How To Go Broke As A Life Coach
There's a big problem in the coaching industry right now that no one is talking about…
It’s called cash flow.
To explain, let me tell you the story of Jane.
Jane decides that she wants to become a coach. She's always been interested in personal development, she hates her job, and coaching seems like a great way to make money while also having the freedom to raise her young children.
After searching the internet for information about coaching, Jane learns that she can get certified as a coach.
So she looks up coach certification programs and, after a lot of research, signs up for one that costs $10,000.
**
Revenue = 0
Expenses = $10,000
Profit = -$10,000
**
Jane justifies this investment to herself because it seems to be a well-respected program, she doesn't know how to coach yet, and she understands that every business has start-up expenses.
But the real emotional driver behind the certification is that she wants validation - validation that this could be a real business, validation that she is "good enough" to coach people, and validation from her friends/family that this is actually a legitimate life choice.
The program starts and Jane is in love. It feels great to be around other likeminded people who want to grow and help others. The program gives her lots of exciting tools and models. It also feels a lot like school - a set path that feels very comforting to her, especially in contrast to the uncertainty of entrepreneurship.
Slowly, though, an unpleasant truth starts to dawn on her...
She still has no idea how to get clients.
Fortunately, her certification program offers a module at the end on marketing.
She waits patiently, and eventually the final module comes.
In the marketing module, they talk about how you can have a blog, or speak places. They talk about how you can choose a specialty, like "business coaching" or "relationship coaching."
This module is taught by a coach that works for the certification company. They have one or two clients, but aren't full time into their own business. This doesn't really bother Jane, though, because it still seems incredible just to have worked with a few coaching clients.
So the marketing module pacifies her until the program ends.
Once her program is over, Jane builds a website like they said to do in the program. She makes business cards with the words "Life Transformation Coach" on them. This all adds up to a hundred bucks or so.
**
Revenue = 0
Expenses = $10,100
Profit = -$10,100
**
Jane is so excited. "I have a real business now!"
She quits her soul sucking job and gets ready for the clients to start rolling in.
A few weeks go by. And a few more. No one has reached out to her about becoming a client.
And that's when the anxiety sets in.
Because Jane has just realized what every coach realizes at some point…
Which is that there's a huge difference between:
a) being able to coach people; and
b) having a successful coaching business.
But Jane is smart. She doesn't just cross her fingers and wait for clients to come to her.
Instead, Jane starts to learn more about marketing.
She reads books like the Prosperous Coach. She learns about the importance of picking a niche.
It all seems to contradict itself and she's starting to get really overwhelmed trying to piece everything together into an action plan.
But you know what? Some of the stuff she's learning actually does work for her.
She puts on a free workshop in her city about how to be happier and offers a free consult at the end. Out of the 3 people that take her up on it, she ends up booking a couple of one-off sessions with people for $90 each.
She knows it's not much, but it feels amazing to get paid for coaching.
**
Revenue = $180
Expenses = $10,100
Profit = -$9,920
**
After these one-off sessions, her clients disappear. They aren't booking more sessions and when she finally gets in touch with them, they say they’re feeling much better and are going to continue on without her.
Finally, Jane says screw it and invests $6,000 in her own coach so that she can have some hands-on support.
**
Revenue = $180
Expenses = $16,100
Profit = -$15,920
**
Jane figures it's silly to try to get people to invest in something she's not willing to pay for herself.
Plus, the money that she invested in her certification can't pay off if she doesn't also invest in the business side of things.
So she gets started with her new coach. It feels good to experience being a client herself. She's picking up lots of good insights around mindset and how she shows up in the world.
The coach also helps Jane commit to putting herself out there more, and as a result she gets a few 3-month clients at $500/month.
**
Revenue = $4,680
Expenses = $16,100
Profit = -$11,420
**
Jane feels like she's starting to make some real money now! Technically, the investment in her coach hasn't paid off yet, but Jane feels like she's transformed so much personally that it doesn't matter.
After her time with the coach is finished, Jane decides to go out on her own for a bit to apply what she's learned.
She decides that she has to raise her rates - even if only to pay back the investments that she's made. After all, she paid her coach $6,000. So why wouldn't someone pay her that much?
Unfortunately, Jane isn't totally sold yet that her coaching is worth it. She hides by tweaking her website and, when a potential client does reach out, she ends up holding back during the call and losing the sale.
Jane decides she can't do this herself anymore. She's sick of having these super long conversations with people who will never pay for her coaching anyway.
So she decides to go ALL IN and invest in a really high-end program run by what looks like a really successful coach. The program is $20k, and her husband needs some convincing. But eventually they decide that it makes sense.
**
Revenue = $4,680
Expenses = $36,100
Profit = -$31,420
**
This program lights a fire under her ass. Not everything in it totally jives with her ethics, but she pushes that down and moves forward. She takes action, niches down, and gets a few high-end clients of her own.
Specifically, she gets 5 high-end clients for a group program at 6k each. That's 30k total from a 20k investment.
Now we're cooking with gas!
But when Jane opens her bank account, she realizes that she still hasn't broken even in the business...
**
Revenue = $34,680
Expenses = $36,100
Profit = -$1,420
**
Jane is feeling kind of demoralized now. She did everything that people told her to do. She invested in support. She didn’t try to figure it out all on her own.
And yet, the numbers just aren’t adding up.
Jane is totally tapped out now. Even if she wanted to run paid ads (which is what the program recommends), or invest in another coach, she wouldn’t be able to. And she’s not going to go back to her husband and ask for more money when she hasn’t even made back the first few investments.
The worst part is, she feels burned out. She’s deep into internet marketing world and she’s totally lost sight of the reason why she started her business.
I could keep telling this story, but I think you get the point. Things are F’d up.
Let’s take a look at what went wrong for Jane:
Mistake #1: Investing in a Certification Program Right off the Bat
Look, I get it. You want to provide value for your clients. And that’s great.
Can it be helpful to get some formal coach training now and then? Yes.
Should you read books on coaching, practice your craft, and learn more about your niche? Yes.
Are you allowed to get a certification later if you want, once you’re making money from coaching and you know it’s what you want to do? Sure, if it makes you happy.
But please realize that when you invest $10,000 upfront in something that won’t actually help you get clients, you’re starting off at a huge financial disadvantage.
Hoping that your coach certification program is going to teach you marketing is like hoping that the people who mow your lawn can also fix your plumbing. They might be able to, but doesn’t it make more sense to just hire a plumber?
Which brings us to our next point:
Mistake #2: Hiring a 1:1 Coach to Teach You Marketing
Everyone wants their own 1:1 coach when they start off, but very few people can actually afford a good one.
This may sound odd coming from someone who makes a business out of teaching people how to market themselves, but I think it’s a mistake for most people to hire a 1:1 coach too early on.
The truth is, you probably don’t need a private coach yet. I’d much rather Jane have invested in a really great online course and taken action on the basics. Getting your first three coaching clients isn’t rocket science - you should be able to succeed with free resources or the right $1,000 course.
If you feel like you need the accountability that comes from having a 1:1 coach, it probably means you’re not cut out to be an entrepreneur. If you can’t motivate yourself now, how are you going to be able to run your own business for the next 10-20 years? Hiring a 1:1 coach to keep you accountable is a ridiculously expensive form of accountability.
Mistake #3: Building Your Business Out of Desperation
First, notice that Jane ended up raising her prices after hiring her first coach not because she felt she had more value to offer, but simply to keep up with the investments she was making. This is a bad reason to raise prices.
A much better way to raise your prices is to get better results for your clients.
Second, notice that Jane was so seduced by the promise of the $20k program that she put aside her own ethics in order to follow their systems. This can sometimes make money in the short-term, but in the long-term it’s not sustainable. You can’t be consistent with something that feels icky to you.
Third, Jane quit her job before she started getting any long-term coaching clients. This is stupid from a cash flow perspective. I don’t recommend it unless you have a huge runway saved up. Potential clients will sense your desperation.
The Main Takeaway
There needs to be a clear and proportional return on any investment you make in your business. Especially early on.
Don’t invest in a certification program when you haven’t even gotten your first paid clients.
Don’t invest in a private coach if all you need is a step-by-step process for building your business.
And don’t make any business decision that forces you to sacrifice your integrity in order to survive.
The truth is: just making one of these mistakes won’t kill your business. But making multiple probably will.
You need to invest in your business, and you also need to pay attention to your cash flow. I don’t know any coaches who are raising millions of dollars in venture funding.
If you’re still trying to figure out what to invest in and when, you may want to apply for a strategy session with me.
But what if you’re already in a tight position financially?
Every successful entrepreneur has had cash flow issues at one point or another.
Sometimes it happens when you invest in an expensive program or contractor. Other times you may have a bunch of your clients all end their agreements at the same time.
Whatever the reason, it's important to know what to do when finances are tight.
If You’re in a Cash Crunch, Do This
Step 1: Stay grounded. This is not the time to freak out, think about quitting your business, or make any big changes. On the contrary, it's more important than ever in these times to return to the practices that help you perform at your best (meditation, exercise, sleep, etc.). Keep in mind that every coach goes through this occasionally and your ability to hold the line is one of the things that makes you a true entrepreneur. This will pass very quickly if you stay disciplined.
Step 2: I want you to make a list of your existing leads and forget about everything else for now. This means that if you were going to redesign your website, or create a really in depth blog post to drive traffic, you need to put that on pause for now. The quickest way to make money is to focus on people who already know, like, and trust you. Don't try to get awareness from new people and then convert them - focus on your past clients, current clients, and the people who are already in your sales pipeline (meaning they follow you on social media, are subscribed to your email list, or are in your list of contacts).
Step 3: Once you've written down some names, start with your warmest leads - get on the phone with them and make an offer. This could be as simple as calling up a past client and seeing how you can help, or inviting a current client to your place for a VIP weekend. Do not overcomplicate this and do not overthink it. We're simply going to talk to people who already recognize our value and see if there's an opportunity to serve them at a deeper level. It's always easier to get someone who has already paid you to pay you more than it is to get someone to pay you for the first time.
Step 4: Now you can focus on your second-warmest leads. These are people who are already in your sales pipeline but haven't paid you yet (meaning they have booked a time to talk with you, or you spoke recently but they wanted to think about it). Follow up individually with these people and, if they're right for your program, enroll them.
Step 5: Finally, send a new offer out to the people who follow you on social media and/or are subscribed to your email list. The two things that work best are either: 1) inviting them to a free strategy session and then selling them into your program from there; or 2) selling a one-off coaching session directly from your email or post. Do NOT try to explain or sell an expensive, long-term program directly. In fact, stick to option #1 unless you have a very engaged audience who is ready to buy from you and you also have strong copywriting skills. Here's an example of a free session offer that you can put out on social media if you decide to go with option #1.
Work this process until you're either out of your cash crunch or until you've completed all five steps. Then, and only then, do I give you permission to do other business activities like website design and long-term audience building. That stuff is important, but you won't be able to do it for long if you don't take care of your cash flow issue.
At the end of last year I was actually in this situation myself. I'd been investing a lot in my business, especially via Facebook ads, and my cash flow was pretty tight for a period of 1-2 weeks. So I took some extra time to meditate and then made a plan.
What I decided to do was put out an offer for one-hour consulting sessions. I reached out to my past clients first, then I put the offer out to my email list. I sold some at $850 each and it got me over my cash flow hurdle for the month. After that I got a high-end client, some recurring payments from existing clients kicked in, and I was good to go.
So remember - don't freak out when things are tight. Just play the salesperson for a little bit and then you can go back to long-term business building activities.
