5 Numbers to Consider When Launching a Coaching Business

September 1, 2021
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The coaching industry is one of the fastest-growing sectors with the market size predicted to surpass $20 billion by 2022. (Calendar check, it’s already September.) And while this has left many frustrated and floundering in an overcrowded market, it has also jump-started thousands of budding entrepreneurs’ coaching careers. 

And as with any new career trend, along with all the commotion, there is a lot of information (and misinformation) floating around the internet. While click-bait Facebook ads often depict building a coaching business to look like a walk in the park and endless traveling, the reality can often look a bit different.

Rather than sitting on a beach, spicy margarita in hand, glancing down at your phone while yet another effortless sale hits your bank account, new coaches and coaching side-hustlers are often found drowning amongst a sea of other coaching connoisseurs, endless freebies, masterclasses, and promo threads.

If you are coaching curious, a coaching side-hustler, or looking to launch (or re-launch) a new coaching business, here are five numbers to consider to ensure that you’re setting yourself up for success, and profit, from the get-go (so that dream of sitting on the beach is a much closer reality.)

Number 1: Your Net Income 

How much do you want to make per year?

Have you ever taken the time to really think through the income that would sustain and fund your ideal lifestyle? If not, now’s the time! 

This number will largely differ based on where in the world you live, and what constitutes a dream lifestyle for you. For some, it encompasses travel. For others, it’s as simple as being able to afford childcare. Either way, the first number to get clear on, is how much money you need in your bank account in order to thrive.

Example: I need $75,000 a year in my personal bank account to live my dream lifestyle.

Quick definition from Investopedia: Net income (NI), also called net earnings, is calculated as sales minus cost of goods sold, selling, general and administrative expenses, operating expenses, depreciation, interest, taxes, and other expenses. 

Number 2: Your Total Cost of Doing Business

What will your expenses and taxes look like?

How much does it cost to run your business? If you have no idea what these numbers are, it’s time to PAUSE and do a little research. For business expenses, outline one-off costs, such as building a website build, and reoccurring costs like accounting software. 

For taxes, it’s going to largely depend on the type of business you file and what state you live in. However, for example, expect around 30% of your profits to go to the government. So, multiply your desired net income by .30 to get this number.

Once you know your one-off costs, your recurring expenses, and your estimated tax payouts, you can add them together to get to an estimated “total cost of doing business.”

Example:

One-off costs: $4,000

Recurring monthly costs: $2,000 ($24,000 annually)

30% of 75,000 (net income): $22,500 (taxes)

Total cost of business annually: $50,500

Number 3: Gross Annual Sales

How much does your business need to make?

Now that you have your goal net income, and your estimated total cost of doing business annually, we can add them together to determine what your business needs to generate in gross sales annually in order to support your net income.

Example:

Total Cost of Business ($50,500) + Net Income ( $75,000) = $125,500 = Gross Sales

Quick Definition from Investopedia: Gross sales is a metric for the total sales of a company, unadjusted for the costs related to generating those sales. The gross sales formula is calculated by totaling all sale invoices or related revenue transactions. However, gross sales do not include the operating expenses, tax expenses, or other charges—all of these are deducted to calculate net sales.

Number 4: Gross Monthly Sales 

How much do you need to gross per month?

If you were to work for a company, there are generally 52 pay periods in a given year. When you own your own company, you can either payroll yourself OR pay yourself out via owner’s draws. For “Number 4,” you can either divide your total annual gross sales by 12 months OR by 52 pay periods. 

When you’re starting out, let’s say as an LLC or sole proprietor, it’s more common to look at your expenses and sales monthly, thus we’re going to use 12 for this example. You want to know how much your company needs to gross monthly in order to deliver you your desired net income. So, simply divide your gross annual sales by 12 to learn what you need to gross monthly.

Example: 

Gross Annual Sales Needed = $125,500.00 / 12 = $10,458.33

$10,458.33 = Gross Monthly Sales Needed

Number 5 (Option 1): Total Client Load

How many clients do you need to take on to hit your income goal?

There are two different numbers you can choose to act as your key fifth number (a.k.a. Number 5). The first is your total client load. In this scenario, ask yourself, how many clients do you want to work with at any one given moment? Do you want to only work with three clients annually? Or do you want to work with 30 new clients a month via a group program? You might not immediately know, but pick a number to start out.  

From here, you will be able to determine how much you need to charge per client per. For example, if you identified you only want to work with three clients annually, then that means those three clients need to produce $10,458.33 of gross monthly sales for you. That means each client needs to be on a $3,486.11 monthly retainer.

On the flip side, if you have identified you want to go after a volume model, and you’ve identified you want to work with 30 clients a month every month, each client will need to pay $348.61 monthly in order to hit your gross monthly sales goal ($10,458.33 / 30 clients a month = $348.61). However, also consider that this means you need to sign a total of 360 clients annually (30 clients monthly x 12 months).

Number 5 (Option 2): Pricing First

How much should you charge for your services?

If you already know that you’re looking to create a very specific product at a pre-identified price point, then you can back your way into knowing exactly how many clients you need in order to hit your gross sales goals. For example, if you want to sell a $100 online course, then take your total needed gross sales and divide that by $100. This will indicate that you need to sell 104.16 (round it up to 105) courses a month to hit your sales goals.

The Bottom Line

Ultimately, these five numbers are what you need to know in order to identify your ideal business model. Numbers 1-4 inform us of what we need in order to “play around with” Number 5. If you’re feeling stuck between high volume or high ticket, consider asking yourself this, which business model and workload is most conducive to your dream lifestyle? If you need a little more help breaking this down, check out our free masterclass here.

We’ll leave you with this, “living your dream life shouldn’t be just a dream.”

About the authors: Lexie Smith (pictured left), named “Brilliant PR Expert” and “Trailblazer Women Leaders in 2021,” is a PR coach, host of the “Pitchin’ and Sippin’ Podcast,” co-founder of Ready Set Coach, and the founder of THEPRBAR inc., an online coaching brand that empowers entrepreneurs to increase their influence, impact, and revenue through relationship-driven marketing and PR.

Emily Merrell (pictured right), as featured in Refinery29, Girlboss, Forbes, and Huffington Post, is the founder and community curator of Six Degrees Society, a professional speaker, host of the “Sixth Degree Podcast” business coach, and co-founder of Ready Set Coach.

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