Why charging for value is a myth (and how to rid yourself of pricing terrors as a coach)
September 9, 2016 by Kevin Oubridge
The other day I was speaking to a potential supplier about IT support. Having outlined my requirements I asked him how much it would cost.
If I’m honest, I was a bit irked by his reply:
Well, er, we don’t charge by the hour, we sort of charge for value. What kind of, um, budget have you got?
It was obvious he was asking what budget I had, not to see how much ‘value’ I could afford but to see how much he could get out of me. And not with much confidence either.
Mixed messages and discomfort for me, the potential buyer.
Exactly what you don’t want when discussing price.
It got me thinking that maybe charging for value is a bit of a myth.
What’s more, it isn’t particularly helpful to coaches, who need a more practical approach to overcoming the terrors of pricing.
The meaning of charging for value
What does charging for the value you deliver actually mean?
Well, for a start, if you want to charge for value you need to be clear with your potential client what that value is likely to be. In the above instance, the person I was speaking to wasn’t. At no time did he touch on what I would get out of using his service.
A surprisingly common omission by people selling professional services by the way.
Once you’re clear on the value, you need a charging model. For example, you could charge 10% of the value your coaching adds to your client’s business over a year. The problem with that is agreeing on the cash value you bring. Plus you have to wait a year to collect.
And what if, as a result of your coaching, a leader transforms themselves from an ‘also ran’ to ‘star performer’, who increases business revenue by £5m a year? Entirely possible, in our experience at Accelerated Success.
Ten percent of £5m is 500K!
Would you feel comfortable charging half a million pounds for a 7 month coaching programme?
You could charge 1% instead of ten. But that’s still 50K for a seven month programme. More realistic but there are still relatively few coaches globally who charge this amount for a single coaching engagement.
Most coaches will be charging much less.
The whole discussion becomes irrelevant anyway, because, although it’s possible to measure the impact of coaching in a way that is credible with and useful for your clients, it’s another thing entirely to convince them to cough up tens or hundreds of thousands of pounds on the back of it.
There are other models for charging for value but it’s not an easy option.
How we charge for our coaching
At Accelerated Success we charge flat rates for 7 and 10 month coaching programmes.
This clearly isn’t charging for value.
At least, not in the way described above.
We do, however, have a strong focus on value before, during and after every coaching programme we deliver.
So, in marketing our coaching, we make sure our potential clients understand the value they’ll get. During a coaching programme, we review with our clients the value they’re getting. At the end of the programme we nail down with them the value they’ve actually got. And 3-6 months down the line we review with them the wider impacts of our coaching.
We focus on value because that’s what our clients and potential clients are interested in.
The difference our coaching makes for them and their business.
In turn, this helps us sell more coaching at a good price.
A price that has strong and demostrable links to the value we bring, but is not dictated by it.
How to set your price
As a coach, you are undoubtedly worried you’ll set your price too high and, consequently, you’ll set it too low.
Way too low.
And you’ll probably still feel apologetic, and somewhat terrified, asking for whatever meagre amount you settle on.
To avoid the pricing terrors trap, it helps to consider:
1 Amount of coaching you can realistically deliver in a year, while leaving time to market and sell that coaching, complete all sorts of business admin, allow for time off sick, have holidays and enjoy a life outside of your work
2 A price that will earn you a decent living from coaching, once you’ve deducted all your business expenses
3 How much your clients can afford and are willing to pay
4 Value you bring your clients
5 What you are comfortable asking potential clients for
It’s not an exact science but it isn’t rocket science either.
The last bullet is the toughest. However, you will get comfortable asking for your price with practice and by understanding why it is what it is. The other bullets, and bullet 1 in particular, provide you with the practical information to gain that understanding.
If you address bullets 1 to 4, therefore, you’ll be better able to address bullet 5, and get comfortable asking for your price.
At the end of the day you can charge for value if you want. Just be clear on what that value is and the charging model you are using.
Alternatively, think about what you want and need, and how much your target market will pay and that reflects the value you bring.
You can then come up with a price you are confident in using.