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Pricing Strategies for Business Coaching
By
R. Scott Ward

Many of us struggle with how to price our business coaching services. Set the price too high and we might scare off clients. Set the price too low and we lose potential income. Sometimes we also wish that a professional organization like the WABC would give us more guidance. For example, it may be helpful to see regional surveys of what other business coaches charge and set our prices accordingly. But some legal jurisdictions could interpret such a survey by an association that promotes business coaching as price fixing. WABC has wisely selected to avoid this serious legal problem and not gather this information.

So how do we figure out how to price our services? Here's how business coaches struggling to determine an optimum price strategy may adapt a systematic method taught in many Marketing courses: 

Determine Your Objectives
Understanding your business objectives will help you set prices. If you want to attract as many clients as possible, pricing yourself on the lower end of the spectrum may help attract clients. If you want to establish yourself as providing high quality to clients, pricing yourself on the higher end of the spectrum can help relay the message that you are a leader in quality. If this is your objective, make certain the value you deliver is commensurate with your prices.

Determine How Prices Impact Demand for Business Coaching
Price your services too high and you may scare off potential clients. What we charge for our services will clearly influence demand. One way to estimate the effect of different prices on demand is to test offering your services at different prices. Called "price experiments," you can test different prices in different areas or types of clients and see what response you get. This should be done systematically and carefully. Look to see if the rate at which new clients sign up changes at the test price.

Determine Your Costs to Provide Business Coaching
Make certain you are aware of all of your variable and fixed costs. Variable costs will include your time spent to deliver services to a client. Fixed costs (also called overhead) includes everything from rent, hardware and software, phones, web services, files, transportation costs, marketing expenses, legal fees, and more. 

If you spend 30 billable hours coaching each week you will take the total of all costs (estimated to a weekly average) and divide by 30. This will give you a rough amount you need to charge per hour to break-even. If you want to make a profit, you have to charge more than this amount. 

Analyze Competitors' Pricing Strategies
Take a look at what other coaches who are targeting your same market are charging. A review of other business coaches' Web sites may provide some information; however, many business coaches do not make their prices publicly known. Checking the costs of potential substitutes for business coaching, such as training seminars, might provide good information. For example, how much does it really cost to attend a three-day seminar? It is the cost of the seminar, plus additional expenses such as travel, lodging and meals, and three days of lost earnings (use billing rate to determine this amount). Take that grand total and divide by the number of training hours received (24) and you will see a good estimate of the hourly amount businesses are willing to pay for seminar training. 

Select a Pricing Method
The easiest pricing method is a simple markup over your total costs. If you want to make 20% more than your costs, take the rough hourly break-even amount (determined above) and multiply by 1.2 (120%). Make sure you compare this number to the information gathered while analyzing competitors. It should make sense compared to competitors. 

Set a Price (or Prices)
With this information in hand, you should begin to see a window of prices you can charge and expect clients to pay. It will not be exact, but you should now have a better understanding of what the market will bear. 

Adjusting Prices
Once you have set your prices you should make careful observations of how clients react. Monitoring the performance of your current pricing strategies will help you set future pricing strategies. As your business objectives change, your pricing strategies should be reviewed to ensure they support your business objectives.

As your reputation expands and the value you deliver to clients grows, you may be able to increase your fees. A good rule of thumb is if you are so busy that you regularly delay beginning work with a new client, it may be time to review your prices and see if an increase is merited.

Determining a pricing strategy for your services is not a simple task, but investing the time to do this should help maximize your earnings and let you focus on delivering results to your clients.

 
Sources Used:
A Framework for Marketing Management, Second Edition by Philip Kotler
Essentials of Marketing 3 by Charles W. Lamb, Joseph F. Hair, Carl D. McDaniel

 
R. Scott Ward, MBA, BIS, RCC, is the Principal Coach of Leading Solutions, Inc., a Business and Executive Coaching firm, and an Adjunct Professor in George Mason University's School of Management. Read more about Scott at http://www.leadingsolutionsonline.com.

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