Ultimate Guide: How to Start a Coaching Business 2023
INTRODUCTION: WELCOME TO THE WORLD OF COACHING!
As a Business Startup Coach, I help new entrepreneurs reduce their overwhelm by guiding them through starting and marketing their new business.
WARNING: Most coaches fail before they start.
Either they become so overwhelmed that they give up or they don’t take the time to understand the technical aspects of how to start a coaching business.
This is NOT a motivational piece of content. You won’t find any rainbows and unicorns here. This is a long practical article on HOW TO START a Coaching BUSINESS.
It’s the nitty-gritty. And, if you don’t understand the nitty-gritty, you will fail.
Here’s what we’re going to discuss in great detail.
How to Start a Coaching Business
I know you. You’re just like me. You have so much to give to this world.
There are so many people out there that need your passion, kindness, and coaching experience.
Starting a coaching business is not easy. Most days, you’ll feel like you’re “Drinking from a fire hose.” There’s a huge learning curve to running a business.
You have so much to learn with so little time. Not to mention, the pressure of making enough money to pay your bills. And, somehow find time to spend with your family and friends.
My First Piece of Advice: Start Coaching Now
Get out there. Start your coaching now! Whether you coach for free or charge money doesn’t matter: coach, coach, coach. The faster you get going, the more you’ll learn and grow.
Sharpen your coaching skills and begin living the life of your dreams. Give yourself permission to succeed and fail. Then, learn from your success and failure.
Reframe how you look at other coaches. They aren’t competitors! They are your best teachers.
Learn what they’re doing well and not so well. Then, do it better.
The Advantages of Starting a Coaching Business
The Disadvantages of Starting a Coaching Business
Create a reliable but simple customer acquisition strategy. If you don’t, you will fail. Remember, you’re in charge. Find your style and learn how to market and sell without feeling sleazy.
Now, let’s take the practical steps to start a coaching business.
Step 1 - Define Your Skills, Not Experience
One of the first things you need to do is understand your skills. And I’m not talking about your “work experience,” as written on your resume.
A skill is “the ability to do something well; expertise.” You need to identify four sets of skills:
1. Skills you have to run your coaching business
2. Skills you don’t have to run your coaching business
3. Skills you have that will benefit you as a coach or in the coaching process
4. Skills you don’t have as a coach
5. Take some time. List ALL of your skills.
Once you develop a good list of skills and identify any immediate gaps, develop a plan to fill those gaps. For example, bookkeeping and accounting are skill gaps for me. Not because I don’t know how to do it or couldn’t learn. I hate it! So, I immediately filled that gap using the accounting software – Xero.
Step 2 - Start Developing a Coaching Niche
Finding profitable coaching niches can be difficult. When you start, you’ll want to remain broad. You’ll want to coach everyone.
Don’t do this. Niche your ass down.
If you want to get coaching clients fast, learn to find a profitable niche as soon as possible. You need to understand everything you can about your ideal clients deeply.
Remember, the “riches are in the niches.”
Knowing every need and desire of your niche will simplify your business processes and marketing.
Not to mention, a detailed coaching niche will help you:
My niche as a Business Startup Coach came very naturally. I was a business consultant for years and had to market my services to attract clients.
So, consider the type of coaching you’d like to offer your target audience. There are numerous types of coaching niches. And there are sub-niches and specialties within those niches. But here are a few for you to consider:
When developing your coaching niche, consider the following questions, BUT from your customer’s perspective:
You will fail if your coaching niche doesn’t align with your values and definition of success. You will fail to serve your niche. You won’t be satisfied. You won’t feel passionate about running your coaching business.
Step 3 - Choosing Coaching Business Names
Get your creative juices flowing. It’s time to pick your coaching business name.
Step 4 - Legally Incorporating Your Coaching Business
Once you’ve determined a business name, consider incorporating your coaching business.
Many coaches spend too much time researching to find the right legal structure. I am not an accountant or a lawyer. I cannot provide accounting or legal advice.
However, I’ll tell you to find a local lawyer or accountant to help you.
It’s critical to understand the differences between business structures. Your business structure will determine which applications to submit to your territory, state, and federal government.
And! … And this is a big one; your business structure will also determine the amount of personal liability you’ll accept for conducting business and your tax liabilities.
That’s why I recommend seeking expert advice. Below are the most common business structures as defined by the Small Business Administration (US):
The registration process for your business entity is not expensive. You can even use a company like Legal Zoom to help you but consider a local accountant and attorney. Get them on your team from the start.
Step 5 - Setting Up Your Financial Accounts
Once you’ve incorporated your coaching business, set up a business banking account. I hope you selected a business structure other than a Sole Proprietorship.
Opening a business banking account is essential in starting a coaching business. By having a separate business banking account, you’re separating your business funds from personal funds. Separation of funds helps protect you from liability if someone sues your company.
Co-mingled funds are also a huge red flag for the IRS. Here is why you should have two different accounts:
The fees to open a business banking account can vary. Shop around for a business banking account.
Below are several types of financial institutions that offer business accounts:
Last, sign up for online payment processing, so you accept credit cards and online payments. Having accounts with several online payment processing companies is not a bad idea. Conduct research and be aware of the service fees.
Step 6 - Automate Your Finanances
Let me give you a few other considerations on your finances. I’ve read many books, blogs, and resources. I’ve sat down with my financial adviser and accountant. I didn’t start this way but have transitioned into a systematic approach to my finances.
The MOMENT revenue comes into your business account, do this:
Step 7 - Understand Your Potential Expenses
General statement on expenses:
I don’t know your situation or business. I don’t know what you’ll need. However, I’ll provide a list of expenses you may encounter. Differentiate between needs versus wants. What do you NEED to start up? What can you purchase later when you have more cash flow (wants)?
A note on startup expenses:
In the US, you can write off (deduct) some startup expenses or expenses incurred before formally starting your coaching business. Speak with your accountant to ensure you deduct the correct expenses and don’t miss anything.
Keep good records and your receipts right from the start.
I’ll do my best to provide the expenses most coaches will encounter, but your startup costs will depend on you.
Step 8 - Business Licensing & Coaching Certifications
Coach training programs and certifications add to your credibility. For example, I have a Professional Coaching Certification through iPEC. Another option is Coach Training Alliance (CTA) which provides IFC-certified online training. If you want to gain a certification online, I highly recommend looking into two of their certification programs:
Also, the International Coaching Federation developed a Training Program Search Service (TPSS) to help you find approved and some of the best life coach certification programs.
Are you required to have a coaching certification?
Could you still be a successful coach without one?
However, will a certification add to your creditability?
Many cities or states require at least a general “business” license for business licenses. Even if you’re a Sole Proprietor, don’t make the mistake of operating a business without checking local and state laws.
If you plan to work from home, research zoning laws. Some cities restrict the type of work you can do from a home office.
You can find resources through online research, a local lawyer, and industry associations. Don’t let a simple regulatory or compliance mistake stop your coaching business.
Step 9 – Purchasing Your Business Insurance
Business insurance for most coaches won’t be different from any other business. Whatever you do, don’t skip purchasing insurance. Without insurance, you could find yourself in financial trouble.
We live in a litigious society. People sue for anything. I’m not saying this to scare you. I’m stating the importance of carrying insurance.
At a minimum, you’ll need to have liability insurance. But, if you run your coaching business out of your house or use your car, you’ll need to consider separate coverage options.
From there, your insurance coverage will be a personal decision. Just like your business account, shop around.
Each insurance agent you speak with is an opportunity to learn more about what you really “need” versus what they are trying to up-sell. If you know anyone that’s a coach, ask him or her for recommendations.
Step 10 - Purchasing Healthcare Benefits
Purchasing health insurance is a lot easier than most coaches think. You already know the names of major health insurance companies. Most of those companies have individual policies. If you have a spouse and children, they’ll also have plans to cover them. Go to their websites and do a little research.
In the US, you can also explore healthcare.gov. However, I have no idea how long that will continue. Plus, I found my health insurance was less expensive working directly with my insurance provider and not using healthcare.gov.
Trade and Industry Associations sometimes have healthcare information as well. Freelancers Union offers healthcare insurance. You can also find specialized agents through the National Association of Health Underwriters.
Step 11 - Establish Your Retirement Benefits
According to a US poll conducted by Greenberg Quinlan Rosner Research in 2016, 40% of solopreneurs (some were coaches) don’t have a retirement plan.
Don’t be in this group. Speak with your financial adviser and accountant. Set up a retirement account, even if you can only contribute a small amount for the first few years.
If you’re in the US, I’ll list two options for you to research, but speak with your financial advisor and accountant.
Step 12 - Understand Your Tax Liability
What’s the biggest mistake coaching make when running their business?
Let me be frank and excuse my language a bit. You WILL get kicked in the ass if you don’t set aside money for taxes.
You’ll be rolling along, having a great year, thinking, “Damn, I made $120K this year! I have a 6-figure coaching business. Freaking amazing!”
Then, boom! It’s tax season. But wait, you forgot to set aside money for taxes.
“I owe what in taxes? Oh shit! I’m short.” Your cash flow is crushed. Your bank account is empty. “Mom, dad, friend, brother, sister … can I borrow some money?”
Your mistake … you generated a “pre-tax” revenue of $120K. THIS IS NOT NET INCOME! If you don’t plan, set up your accounts, and automatically set aside part of your revenue for taxes, this can literally put you out of business. Done and dusted.
This mistake happens all the time when someone transitions from employee to entrepreneur. Don’t make this mistake.
Again, talk with your financial advisor and accountant. Set up a bank account that, if possible, automatically transfers a certain % for taxes into a separate account.
The moment revenue drops into your business account, transfer funds into separate accounts for taxes, savings, retirement, etc.
Step 13 - Tracking and Maintaining Cash Flow
Cash flow, or the lack thereof, can destroy your dreams in a flash. Know your cash flow inside and out. Keep your cash outflows as low as possible. You need to develop a system to track your cash flow from day one. Score has a 12-month Cash Flow Template that you can use.
Here’s a dilemma you might run into. Let’s say you accepted monthly payment plans to close a few clients. Those payments come into your account on different dates throughout the month. But, you have several significant business expenses that land around the same date of the month.
All of a sudden, the “timing” of the money coming into your bank account versus the timing of the money going out of your bank account is off.
You have more cash flowing out of your account than going into your account.
If you can’t come up with the money to cover the expenses, your business could collapse right before your eyes.
Tracking payments and cashflows and understanding your business expenses are key to your success. Again, I’d highly recommend considering software such as Freshbooks to help automate this process.
Step 14 - Building Your Team
You’ll need support, but not necessarily employees.
When you start a coaching business, you’ll wear different hats: CEO, CFO, CMO, COO, Head of Sales, etc. However, just because you’re a solo entrepreneur doesn’t mean you can do everything.
It’s not advisable.
Track your daily tasks. Assign dollar-per-hour increments to every task you perform. Once you build up some cash reserves, find freelancers, software, or automation to support your business.
Here’s an example to illustrate my point. You can choose your own $/hour increments but think about it this way.
I’ll share with you examples from my business:
From writing to graphic design and even bookkeeping, you can find freelancers on Fiverr or upwork that can perform almost any task you need.
Conduct “video” interviews and consider a tryout period when hiring freelancers. Most importantly, provide exact instructions and detailed information on the final product you expect.
Ask around in your network and social media if you want to delegate a high-quality task. Sign a contract that clearly states the scope, terms, and expectations.
Last, in the US, there are IRS and contractor compliance requirements. These requirements are designed to protect the contractor and you. Ensure you read over the compliance requirements from the IRS website.
Seek legal advice if you have any questions.
Step 15 - Develop a Coaching Business Plan
You need to be able to explain your coaching business to yourself before you try to explain it to anyone else. It’s your business. It’s your coaching business plan. Write it yourself.
Start with the simplified business plan discussed below, then add more details as you progress.
Alex Genadinik has written 20 books and produced over 100 business courses, including a few best-sellers on business plans. Alex has a simplified “3-Sentence Business Plan.”
Write detailed answers to these questions:
As your coaching business develops, refine, or add to your answers. Measure your business plan in sentences, not in pages. You want a business plan to be a flexible resource, not a big-ass book you never touch.
Step 16 - Coach Pricing - How Much Should I Charge for Coaching?
How much should I charge for coaching? This is a question I hear all the time. You get all sorts of answers but no real explanation for pricing coaching services.
Life coach pricing or any other type of pricing for coaching can be difficult. But, hopefully, I can clear that up a little below.
Step 17 - Get Out There And Start Signing Clients
You are well on your way to starting your coaching business. It’s time for you to “Become the Cause” of your success.
I really appreciate all of those people that have shared this article! That’s a huge sign they found this article useful! Thank you so much!
Subscribe to The Market Segment newsletter
Unlock the secrets of effective market research and competitive analysis with our exclusive access to success stories, research, and case studies