What fees a new coach should be charging:
The number of coaches entering the market has made it difficult to work out
I have been running my own coaching practice for 17 years so have made plenty of mistakes. The marketplace is also very different than it was pre-2008, before the financial crash.
Setting a realistic fee for your work is central to a good business plan as a coach and having a viable commercial operation. Set the fee too high and you won’t attract work. Set it too low, and you’ll be working long hours for little return.
So, what do you need to earn from your business?
The dangers of mispricing
Speak to established coaches and most will tell you some of their golden rules, including:
- Don’t undersell yourself; believe in your skills and expertise, and charge accordingly, although the emphasis is on “skills and experience” here. If you are a new coach you may not have as much coaching skills and experience as others out there who could charge more. You may need to think “what am I uniquely bringing that others will not?” e.g. experience form a certain industry or your even your personal qualities.
- Set an income target for month/quarter/year
- With an income target in place, the higher your fees, the fewer days you need to work to reach them
- Check what your competitors are charging, then set down how your services are better and therefore worth more
- Bear in mind geography; what you can charge in the City of London can be radically different than the Highlands of Scotland (and not in the way you would expect necessarily!)
- Make sure you know all your own direct costs
- Don’t forget to allow for the costs associated with buying/leasing any capital equipment
- Be prepared to be flexible in your pricing: listen out for clues as to what the client is expecting to pay and negotiate
- Know your own marketing costs: larger or multiple contracts might be discounted whilst shorter, one-off contracts may attract a premium – both may take the same length of time to secure, but the former is far more rewarding
And a golden rule from the marketing people – it’s easier to attract more work from an existing client than it is to obtain a new client.
- If you have the opportunity, it’s worth setting yourself at least two goals: how much you want to earn (e.g. in a year),
- how many days you want to spend in chargeable delivery to clients (over a year).
Link the two, and you immediately give yourself a notional daily rate, assuming that all your expenses and overheads can be charged extra. (My trips up and down the M6 between Manchester and Birmingham soon add up!)
Many coaches find themselves working too many days at a stretch. To be effective, you just can’t work 4/5/6 days at a time. It might be profitable, but it doesn’t allow time for preparation, administration, marketing, learning and maintenance. The secret is to pace yourself and charge a realistic rate for the right number of days. However, the reality for many freelancers and small firms is a cycle of “feast or famine” with either too much work or too little work.
Here is a systematic way of helping you to work out fees. Also bear in mind how many coaching sessions you can do in a day and for how long. More than 5 - 6 hours in a day can be very tough physically, mentally, and ethically questionable.
There are 365 days in the year but a lot of them cannot be used for fee earning days
There are 104 days that are weekends (you do want to see your family)
There are also about 15 days that are bank holidays; and obviously you would like to have a couple of holidays a year
That leaves you with around 220 potential fee earning days. Within those 220 days, you need to administer your business: make phone calls, do your accounts, write emails, update your website, write blogs, keep up with social media and do general unproductive, boring office ‘stuff ’.
Business administration, let us say, takes an average three days per month. And then there is your CPD and Supervision; you do want to be a professional up-to-date coach? This can easily take up another day per month.
After all this you have no more than 190 potential fee earning days left. Going to networking events, conferences, exhibitions etc, all take up days and mostly days that you could be earning fees. Then there are the meetings with purchasers to present and negotiate contracts. Talking conservatively this is going to use up another 30 days per year, potentially more.
You now have at best 160 potential fee-earning days, but we are not quite finished. Of these you will have to research and work on new tools and techniques and/or do preparation work prior to coaching. And there will be the occasions where you have to travel. At worst this reduces by one third the number of potential fee earning days left.
Some clients are also very seasonal e.g. schools, retail, motor trade whish may have an impact on when they wish to engage a coach.
The result is that at best, you need to generate all of your required revenue in 100 or so fee earning days
For coaches, consultants and trainers, there are two ways of quoting a fee:
The per day/half day or per hour rate for your services
This is particularly useful for short contracts such as one-off coaching sessions. Bear in mind though that the client is only paying you for your ‘visible’ time. If you need to spend time in advance preparing materials, or afterwards gathering feedback, this will need to be built into your daily
rate (see below). Many coaches charge on a half day rate and this then covers them for preparation time and writing up of notes after coaching sessions which is crucial for ethical record keeping and reflection. You may also want to cover any other support for the client like phone/email coaching and even review meetings/calls with the sponsor.
A fee for the whole contract
For larger contracts, perhaps stretching over several months, the client may prefer to know that the total package is say for six sessions over 6 - 8 months. You may then prefer to discount it from your usual half day rate because they are buying a larger number of sessions. Again, check out what other coaches do.
You should remember a couple of useful points. First, everything is negotiable in a contract: put in what you want and invite the client to discuss your proposed terms. Second, if a contract is proving too difficult or insufficiently attractive, walk away; spend your time doing what’s rewarding to you!
Just how much are you worth?
Most coaches make the mistake of under-valuing themselves – particularly in the early days – and sell themselves too cheaply merely to ensure they have some income. Any business development programme will teach you that the success of a small business is built upon identifying a niche product/service and then charging a premium for it. Only the big players can afford to charge lower rates because of their volumes. Pricing yourself too cheaply has two other adverse consequences. You look cheap (so people don’t value what you do). You feel cheap (so you don’t value what you do).
Remember to count all the things you have to pay for to run your business too. As my accountant always says “Turnover is vanity; Profit is sanity”. And he would know!
If you would like some help with business development for your coaching practice, then do get in touch firstname.lastname@example.org
This blog is a short section form my e-book “Running a Successful Executive Coaching Business” by BookBoom.com