Fees

How much to charge? How to charge? How do I discuss charges with potential clients? These are vexing questions, particularly for those coaches in the early business-building phase.

How Much to Charge: Please don’t read this post expecting to find THE number. The Federal Trade Commission gets really excited about price fixing. Professional groups are even forbidden to mention numbers on listservs and other mass communication mediums. I don’t think I’d like to have to wrestle with the FTC. But we can talk about how to think about fees.

What kinds of criteria does one use to determine a fee? A number of them come to mind:

  • What is your time worth to you? How does it compare to other ways that you could make a living? To what income level do you aspire?
  • Consider the time, money, and effort you have spent getting trained. Usually, those years are lost income years. Good training has value. Training gives you the framework to acquire and learn from experience. As a result, you can do things most people don’t know how to do.

A man calls a plumber. The man looks over the complex plumbing situation for a minute or two. Then he takes out his hammer and strikes a joint once. Problem solved. The plumber gives the man the bill. The man responds “Wait! You spent five minutes here, and all you did was hit the joint. How can you charge so much?” The plumber responds: “It’s all in knowing what and where to hit.”

  • What level of training do you bring? How much experience do you have as a coach? Do you have other work/life experiences that add to what you can do?
  • What do other coaches charge? Again, you don’t want to run afoul of the FTC. But there is nothing wrong with asking a few of your fellow coaches what they charge in order to get a range. (You can also Google the question. But you will find the reported ranges so broad as to be nearly meaningless.)
  • What are client organizations willing to pay? This will depend on a variety of factors. Does this organization have a history of using executive coaches? If so, they already believe in coaching and may have an established range. (Some coaches will get more than others.) Is this an organization that is new to using coaches? If so, they are going to depend on you to help them know a fair rate. A coach who was consulting me shared this story:

An HR VP wanted to engage him to coach a senior leader in her company. She asked: “What do you charge?” He answered “$300 an hour” a little nervously. He didn’t want to charge too much and chase away what looked like a sure sale. She answered: “I can’t go to my CEO with $300. We need to make it at least $500. Otherwise, you won’t have any credibility.”

  • What is the value of your service to the organization? This is the most important factor of all. It is tricky because the impact of coaching is difficult to measure directly.

A senior finance leader in a Fortune 500 company worked with me for about three years. Near the end I asked him the extent to which coaching impacted his value to the company. “Fifteen percent,” he responded. Imagine that his total compensation package is about $700,000 per year. Fifteen percent is $105,000, i.e., that’s how much more value he added to the company because of your coaching. You won’t get all of that, but let’s say you get 30%. The company gets a great return on its investment, and it begins to give you a feel for your impact.

How does that impact show up? Leaders who learn from you how to improve their work relationships lose fewer employees. (By and large, people quit managers, not jobs.) Leaders who learn from you how to communicate elicit greater alignment. Their people more rarely go off in an unintended direction. Leaders who learn from you how to be assertive no longer operate as absentee managers, i.e., managers who say “If you don’t hear from me, you are doing fine.” They learn to confront problems early and help with course corrections. Their people know what they need to do to succeed. Those who learn improved Self Regard from you have more access to their strengths, and thus, so does their organization.

As an exercise, go through the sixteen skills measured by the EQ-i 2.0 and think through how improving them will improve your coaching clients’ value to their organizations.

How to Charge: There are a variety of billing models to consider. Many if not most coaches bill by the hour. If they spend 30 hours working with a client, their bill is 30 times their hourly rate.

Other coaches bill by the engagement. For example, one coach I know bills $X for a six month engagement. She and the client set up a regular schedule, but the client is invited to call anytime for ad hoc conversations. Very few clients abuse that offer. They are too busy with their jobs! But the freedom to touch base when needed without being nickeled and dimed appeals to them.

Another approach is to set up a retainer. In this approach, you promise to make a certain amount of time available to the organization for $X. It is the organization’s job to see to it that they use your services in ways that justify that time and the amount set aside for them.

Finally, as Alan Weiss argues in Million Dollar Consulting, some coaches bill on the basis of the value of their services. To use the Finance example above, your services are worth $105,000 per year, of which you would get a negotiated percentage.

How do I discuss charges with potential clients? It’s just business. Decision makers are accustomed to paying vendors. Again, it’s just business. We coaches tend to take money way too personally. With that in mind, don’t apologize. Don’t hem and haw. Don’t undercharge (proving you don’t believe in yourself). Don’t gouge. Do your homework. Write a proposal. Outline what you are going to do and how it matters. Name a figure.

All of this is easier said than done when you are sweating the mortgage payment. But that is your problem. Don’t impose it on your clients by making them deal with your anxiety.

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