How to Start a Coaching Business From Scratch
INTRODUCTION: WELCOME TO THE WORLD OF COACHING!
WARNING: Most coaches fail before they start. Don't be that coach!
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 from scratch.
This is NOT a motivational piece. You won’t find any rainbows and unicorns here. This is a long practical article on HOW to START a Coaching Business." It's nitty-gritty. And, if you don't understand the nitty-gritty, you will fail.
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.
So much to learn with so little time. Not to mention, the pressure of making enough money to pay your bills.
MY FIRST PIECE OF ADVICE
Get out there now! Start coaching now. It doesn't matter if you coach for free or charge: coach, coach, coach. The faster you get going, the more you'll learn and grow.
Sharpen your skills and begin living the life of your dreams. Give yourself permission to succeed and fail. Then, learn from your success and failures.
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
Market Demand - The demand for quality coaches is high. But, the “riches are in the niches.”
Low Technology Costs - You can start with a computer and basic software. As you scale and gain clients, upgrade to better tools, software, and technology.
Low Barriers to Entry - Although I recommended them, you don’t even need a website or social media profiles. Start by reaching out to your network for potential clients.
Speed to Market - If you can coach someone through solving a specific challenge, then finding your first client is the only step holding you back from starting today.
Freedom of Choice - You are the captain of your ship. You choose your clients. Then, when, where, and how you coach them. Meaning, you can say no! You can also fire a nasty client. It's your choice, do what's best for you and your client.
Love Your Work - No more sitting in a shitty cubical, listening to the buzz of the lights above, while hating your work. Sure, you may have to or want to take on a few non-ideal clients to make some money and build your portfolio. However, as you grow, you can narrow down to EXACTLY what you love.
THE DISADVANTAGES OF STARTING A COACHING BUSINESS
Unpredictable Revenue - Sometimes you're slammed with clients - then all the sudden nothing. Your internal alarm goes off, and you think - "Did I make the right choice?" YES! Breathe. You've planned for this. You knew it would happen. Keep pushing, and work clients will flow in again.
Isolation - You can feel isolated if you’re not careful. You may have left a corporate environment with a busy and bustling office. Now you’re in a small home office all alone. Get outside. Go to a coffee shop. Join a co-working space. Don’t forget to find social and networking activities to cure that isolation.
Operating Your Business - When you have lots of clients, it becomes harder to keep up with business operations and continued marketing. You'll start feeling stressed, trying to figure out how to keep up with everything. Stay organized and create systems, processes, templates, and automation right at the beginning. Mark my words, this will make your life much more comfortable. Pro Tip: Read E-Myth Revisited
Marketing & Selling - I’ve met so many coaches that don’t want to “sell.” It feels “sleazy” to them. I hate to break it to you, but you’re now a business owner. You have to make money to stay in business. That means you’ll need to learn to love the process of selling and marketing your services. If you don’t, you will fail. Remember, you’re in charge. Just find your style and learn how to market and sell without feeling sleazy.
Now, let’s jump into 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. Your skills are not 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:
Skills you have to run your business
Skills you don't have to run your business
Skills you have that will benefit you as a coach or in the coaching process
Skills you don't have as a coach
Take some time. List ALL of your skills out. Don't forget to consider skills outside of your traditional work experience, such as volunteering.
Once you develop a good list of skills, and identify any immediate gaps, develop a plan to fill those gaps. As an example, I considered bookkeeping a skill gap.
Not because I don't know how to do it or couldn't learn. I hate it! So, I immediately filled that gap via 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. Believe me; I've done it. We all have bills to pay! That’s OK.
I want you to start considering a coaching niche early in the process. Learn how to find a profitable niche as soon as possible.
Remember, the "riches are in the niches."
Continue the process of finding a niche. As you progress, knowing every want, need, and desire of your niche will simplify your business processes and marketing operations.
Not to mention, knowing your niche will help you:
Increase your satisfaction, expertise, and your rates
Identify Ideal Clients
Tailor Content Marketing & Sales Messaging
Target Ads to Prospects
Develop Signature Coaching Programs
My niche for Career Transition Coaching came very naturally. I already help successful professionals achieve their definition of success. Many of my clients are on the path of transitioning from employee to entrepreneur.
I support them through this journey. Since I've already gone through the process of starting and growing a business, I understand my client’s challenges.
As for my Marketing Coaching, I was marketing consultant for years. But, many of my employee to entrepreneur clients needed help developing the marketing strategy to grow their coaching businesses. So, I started offering my services to coaches, consultants, and solopreneurs. I LOVE IT!
When developing your niche, consider the following questions, BUT from your customer's perspective:
Understand - What are your strengths and weaknesses according to your niche/clients perspective?
Consider - How can you help your established network? Are you always asked for the same advice or to use the same skills to solve a problem?
Envision - Who is your ideal customer? Who do you want to coach? What makes your heart sing?
List - 5-10 of your personal and professional values - Personal Development, Authenticity, Fame, Contribution, Happiness, etc.?
Write - Your Definition of Success personally and professionally. Do you want to be a millionaire? Do you want to start as a solopreneur then grow your business by hiring employees? Do you want to live by the ocean?
Consider - How do your values align or conflict with your Definition of Success? If they conflict, do you need to change your Definition of Success?
When finding your niche, it’s essential to evaluate your values and definition of success.
If your niche doesn’t align to your values and definition of success, you will fail. You will fail to serve your niche. You will fail to find satisfaction and passion.
STEP 3 - CHOOSING COACHING BUSINESS NAMES
Get your creative juices are flowing. It’s time to pick your coaching business name.
Try to make your coaching business name unique, but somewhat related to your market, niche, or coaching program
Your business and domain names (URL/www.yourbusinessname.com) should be an exact match or very close with one exception: You could use your name for the domain.
Example: My LLC is ShapeShift Lab LLC, but my domain name is www.stewartswayze.com. My brand is Swayze, my logo is Swayze, and all my marketing uses Swayze. Swayze is a recognizable name - a brand
But, all of my contracts are signed using ShapeShift Lab LLC
For personal reasons, I didn’t want my LLC to bare my name, plus if / when I expand my company, I can switch to using ShapeShift Lab. I’ve already purchased that domain name as well.
If your business name is unique, it will reduce the chances of another company slapping a trademark lawsuit on you
Keep your business name relatively short. Again, consider your future website URL. You don’t want 30 characters before the “.com.” Nobody will remember that!
You can check domain name availability at Google Domains
STEP 4 - LEGALLY INCORPORATING YOUR COACHING BUSINESS
Once you've determined a business name, you should consider incorporating your business.
Many coaches spend too much time researching online to find the right business structure. I am not an accountant, nor a lawyer. I cannot provide accounting or legal advice.
However, my advice is to stop researching, find a local lawyer or accountant, talk to them, and take their advice.
It's critical to understand the differences between each type of business structure. Your business structure will determine which applications you need 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 as well as 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):
S-Corporation: "An S-Corporation (also referred to as an S-Corp) is a special type of corporation created through an IRS tax election. An eligible domestic corporation can avoid double taxation (once to the corporation and again to the shareholders) by electing to be treated as an S corporation."
Partnership: "A partnership is a single business where two or more people share ownership. Each partner contributes to all aspects of the business, including money, property, labor, or skill. In return, each partner shares in the profits and losses of the business."
Limited Liability Company: "A limited liability company (LLC) is a hybrid type of legal structure that provides the limited liability features of a corporation and the tax efficiencies and operational flexibility of a partnership. The 'owners' of an LLC are referred to as "members." Depending on the state, the members can consist of a single individual (one owner), two or more individuals, corporations or other LLCs."
C-Corporation: "A C-corporation is an independent legal entity owned by shareholders. This means that the corporation, not the shareholders that own it, is held legally liable for the actions and debts the business incurs. Corporations are more complex than other business structures because they tend to have costly administrative fees and complex tax and legal requirements. Because of these issues, corporations are generally suggested for established, larger companies with multiple employees."
Sole Proprietorship: "A sole proprietorship is the simplest and most common structure chosen to start a business. It is an unincorporated business owned and run by one individual with no distinction between the business and you, the owner. You are entitled to all profits and are responsible for all your business's debts, losses, and liabilities."
Incorporation (not forming sole proprietorship) is the primary method of protecting and reducing your personal and company’s liability. You are formally separating your personal assets from the company. The company is a separate entity.
That means you can only be held liable for the amount invested in the business. There are nuances and rules you must follow with each of legal structures, speak with an accountant and attorney.
The registration process for your business entity is not an expensive process. 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’m going to hope you have a business structure other than a Sole Proprietorship.
Opening a business banking account is an essential step in the process. By having a separate business banking account, you are separating your business funds from personal funds. Separation of funds helps protect you from liability.
Not only will co-mingled funds hurt if someone sues your company, but also it’s a huge red flag for the IRS. Here are some thoughts on why you should keep separate accounts:
Deducting Startup Expenses: You can deduct startup costs from your business expenses during your first year.
Claiming Business Expenses as Deductions: If you use a business account, you capture all business income and expenses in that account. Much easier during tax time.
IRS Audits: If you co-mingle your funds, the IRS might deny deductions and business losses if your accounts aren’t separated
If you make a mistake, correct it. Then, document the error in your records
If you are sued and have separate accounts, your personal liability is reduced, if not eliminated
Shop around for a business banking account. Fees for business versus personal accounts differ. Make sure you know all costs associated with opening a business account.
Below are several types of financial institutions that offer business accounts:
Credit Unions: Could be an excellent option to start. Sometimes, Credit Unions are an inexpensive option with lower fees and competitive rates. But, you should still shop around. Some have pricing models as high as larger institutions
Smaller Community Banks: a similar scenario to Credit Unions. Depending on your business, it could be essential to develop a “local” banking relationship. Expanding your network is never a bad option. Several local banks in my city put on networking events for businesses and entrepreneurs
Online Banks: If you’re happy going online, you may find lower prices and attractive lending rates. However, you give up the personal relationship and potential networking opportunities
Institutional Banks: They’ll have every service that you need and then some. Don’t shy away because you think they might have higher fees. Sometimes, the more volume, the lower the fees.
Be able to accept credit cards and online payments. It’s not a bad idea to have accounts with several online payment processing companies. Conduct research and be aware of the service fees.
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STEP 6 - AUTOMATE YOUR FINANCES
Let me give you a few other considerations on 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:
Automate a 10% immediate transfer into a personal savings account
Automate a percent transfer into an account for taxes (know your state and federal tax rates)
Allocate or pay your fixed operating expenses
Allocate an amount to build up your business cash reserves
Allocate a percentage to contribute to your pre-tax retirement benefits
Anything left goes to salary, personal development, or re-investment in your business
STEP 7 - UNDERSTANDING 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 really 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 business. Speak with your accountant to ensure you deduct the correct expenses, and you don’t miss anything.
Keep good records and your receipts from the beginning.
I’ll do my best to provide expenses most coaches will encounter, but your startup costs will depend on you.
Equipment: Equipment lasts longer than a year. Typically, this includes your computer, extra monitors, all-in-one printer, and a work vehicle (if required).
Supplies: Business Supplies you typically consume within one year. These include furniture such as your desk and chair, paper, pens, printer ink, paper clips, etc. Supplies are low-cost items but can add up over time.
Real Estate: Your real estate expense will depend on your business and needs. Keep these expenses as low as possible. You have several options. If possible, work from home, a coffee shop, or bookstore. When you need an office, consider using a “day office” or co-working space. Companies like Regis offer offices you can rent by the day.
Insurance: Speak with an insurance broker for your specific needs. In general, most businesses will require General Liability Insurance. You might consider an Umbrella Insurance policy as well. I’d speak with your broker to determine if you need Errors and Omissions insurance (E&O). This type of insurance covers claims made by clients for inadequate work or negligent actions.
License and Permit Fees (Regulatory, Country, Federal, State): As previously discussed, you need to research any licensing or permitting requirements. Based on your needs, there will be startup and ongoing expenses.
Incorporation and Filings (Regulatory, Country, Federal, State): My advice, please incorporate. Don’t go into business as a Sole Proprietor.
Contractor Expenses: Do as much as you can on your own. You may need to hire a freelancer to perform services. Contractor Expenses could include a Virtual Assistant, a Web Site Developer, Marketing Services, Logo Designers, etc.
Website & Domain: Do NOT go into business without a website. Social Media sites alone (no website) won’t help you in the long-run. No matter what, you’ll have startup and ongoing expenses to keep your website up and running, plus secure a domain name. Consider using a DIY website service as Squarespace or Wix. Keep these expenses low.
Professional Services (Legal, Consulting, Accounting): If you haven’t figured it out by now, I highly recommend using local legal and accounting services. Using a company like Xero can help reduce your bookkeeping expenses. Xero provides accounting/bookkeeping software as well as other
STEP 8 - BUSINESS LICENSING & COACHING CERTIFICATIONS
Training programs and certifications add to your credibility. For example, I have a Professional Coaching Certification through iPEC. The International Coaching Federation developed a Training Program Search Service (TPSS) to help you find approved training programs.
Are you required to have a coaching certification? No. Could you still be a successful coach without one? Yes.
I have tons of experience coaching domestically and internationally. I’m sure you do too.
However, will a certification add to your creditability? Sure.
As far as business licenses, many cities or states require at least a general "business" license. Even if you're a Sole Proprietor, don't make the mistake of operating a business without checking local and state laws.
You may need to research zoning laws. If you plan to work from home, 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 in its tracks.
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 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 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. As we discussed before, shop around.
Not only will you find better prices, but also each person 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.
Freelancers Union is a non-profit that provides advocacy and insurance to its members through its for-profit Freelancers Insurance Company. I do not use them, so I cannot provide a personal recommendation.
However, it’s an option to research. Other options include traditional insurance agencies: State Farm, Farmers, The Hartford, Hiscox, etc.
STEP 10 - PURCHASING YOUR HEALTHCARE BENEFITS
Let’s be honest, if you had healthcare benefits in the corporate world, it might be difficult to keep the same level of benefits as a coach. Don’t let this stop you.
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 have plans to cover them as well. Go to their websites and do a little research.
In the US, you can also explore healthcare.gov if you’re in the US. However, I have no idea how long that will continue. Plus, I found my health insurance premium was less expensive working directly with my insurance provider and not using healthcare.gov.
Trade and Industry Associations sometimes have information on healthcare as well. Freelancers Union offers healthcare insurance. You can also find specialized agents through the National Association of Health Underwriters.
Through this same process, you’ll be able to find vision and dental benefits as well. There are plenty of options and that it’s easier than you think.
STEP 11 - ESTABLISHING YOUR RETIREMENT BENEFITS
According to a US poll conducted by Greenberg Quinlan Rosner Research in 2016, 40% solopreneurs (some 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 small amounts 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.
Solo 401Ks – Also called One-Participant 401(k) Plans by the IRS. According to the IRS: "The one-participant 401(k) plan isn't a new type of 401(k) plan. It's a traditional 401(k) plan covering a business owner with no employees, or that person and his or her spouse. These plans have the same rules and requirements as any other 401(k) plan." Find detailed information on Solo 401Ks on the IRS Website
SEP IRAs – Again the IRS definition is: "A Simplified Employee Pension (SEP) plan provides business owners with a simplified method to contribute toward their employees' retirement as well as their own retirement savings. Contributions are made to an Individual Retirement Account, or Annuity (IRA) set up for each plan participant (a SEP-IRA)." Find detailed information on the IRS Website.
STEP 12 - UNDERSTAND YOUR TAX LIABILITY
Where do coaches make the biggest mistake?
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! Freaking amazing!
Then, boom! It’s tax season. But wait, you forgot to set aside money 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. 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 & MAINTAINING CASH FLOW
Cash flow, or the lack there of, can destroy your company and dreams in a flash. Know your Cash Flow inside and out. Keep your cash outflows as low as possible. From day one, you need to develop a system to keep track of your cash flow. Score has a 12-month Cash Flow Template that you can use.
Here's the Coach's dilemma. 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 track.
Now you have more cash flowing out of your account than into your account.
If you cannot come up with the money to cover the expenses, your business could collapse right before your eyes.
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.
In fact, it’s not mentally advisable.
Plus, you don’t want to run the risk of losing work because you’re focused on lower value tasks instead of generating revenue.
Track your daily tasks. Assign dollar per hour increments to every task you perform. Once you build up some cash reserves, find freelancers or technology/automation to support your business.
Here’s example to illustrate my point. You can choose your own $/hour increments but think about it this way.
Highest Priority – A task that costs or generates $1000/hour
If possible, do it yourself
Medium Priority – A tasks that costs or generates $100/hour
If possible, do it yourself at first
Low Priority – A task that costs or generates $10/hour
Immediately delegate to a freelancer or find a way to automate
I’ll share with you examples from my business:
Manually posting my content on each social media channel, $10/hour task
Solution – Automation through Buffer
Logo Design, $100/hour task
Solution – Hired a Freelancer
Strategy Sessions & Sales Calls with Prospects, $1000/hour task
Solution – My highest priority
When you hiring a freelancer you are giving up a little quality control (QC). QC is a risk, but it can be mitigated.
As you think through your $/hour categories, consider the tasks that don’t need your “personal” touch or won’t jeopardize your business.
Conduct “video” interviews and consider a tryout period. Most importantly, provide exact instructions and detailed information on final product you expect.
If you want to delegate a high-quality task, ask around in your network and social media. Sign a contract that clearly states the scope, terms, and expectations.
Last, in the US there are IRS and compliance requirements for contractors. 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 - DEVELOPING A BUSINESS PLAN
I intentionally saved developing a business plan for your coaching business until the end of the post. I wanted you to read through everything before you considered writing your plan.
You need to be able to explain your business to yourself before you try to explain it to anyone else. It’s your business. It’s your business plan. Write it for yourself. Gain clarity on what you want to accomplish, how you want to achieve it, and what success means to you!
Start with the simplified business plan, discussed below, then, add more details as you progress.
Writing a simplified business plan
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 concise, but detailed, answers to these questions:
What is my product or service?
What steps do I need to take to grow my business?
How will I finance my business during the startup phase?
As your 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 once you’ve written it.
STEP 16 - RECOMMENDED TECHNOLOGY AND RESOURCES
Website: I have a DIY Website through Squarespace. I want complete control of my website. With Squarespace, I’m able to update and add to my site any time. Plus, it’s super easy! I didn’t have to learn code, hire an expensive website designer, and it already comes packed full of integrations. Wix is another good option.
Client Scheduling: Acuity Scheduling. Simple to set up. Great user interface and integrations. Plus, if you have a Squarespace account, they automatically upgrade your plan.
Social Media Scheduling: I use Buffer to schedule and automate my social media posts. Buffer has plenty of pricing options that will suit any budget.
Customer Relationship Management: I use HubSpot’s CRM. They have a free CRM for Small Businesses that is simple set up. I’ve found that their CRM has everything I need to track, organize and nurture my prospects and customers.
Graphic Design: Canva is impressive! Anything I say won’t do it justice. It’s so easy to design and create any type of marketing materials you need. They have all sorts of ready-made templates for you to use.
GIFs: Giphy has been around forever. If you use GIFs or want to create them, this is the place.
Free Stock Photos (and videos): I wrote a detailed article on finding cool pictures for Instagram. Although the title is specific to Instagram, you can use the resources for any social media platform: Free Stock Photo Sites.
Typeable/Editable PDFs: I’m sure you create PDFs, but don’t want to spend a bunch of money to get Adobe Pro. Your solution: PDFescape. Create a PDF, upload it to PDFescape, and then select the areas you want to be typeable. Done!
Audio/Video Conferencing: Zoom. I’ve tried them all, but haven’t found anything that’s as good as Zoom for the price and options.
You are well on your way to starting your coaching business. It’s time for you to “Become the Cause” of your Life & Success.
I really appreciate all of those people that have clicked the sharing buttons scrolling on the left side of this page! That’s a huge sign they found this article useful! Thank you so much!