How to establish your coaching rates fairly and profitably?
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Fixing your coaching rates is a crucial step that can greatly influence the success of your business. It is essential to establish prices that not only reflect the value of your service, but are also competitive and accessible for your target market. Here is a guide to help you determine fair and cost-effective prices for your coaching services.
Things to take into consideration when setting your prices
Your positioning and expertise
Before setting your prices, it is important to consider your positioning in the market. Are you an expert in a specific area of coaching, such as executive life coaching or health coaching?Your level of expertise and qualifications may warrant higher rates. Think about your experience, certifications, and niche specificity to assess your unique value.
Your customers and their purchasing power
Knowing your target customers is essential to setting appropriate prices. If you are targeting business executives, they may have different expectations and budgets than young entrepreneurs or individuals. Analyse the needs, expectations and above all the purchasing power of your potential customers to align your prices strategically.Your competition
Look at what your competitors are charging for similar services. This will give you an idea of what the market is willing to pay and help you position your rates competitively. Be sure to compare similar services in terms of length, content, and promised results.Your costs
Calculating all of your costs is crucial to ensuring that your rates are not only competitive but also profitable. Include direct costs like training fees and materials, as well as indirect costs like marketing and administrative expenses. This will help you understand the minimum threshold at which your services remain profitable.
How to calculate your costs?
Let's imagine that you are a professional coach specialising in career coaching. Here's how you could calculate your costs and set a minimum profitable rate for your services.
Direct Costs
- These costs are directly related to the provision of your services.
- Training costs: Let's say you pay €2,000 per year for refresher courses.
- Materials: That includes the costs of tools and resources you provide to your customers, say €500 per year.
Indirect Costs
These costs are associated with running your coaching business but are not directly related to providing services to a specific client.
Marketing: Including advertising, website, email marketing, etc. Let's estimate this at €3,000 per year.
Administrative expenses: This can include management software, office rent (if applicable), accounting services, etc. Let's imagine that it costs €4,000 per year.
So here you are with:
- Direct costs: €2,500 (€2,000 training + €500 materials);
- Indirect costs: €7,000 (€3,000 marketing + €4,000 administrative);
- For an annual total of €9,500 (€2,500 direct costs + €7,000 indirect costs).
Your minimum hourly rate
To simplify the calculation, let's say you plan to work 20 hours per week for 48 weeks in the year, which totals 960 hours of work per year.
- Total working hours per year = 960 hours.
- Cost per hour = Total Annual Costs / Total working hours per year.
- Cost per hour = €9,500 / 960 hours = approximately €9.90 per hour.
However, this calculation only takes into account your costs. To be profitable, you also need to include a profit margin. Let's say you want to get a 50% profit on your costs.
Minimum hourly rate for profitability = Cost per hour x (1 + Profit margin).
Minimum hourly rate = €9.90 x (1 + 0.50) = approximately €14.85 per hour.
No matter which pricing model you choose, you need to think about your costs and estimate your minimum hourly rate. From there, you can set the price of your session per hour, your package or your value.
As you notice, it all depends on the number of hours you want to work per day and the number of days you want to be available for your customers.
The 3 coach pricing models
To help you set your prices, here are three pricing models primarily used for coaching. Take the time to think about which model suits you best. To find out more about these pricing methods, I invite you to read the Pay-coach article dedicated to this subject: Which pricing method should you choose for your coaching activity?
Once again, take the time to think about your rates and the payment method you want. This choice is much more strategic than it seems.
Payment on time
There are both advantages and disadvantages to using an hourly rate for coaching services, and it's important to consider them to determine if it's the best pricing model for your offerings. This pricing method is ideal for launching your business, attracting your first customers and taking your place on the market.
Package payment
Ideal for long-term commitments or specific programs. This pricing method allows you to bring your activity to a threshold of profitability and financial security.
Payment by value
Ideal for highlighting the specific impact and results your coaching brings to clients, this pricing model takes into account the perceived value of results rather than time spent. With this pricing method, you take your activity to another level, that of financial abundance. Here, you are looking to assert your business and generate significant income.
Test and make the most suitable choice
Be flexible
The market is changing, and so is the perception of the value of your services. Be prepared to adjust your prices based on customer feedback, the evolution of your expertise, and market conditions. It’s also a good idea to offer promotions or discounted rates for new customers or as part of special packages to build customer loyalty.
Communicate your value
No matter what price you set, it's essential to learn how to communicate your value. Your future clients must understand your field of expertise and what you will bring to them, as quickly as possible. It is from this moment that they will start to think:
- The intensity of their need;
- The urgency of the situation;
- Your ability to resolve their problem;
- The financial (and other) means they are prepared to invest.
Highlight specific benefits, expected transformations and past successes. This helps justify your pricing and reinforce the perception of value among your potential customers.
Pay-coach helps you set your coaching rates
By considering your expertise, carefully evaluating the market, and effectively communicating the value of your services, you can establish prices that benefit both you and your clients.
Remember that the right price is one that reflects the value of what you offer and meets the expectations and capabilities of your target market.
At Pay-coach, we are dedicated to providing you with all the resources necessary so that you can confidently navigate the world of coaching.
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