Audio stream
Krista
Krista coaches widowed women, and she’s built a great business. Last year she got very busy with her 1-1 practice, getting up to as many as 20 coaching sessions in a week. It didn’t leave much flexibility in her schedule, and she decided it was time to move to groups.
She started offering group coaching for $5,000. Women have been joining her group regularly (around three per month), but she thinks she needs more signups (in the 6-8 range per month) to feel like it’s really working. She has relatively high marketing expenses (~4k per month on ads, $2k per month for her ads consultant, and $1k for her podcast production person). The whole thing isn’t feeling “worth it” given the relatively low numbers of signups per month and the high marketing expense.
She’s wondering if it’s time to do a membership.
I told her I wanted to ask her a question about starting a membership, and there was only one answer she wasn’t allowed to give me:
Question: why do you want to start a membership?
Answer I wouldn’t accept: because I want to help more people.
That made her laugh because of course that’s exactly the answer she wanted to lead with.
Wanting to help more people is great, obviously. We all want to do that. But I don’t think it’s a sound reason for changing to a lower-priced business model.
I told her I can think of a few reasons to start a membership. A couple I don’t like and a couple I do like.
Reasons I like:
- You enjoy the format of a membership and you don’t mind the marketing treadmill a membership requires.
- You plan to use the revenue from the membership to offset marketing costs, and you have a higher-priced next thing for people to buy from you after they love the membership.
- You want to build a community of people such that the community itself is the primary value of the thing (as opposed to coaching or content).
Reasons I don’t like:
- The desire for “passive income.” There’s nothing passive about it. More on this in a minute.
- Price objections to your higher-priced group or 1-1 programs.
I told Krista that of all the business models I’ve come across, my favorite is the one she’s already running: high-priced groups a client can participate in multiple times. Why? Because the customer lifetime value is so much higher in that model than in others. And high customer lifetime value can (doesn’t always) bring such simplicity and elegance to a coaching business. The easiest way to say it might be this: the lower your price, the more of everything you need: traffic, webinars, content…etc. The higher your price, the less of everything you need because one relationship is worth so much more.
Krista seems to be partly thinking about the membership as a solution to price objections. I don’t think it quite works that way. You’d be surprised how feisty people get about fifty bucks. Often much more feisty than they are about $5,000.
I had no answers for Krista, so all I could do is tell her where I’d go looking for solutions:
Can she reduce her cost per lead (through Facebook)?
Can she generate leads less-expensive leads elsewhere?
Can she reach out to other successful coaches in our community who’ve sold high-ticket groups, sometimes without even a consult?
She said she’d look into all of it.
Becky
Becky’s working on her bookkeeping and had some very nuts and bolts questions:
Question: How do I use the bookkeeping spreadsheet to account for my clients’ payments through Stripe? If I enter the Stripe details and enter the deposits into the bank account, won’t I be double-counting my revenue?
Answer: No, because the transactions in the Stripe account are the only thing you count toward revenue. The deposits to the bank account don’t count toward revenue–they’re simply transfers from Stripe to the checking account.
Question: A client requested a refund. She bought my program last year and asked for the refund this year. Do I go back and delete the original revenue transaction, or what?
Answer: Nope. You got the money last year and gave it back this year, so there’s a positive transaction in last year’s report, and a negative transaction in this year’s report.
Question: Is the bookkeeping spreadsheet the right tool for me at this stage in my business?
Answer: Maybe. The tool is really intended for people who have very few transactions, which makes it easy to keep everything clear and accurate. Once you get above 20(ish) transactions per month, you’ll want to move to something more robust (I use You Need A Budget for myself and my clients). Also, you might find it most convenient to just hire my team to do your bookkeeping for you. It’s a monthly expense, but then you don’t have to think about it anymore.
Ceri
Ceri and I talked a lot about Instagram, but our conversation was really about making the best use of our time and money in the business. If we want to grow, and we have a limited number of hours and dollars, we’ll need to allocate those resources as efficiently as possible.
In Ceri’s case that looks like this:
She’s spending 35-ish hours per month creating content for Instagram and engaging on the platform. She doesn’t love it, but that’s where her clients have come from. She’s wondering if she can stop or slow down.
My answer is: if that’s the source of your clients, why would you stop or slow down? Figure out which parts of it you like least and let someone else handle those. If you’ve created an effective hourly rate of, say, $200 to $300, then you probably don’t want to spend 35 hours per month doing $25 per hour Instagram-related tasks you could outsource. (Unless, of course, you love doing those things. In which case who cares what it pays or doesn’t pay?)
Ceri said she struggles to spend money on her business but she doesn’t mind spending more and more time. That’s fine with me, I told her, as long as you’re willing to acknowledge that by spending all that time you ARE spending money (because you could be doing more-profitable things with the same time).
We all do some of that–we spend our time inefficiently in our business. I’m just voting for doing it consciously instead of doing it to avoid discomfort in the form of trying new things or spending money on experiments that could help us grow. (If growth is the goal. I’m fine with people cruising along in a business they love and forgetting about financial growth.)
Ceri says she doesn’t want to do things like Facebook ads because she worries she’ll waste her time or money. I reminded her she’s already wasting time and money (and so are the rest of us), so why not “waste” some of it on experiments that could teach her new things and maybe even work? You all know I don’t care one way or the other about Facebook ads. I’m interested in seeing you do things that teach you new skills and give you opportunities to do more of what you love.
Jill
Jill is wondering what sales approach is right for her. Should she use something formulaic and consistent with every prospect? Or should she do more coaching on the sales call as a way of “converting” the person to coaching and helping them want more?
I told her that, unfortunately, there’s no right answer. And anyone who gives you a right answer is probably just telling you to use the method that’s most comfortable for them. And the reason they tell you that is because they don’t like the uncertainty of admitting there are many, many ways to sell, and the right one for you depends on more factors than they can really address in their program.
I said to Jill that we could probably take three different approaches to sales calls:
We could use a very formulaic approach with every prospect.
The benefit: we know what we’re going to say on every sales call, which seems easier and leaves less room for doubt (because we did it using the formula).
The downside: not every prospect is ready for (or appreciates) or heavily-scripted approach.
We could use a coaching-driven approach.
The benefit: the client feels loved, served, and not “sold to.” Sales calls become one more opportunity to coach and serve. Jill herself said she just signed up with a coach who took this exact approach with her. She was caught off guard because the coach was “breaking the rules.” I asked her how it was to have the sales call go this way. She loved it. Great.
The downside: Since this method doesn’t create the classic sales confrontation, these calls are less likely to end with a clear yes or no. It’s more fluid and open-ended. You’ll end many of these calls without much certainty. If you’re particularly anxious or controlling, you won’t like this method. That’s fine. Lots and lots of money is made through the formulaic approach, and I have lots of evidence that clients who experience a formulaic, confrontational sales call end up loving their coach and the whole experience. There’s not a right or wrong answer. There’s what feels good and true to you.
I told Jill the day will never come when she knows she’s doing it the “right” way. But she’ll know whether she’s happy with the outcome, and that will guide her experiments with different approaches.
Building any business requires lots of patience and willingness to deal with uncertainty. The same goes for finding a “winning” sales approach.
Mara and Danny
Mara and her business partner/husband, Danny, are excited to sell their “we help you get married” coaching. They’ve decided to charge $10,000 for it, and Mara wondered what my thoughts are about payment plans.
I told her I have almost no opinion about payment plans because I’ve seen so many of them and they all seem to work fine.
I did share two opinions about price and payment plans.
If your prospect is able and willing to pay for coaching, it seems to be true that you can charge almost any price you can say with a straight face. Sure, there’s an upper limit to ability and willingness to pay, but that number seems to be higher than most coaches expect.
The lower the price and the longer the payment plan, the higher the default rate. Example: a 12-payment plan for a $1,000 or $2,000 program is likely to have a pretty high default rate on payments 9-12 (ish)–especially if those payments are made after the program is complete.
There’s a weird thing where the higher the price, the lower the default rate. The lower the price, the higher the default rate. I’ll let all you life coaches speculate about the underlying psychology.
Mara and I also talked briefly about her and Danny’s content plan for their coaching. They know what modules/lessons/etc they want to include. They’re going to start producing it right away. Did I have any thoughts?
Yes. There is a subset of clients who will read/watch/listen to everything. I call them the straight A students. I think it’s a small minority of clients, but that’s probably a case of projection on my part (since I’m unlikely to read/watch/listen to anything in a program).
Don’t bog down in content creation or waiting to “launch” until all the modules are ready. A decent percentage of your clients won’t read/watch/listen anyway, and there are people right now waiting for you to invite them to coach with you. So, invite them today and get started. Develop the content as you go.
And that’s that! I’m amazed that any of these emails make it through all your spam filters, given the constant talk about price, money, offers, etc. Anyway, see you next Tuesday!