This episode is inspired by a smart question from one of my VIP clients.
So I’m going to reveal where expenses go for my coaching business. And while I’m at it, I’ll share common expense pitfalls for coaches and finance savvy mindset tips.
I know this might seem boring but earning well is not boring. Losing profit after all you work feels like a tragedy. Don’t go there.
Reading the show notes for this episode will be especially helpful because I’ll list the sources of my expenses but I’m not going to bore you by listing them out verbally. Find those complete show notes at prosperouscoach.com/111.
Bright Shiny Apps & Services Steal Your Coaching Profits
First let’s talk about not-so-smart uses of your money for your coaching business.
There are multitudes of ads for bright shiny apps and services coming at you in your inbox and on social media. And in a moment of scarcity thinking you might be tempted to buy one, and another, and then another.
You know, you might think something like “maybe THIS will make the difference in my business”. That can be a dangerous thought.
Those seemingly little $10/month and $20/month expenses quickly add up to thousands of dollars annually that your earnings might not cover. So think smart and choose wisely.
It’s so tempting as a new coach to get services for online client portals, social media time saving apps, virtual assistants, bookkeepers and all sorts of extras that in the long run probably won’t add enough value to help you earn more.
Keep Your Business Low Labor and Low Overhead
Design your business to run lean. That doesn’t mean being cheap with your business. The old penny wise pound foolish adage applies.
Smart expenses are those that save you significant time so you can serve clients more efficiently and earn more. But it takes some trial and error to learn how to invest money only where it really counts.
Be strategic with this rule:
Only invest in what you need right now
not what you think you might need someday.
Regularly dump apps and services that aren’t helping you earn more. If you have a low-income month or year, it could partially be that you’re spending too freely.
Think twice about the fancy, expensive coaches portal or top of line email campaign service. You don’t need those.
Here’s a tip … if you’re 100% sure you like an app or service and it’s truly helping your bottom line then opt for annual payments for as many expenses as you can instead of monthly because you’ll save a lot.
Startup Expenses Are Higher
Investing in your business is not only necessary, but it’s a privilege. Think of expenses for useful services as a blessing that helps you thrive. Pay for them with gratitude.
For example, significant investment goes into coach training (the vocational skills side of your business) and for hiring a business mentor like me to help you get everything set up right the first time (which is the strategic side of your business).
Also I think it’s wise to invest in a good web designer who is also a coder to create a WordPress website for you. Doing your own site on Wix or Squarespace may come back to bite you now or later.
It is not unusual to spend $25,000 out of pocket before you earn much as a coach. So don’t let anyone make you feel bad about start up expenses. It’s normal for ALL businesses and entrepreneurs. But do choose wisely.
Don’t Waste Money on These Expenses
Finance experts say your expenses should be no more than 30% of total revenue. But imagine your profits if you could cut expenses down to only 10%? That’s doable. Check out Episode 5 about The Simplest Coaching Business Model. It’s one of my most listened to episodes.
By design, my business model is high on profit and low on labor and expenses. And that’s what I teach my VIP clients to create in my Coaching Business Breakthrough program.
I administrate nearly every aspect of my business myself. Once you learn how it’s fast and easy.
For a few years I’d had a bookkeeper. No more, I just use Quickbooks. A one time expense and an hour each month of my own time is far better than spending thousands monthly.
Virtual Assistants are also expensive and most don’t save you time unless you opt for a more complex business model with online products, training, webinars etc. Those things greatly reduce your profits unless you get into the business of expanded promotion, which frankly wore me out and brought me no joy.
I think it’s better to work a 30 hour week earning $200K and keep 90% of it than to work a 60 hour week earning $500K and keep only 50% of that. But that’s me.
I do most of my website updating and all of my podcast tasks. I have it all streamlined.
I also don’t advertise. Look … what I do and what you do can’t effectively be advertised.
So instead of blowing money on ads, have a strong content strategy. Put out an excellent weekly podcast episode or video. That’s how you attract ideal clients because if they like you and trust you they’ll want to work with you.
Ads do not build trust!
My annual business expenses for this past year were $6,000. That may sound high but it’s really not when you consider that as well as the monthly or annual costs for apps to run my business and podcast, it also includes:
- cell phone and internet costs
- CPA for tax prep
- web design
- computer consultant services
If I remove those things my total expenses this past year were only $3300 or an average of $275 per month.
I hope this inspires you to run a lean business and keep your business model simple. It’s a great life!
Here’s a list of my expenses for your interest:
Web Domain fees – GoDaddy is usually less than $10 per domain and you don’t need any bells & whistles they try to sell you like privacy, email and web hosting.
Web Hosting – I use A2 Hosting because they aren’t a huge company and don’t drive me crazy trying to sell me stuff no one needs.
Email Campaign Company – I swear by Aweber’s excellent customer service at $179 per year.
Podcast Hosting – I love Buzzsprout for their high customer service at $12 per month.
Internet fees – You can deduct ½ of your internet fees on taxes each year.
Mobile Phone – I use my cell phone for business and personal and can deduct ½ the charges
Credit card fees – After much research and trial I use PayPal to collect fees and pay 2.5%. I’ve found that no fee solutions or low fee solutions have huge hassle factors.
Scheduling system – TimeTrade is what I use and one of the best and least expensive out there. I’m grandfathered in at $40 per year.
Password System – LastPass keeps my passwords easily accessible for $37 per year.
CPA – My expenses for tax prep run about $300 per year I stay with free services for Canva, Dropbox and a few others because I try to stay away from monthly fees which add up fast.