This article is relevant for all service providers, but I’m focusing on coaches and consultants who use the online space to make sales and provide services. Here are a few financial tips for coaches and consultants to make the finances easier, and better, for service providers!
FINANCIAL TIPS FOR COACHES AND CONSULTANTS
Have a financial structure for money management and taxes right away
I see service providers frequently live out of their own personal accounts for a while. It’s so important to set up your business bank account and to create a system for withholding taxes and paying yourself as soon as you can. Typically profit margins can be larger in the online space, because the cost of doing business is minimal, and I see many entrepreneurs make the mistake of treating their revenue as, “it’s all my money anyway.” This co-mingling makes it difficult to hire contractors, such as a social media manager, because you shouldn’t pay business expenses from a personal account. This can create a tax nightmare.
You must pay self-employment taxes on your own paycheck, and if you are using the money in that account, even for business purposes, it be your own personal money. Create a separate financial identity from the start. Get a business bank account. Set up your online deposit with the Internal Revenue Service or your home tax agency and make sure you are withholding and depositing your taxes. Pay yourself every two weeks and let the rest of the money sit in the bank until you get paid again or must pay bills.
Calculate everything in your pricing, and know your numbers and your margins
My next tip is one that I get some pushback on, I want you to calculate your numbers and know your margins. The reason I get pushback is because people frequently want to “feel” into their pricing, which isn’t a bad thing, but just make sure your feelings are profitable.
I worked with an entrepreneur who was losing money on her most expensive package. By the time we calculated the hours, the services and additional bonuses and things provided, her $1500.00 package had a net LOSS of $80.00 per client. OUCH. In fact, her most profitable package was $195.00. It was extremely hard for her to hear, but it was the truth. Her lower cost packages were covering her losses. She was very frustrated in business, and that was why.
You need to know how much you need to make, how much you are legitimately profiting, how many things you need to sell, and at what price, to grow your business strategically and sustainably. Please get your numbers.
Stop feast or famine with payment plans and signature offers
Coaching and consulting can be feast or famine, and the income can be very unpredictable, especially when you are starting out and haven’t built up your client base. To stabilize your income quickly, please have payment plans available for anything you offer over a certain dollar amount. You get to decide, but I have a client that offers at least 2 payments for anything over $299.00. I have another client that starts at $500.00 and still another that starts at $1,000.00
When you offer payment plans you are giving people access to your programs and services at a price point, they can more easily afford, and you get to project income out into the future. Just make sure you cover any additional interchange fees, the fees charged by the bank for running the card each time, in your pricing. Based on the dollar amount, that may be just a few dollars. Again, this is your decision.
I know there are some people who do not recommend extending payment plans beyond the length of the program or service the client is buying. I understand that there is a risk that they will get the service and not pay the remainder. But, while there is a little risk that someone will not honor their payments, generally people follow through, and if you have good policies and procedures surrounding payments (discussed below), you can protect yourself from these instances.
Have policies to protect you from chargebacks and from giving refunds if you do not offer them
Do not accept anything without a payment agreement. I have a podcast episode, “Get it in Writing” that talks through the basics of what should be in an agreement. I want to talk here specifically around payments. Protect yourself from chargebacks. That is where someone complains to the credit card company or payment portal, and the company gives them the money back- straight from your account. If you do not have anything in writing that says, “no refunds” or “all sales are final” then you will not win against the payment vendor.
Make sure that your terms and conditions are required for EVERY sale you make. Take the time to draft them or have an attorney help you and post them inside the sales process. For longer programs or bigger ticket items, send a follow-up agreement in writing to clients. There are a few people in the world that will try to take advantage, and having good, clear, and acknowledged policies surrounding payments will protect your income and your business.
Coaches and consultants need to protect themselves financially. I have a special place in my heart for this group of entrepreneurs, because it’s where Mike and I started with UNEQ Consulting in 2011, and I wish I would have had these tips, and had taken this advice back then.