

2. Client Loyalty And Retention

The relationship between a coach. A client will often choose a coach based on a feeling of trust, connection and that they feel understood. Leaving the business will break that bond if the original coach leaves.?

Create a smooth and stepped transition plan. Some ideas would be to introduce the new owner or coach to your clients, possibly over several sessions, maybe you could stay on as a consultant for a time, or ensure contracts are incentivised to ensure client retention with the new owner.?

3. Scalability

Coaching is a people intensive business, to grow revenues you need to run more coaching sessions and hire more coaches to do so. This makes it expensive and difficult to scale. This is why a lot of SME coaching companies don’t have coaches that work with them exclusively full-time but more on an on-demand contracting basis as steady work cannot be guaranteed.?

Invest in technology to streamline operations by reducing administration time as well as software that helps generate new business. Introduce group coaching, digital courses that need no in-person labour once produced or memberships that can generate a recurring revenue stream. Diversify the revenue streams and automate as much as possible to make the business more attractive.?

Did you know that investing in technology that makes you more efficient will increase your valuation on exit?

Look at the revenue multiples for the coaching and training sector:

Lifelong Learning & Skills: 11.3x

Corporate & Skills Training: 12.6x

Professional Development: 22.8x

Source: https://www.finrofca.com/news/edtech-multiples-mid-2024-update?

4: Revenue Reliability

The revenue profile of a coaching company can be ‘lumpy’, some months are good, some are bad. It’s important to smooth out the cashflow profile.

Try to secure long-term contracts or retainers with existing clients, offer financial incentives to lock in longer commitments in multi-year contracts and if you can get paid up-front for doing so. This gives buyers reassurance in the sustainability of repeat business and client loyalty.

5: Certification

You may be a fully certified coach but the buyer may not have the same qualifications, so this would make it more difficult for the acquirer to be operationally involved at a coaching level.

Provide a plan that includes training the new owner, you could also offer to stay on for a limited time as a transitional coach to bring them up to speed.?

6: Competition and Market

Coaching is a highly competitive and fragmented industry with relatively low barriers to entry.?

You must have a differential edge or niche that you dominate. Build competitive advantages via specialisation, proprietary or unusual coaching methods and the strength of your brand judged by its visibility in the market. ?

7: Reputation

Your reputation will make or break your business. Any negative reviews or clients spreading a bad word of mouth will harm your sale when the buyer does their due diligence.?

Make sure you maintain a strong and positive online and offline reputation and show evidence of client satisfaction through reviews, testimonials and case studies.?

8: A lack of tangible assets

Coaching businesses have far fewer tangible assets than many traditional businesses who may have assets like equipment, inventory, offices, vehicles etc and this can make it harder to justify a high purchase price.?

You have to really emphasise the value of your intangibles, such as IP, internal IT systems, website traffic, CRM data and anything proprietary that is hard to replicate and show how these intangibles can contribute to recurring revenue or lead generation.?

9: Buyer Beware

Buyers will have a concern that there is a possibility you could start a competing business, possibly even taking clients who already have a pre-existing trusted relationship with you. ?

You likely have to sign a non-compete agreement which will give comfort to the buyer that you will not start a competing business within a certain period or geography as well as convince them of your future plans.

10. Buyer Qualification

Remember, not every buyer will be experienced in how a coaching company works, it may need some hand holding and education. ?

Have a backup plan and always keep on friendly terms with all suitors.?

11. Unsettling The Troops

If you have a team they will likely get wind of a potential acquisition. This will be disconcerting and people will worry about their job security as in a lot of acquisitions any duplicate roles are made redundant, possibly key people could leave upsetting the whole transaction.

Keep the momentum going post closing the deal and manage expectations across the team.

Best of luck!

On October the 8th 2024 Delenta will be conducting a series of webinars entitled:

“Maximizing Your Exit: What to know before selling your coaching business”

This series of webinars is aimed at owner managed SME coaching companies.?