One of the major aspects of your business coaching career is going to involve finances. As you will most likely be operating as an independent contractor or sole proprietor of your business coaching service, all financial responsibilities for your coaching business is entirely on you. Even if you work as part of a coaching firm or collective, you are still going to be responsible for your part in the business.
As you prepare for your business coaching business, you need to make sure that you are covering all of your bases. Even if money is nowhere near your list of motivators for getting into the business coaching field, it still is going to be important. This article will cover the financial aspects of your business coaching career, including setting your prices for your services, managing your business expenses, billing options, record keeping, and insurance information.
Setting Your Prices
The claim that nothing in life is free is true, and your business coaching services are no exception. When you offer your services to clients, you need to have the cost of those services in mind beforehand. Some clients will want to discuss price before making a decision about employing your services. Often, the cost of service or product will make or break a customer's decision to purchase it.
While you could simply base the prices for your coaching off what your fellow coaches are charging, it really isn't going to do you much good. Yes, it could allow you to compete with them within your market, but doing so might end up costing you. Setting a price for a product or service needs to take three things into account: time, the cost to you, and the affordability for your audience.
- Audience Affordability-Your clients are more than a source of income and you need to view them as such. By this point in your business development, you should have at least a general idea of who is going to be a part of your target audience. Think about what they make on average during, let's say, a year. Even if you use a general estimation based on information from their industry, are they going to be able to pay your estimated price for your services? 1 If your proposed rates are well above what your audience can afford, then you may need to head back to the drawing board and rework things.
- Your Cost-The price of a service or product should offset the cost put into it. If you put five dollars into something, you should at least be able to get your five dollars back when you sell that item. For business coaching, your rates for your services are going to take into account your business expenses, like those listed below. Any supplies that you use in your coaching sessions are going to cost you money as well, another factor you need to calculate for cost. Same goes for the labor put into the service. When you are calculating your costs for your coaching rates, don't get greedy and inflate your estimate to build up your profit. 2 Doing so can be harmful to your clients, your reputation, your local market, and to the business coaching industry at large.
- Time-The amount of time that goes into a product is also going to have an impact on its price. Most sellers and producers will have an estimate price per block of time, taking into account all the aspects that do not normally come with a price tag. They will then take that estimate and apply it to the cost of the item. For services, there cost is often broken down in a similar manner of a set price per block of time, typically an hour. As you cannot accurately price something like the value of a skillset, most business coaches have a set rate for their coaching. For example, you could have an hour's long session at a set price and then have an additional cost per half-hour after that initial hour.
Business ExpensesInterested in learning more? Why not take an online Business Coaching course?
Operating a business is going to cost money, no matter how frugal you attempt to be. Your business expenses are going to depend on how what you need for your business, based on what you've laid out in your business plan and how you've structure your coaching service.
- Travel-Regardless of distance, traveling is going to be a part of your business coaching career. You will need to be able to go to your clients somehow, safely and on time. If they are close enough to drive there, the cost of gasoline and maintenance for your car are going to be regular expenses. Some clients, especially if you need to travel a great distance to get to them, will offer to cover a portion of your travel expenses but you shouldn't expect that to happen all the time. Network and continuing education activities, like conferences and seminars, will also be a part of your coaching services travel expenses and may require additional financial planning.
- Employee Paychecks-It's not necessary to have employees for your business coaching service, especially if you are a small operation. However, if you do expand to the point where you decide or need to hire employees, you will need to pay them. As the owner-operator of a business-which your coaching service is-you are responsible for providing for any and all staff members, no matter their role in the company. Establish what an employee will be paid in terms of salary and make sure that it is in compliance with any and all hiring laws.
- Rent and Utilities-If you have a retail space for your business coaching service, changes are you are going to have expenses for the space. You'll need to pay rent-on time!-if you're leasing, and probably a mortgage of some sort if you are the property owner. Even if you own the property outright, you will need to pay for the utilities necessary for the business to function: electricity, heating and cooling, and internet. If you are based out of your home, you will still have some of these expenses, but they will just be a portion of your costs that you already pay for your home.
Your coaching will not be financially successful if you are sloppy with your bookkeeping. Any and all financial records pertaining to your business coaching should be documented and organized for several reasons. While keeping track of your finances will allow you to monitor your progress and ensure that you are not falling behind on paying for any business expenses, it will also help you avoid breaking any laws.
- Taxes-Your finances are going to tell you what you need to pay in taxes every year. The IRS's business classifications will affect what you have to pay for your taxes, your potential deductions, and what you can get in returns.
It is recommended that you keep any records that provide evidence of your expenses and income, and they should be kept as long as necessary to prove them. 3 In the event of an audit, you will need that information to prove that you have been honest with your taxes and that you are not committing fraud.
- Client Payment-Keeping records for your coaching business will allow you to make sure that your clients are paying for services rendered. Disorganized bookkeeping may result in errors, like misplaced payments and failure to send invoices. It is your responsibility to make sure that your clients are receiving notice about payments that they need to make and that you track when they do or do not make those payments. It's one thing for your client to make a mistake and miss a payment, but it's another thing entirely for you to be negligent and accuse them of not paying.
- Inventory-You will need to keep track of your business coaching service's supply usage. Failing to pay attention to your inventory-especially for items that are crucial to your business-is frustrating and foolish. It is simply common sense and can be an embarrassing error for a business coach. No matter how busy your coaching makes you, always keep track of your inventory and make sure to replace what you need. Keep a record of what you have, tracking when you got it and how fast you go through your supply, in order to avoid problems.
The billing process for your business coaching is basically how you will be paid for your services. It does not need to be overly complicated, but it does need to be functional enough to avoid causing problems for you or your clients. A standard billing process should include accepted payment options, receipts, or invoices for services, and a policy for refunds.
- Invoices-The invoices you send to clients are going to be the receipts detailing what services were done, when they were done, and their costs. All invoices you send to your coaching clients should include a full breakdown of what you did for them per your business agreement. You should have the total payment required and when it is due clearly marked. If your invoice is overly complicated, your clients will not know how to interpret it and it may result in misunderstandings and missed payments.
- Payment Options-When you submit a bill to a client for your coaching services, you should make it clear what payment options they have. Cash payments are often too impractical and inappropriate for business transactions and are simply not recommended. Most businesses will pay through a company credit card or a wire transfer between accounts. Check is also a possible option, but it depends on how comfortable you are with the issues that can arise-losing it, insufficient funds, fraud, etc. The payment options you make available to clients may be impacted with how you have your business accounts set up, as well as any fees that might be incurred through credit transactions.
- Refunds-Offering refunds for business coaching services can be a bit tricky. If you have a policy that is too lax, you run the risk of clients taking advantage of it. If it is too strict, then there's the chance of you may abuse it. Determining grounds for a refund should be something you establish before you sign your first client and the policies related to refunding should be clearly laid out in the contract. What those grounds are will be up to you, but most will consider offering a refund if the contract is canceled before a certain point or if services are not as advertised.
When buying insurance for your business coaching service, you will need to take inventory of your assets to determine coverage. The insurance company will do the same and decide what they will cover, but you should still have some idea of what you need to look for in an insurance policy. Standard coverage should include your place of operations, your services, and your general liability. If you are working out of your home, you may need to make a few adjustments to the policy you have for it, depending on the requirements of your insurance company.
You are legally required to provide insurance options for your employees. At minimum, you will be federally required to purchase three types of insurance: unemployment, disability, and worker's compensation. 5 What will be covered underneath each one will be determined by the policies of the state you are operating out of. Additional employee insurance requirements may be set forth by your state laws. It is your responsibility to determine what you are legally required to do for your employees, and you may consider going beyond those requirements if you so choose.
Employers are required by law to have business insurance, as well as provide an insurance policy for their employees. Those who are self-employed or are independent contractors, like most business coaches, will often choose to purchase insurance for the sake of covering their assets related to their business. 4