Main / Blog / 
Establishing a Pricing Structure for Your Coaching Business

Establishing a Pricing Structure for Your Coaching Business

Many enter the coaching industry with dollar signs in their eyes, aware that a lifetime of expertise can be monetized quite effectively in this space. But it’s not as easy as putting up an ad and asking people to pay thousands of dollars for your time. 

An effective coaching business must establish credibility, show value, and provide a wide range of products and services based on the resources your ideal customers have. This starts with a value ladder that takes into account the spectrum of possible clients and customers you might have, and the potential products you can sell.

What is a Value Ladder? 

A value ladder is exactly as it sounds—a pricing structure that offers multiple rungs, starting as low as “free” and rising as high as you feel your clients and customers will pay. 

Value Ladder

Coaching businesses structure their monetization plans this way for several reasons. 

  1. It makes your services accessible to everyone, even those who cannot afford to pay for them. 
  2. It provides a way to build credibility and trust with your clients, offering low-stakes, inexpensive products at the bottom of the ladder. 
  3. It builds a system through which you can generate recurring revenue from clients who might signup for membership plans or purchase new products at different levels of the ladder. 

An effectively structured value ladder addresses the two most substantial pushbacks to buying you’ll hear: cost and trust. Let’s take a closer look at what an effective value ladder looks like. 

Building a Value Ladder that Works

An effective value ladder will contain multiple tiers that grow in price as clients and customers move their way up. Where you start the ladder and how high it goes will depend on how you structure your plan, but one of the most common value ladder structures looks like this:

Step 1 - Free Offer

Step one is your free offer. The lead magnet that will attract people to your business, both for those who cannot afford to purchase something yet and for those who want to learn more about you and your services. 

The trick with a free offer is that it needs to be substantial. The length is less important than the usefulness of the resource. It should be actionable, exclusive, and specific to your area of expertise. This might be a free eBook, multi-step email list, newsletter subscription, webinar, or even a shortened version of your course (which we’ll get to in a minute). 

Pricing Considerations: Some have success charging a small fee for this introductory offer. The key though is to reduce the barrier as much as possible so that people can engage with your ideas. 

Step 2 - Membership Plan

The next rung on the ladder is a membership plan that provides regular content and resources to your members each month. This helps establish the holy grail of coaching—monthly recurring revenue (MRR). Each person who signs up is a potential long-term revenue source, allowing you to grow exponentially as membership numbers increase. 

Before pricing your membership site, make sure that you have a plan in place that solves a specific problem or set of problems for your target audience, and provides recurring, tangible value to your subscribers. The upfront pricing is meaningless if your churn rate is high after 1-2 months. 

Pricing Considerations: There are several pricing models for membership sites, including

  • One-time - The first is a one-time payment, often at a much higher rate, but without recurring revenue over time. This is best if your membership runs automatically and doesn’t require recurring work or efforts on your end. 
  • Recurring - Recurring payments come in monthly or annual payment methods and are important if your site offers training, regular content updates, or other forms of support that will be ongoing. Yes, you’ll build a nice source of recurring revenue, but you’ll also need to cover those expenses over time. 
  • Freemium - Some membership sites offer free membership access and then offer additional content and upgrades through paid portals on their site. This is a great way to grow membership up front, and then upsell people, using a separate, smaller value ladder within your membership structure. 

How much should you charge for each of these possible options? Membership sites are tricky in this regard. If the price is too low, the value won’t be evident to potential subscribers. Consider the membership site demand curve.

At the same time, high prices can reduce interest due to a lack of resources. Too few subscribers who can afford the high price will doom your site just as quickly. 

So what’s the ideal price? It depends. You’ll need to test different numbers to see where you land, but some other factors to consider include:

  • What your competitors are charging. 
  • Minimum cost - how much do you need to charge to break even? 

For the latter, you need to establish a target number of members you want to signup as well. This will provide a basic equation you can use to identify the cost per-member minimum fixed price:

Per-member cost = Monthly fixed costs / Target membership

Keep in mind you will have variable costs as well. These include transaction fees, sales commissions and affiliate fees, and any consulting hours or time from your schedule. Be sure to factor these into the total cost of goods sold (COGs) as well. 

The minimum pricing floor for your membership site will then be:

Per-member cost + per-member variable costs

Once you know the floor for your pricing, you can do a number of things, including

  1. Check your competitors to see if you’re in the right ballpark. 
  2. Evaluate if the ROI makes sense given the minimum cost of your product. 
  3. How quickly do you want to grow - will people pay what you need to charge?
  4. What kind of profit do you want to make? What is the final price you’ll charge? 

Step 3 - Targeted Course

As you move up the value ladder, you’ll need to start charging more money for your products. A digital course is a prime example. Many people start their pricing too low and several things happen. 

  1. They don’t build an audience. The people who buy $19 courses are the same who download them, read them for a few minutes and put them away. They don’t come back and they don’t rise up your value ladder. 
  2. The value of your work is minimized. It’s impossible to evaluate what you’re doing effectively if the cost is too low. It’s cheap. 
  3. You won’t make enough money to reinvest in your product and advertise the course effectively. If the margins are very small, you can only spend so much on promotion, and you quickly start to lose money. 

So how do you avoid this? You charge a reasonable amount of money for your course. Here are some considerations for how to price your course:

  1. Set a minimum length but don’t charge based on time. This can lead to low prices, or you doing a heck of a lot more work than you need to do to build your course. 
  2. Check the competition in your field. What are they charging? If they are advertising it and building an audience, they’re making money. 
  3. Consider the value of what you are teaching. You are an expert; someone who has skills they can pass on. What do those cost? Reasonably. 
  4. Test different price points until you start to see resistance. That is, at what cost does the revenue from your efforts start to drop? In general, you’ll find the effort that goes into marketing a course is the same regardless of price, so where do you start to see diminishing returns? This will be different for everyone. 

At the end of the day, the price of your course will likely be higher than you expect, but proper testing is needed to find the sweet spot in your industry. 

Step 4 - Coaching Plans

Finally, toward the top of the value ladder, we have coaching plans. Typically before one-on-one coaching plans, you’ll run into group coaching plans, but the idea remains the same. You’re asking people to pay a significant amount of money to spend time with you personally. What can you charge for that? 

First, avoid pricing your time out. This is a losing path every time. Your time is valuable, but you shouldn’t be selling it for a flat rate. This teaches clients that the value is in your time and not in the insights you provide. It’s a bad mindset to teach and can hurt you in the long run. 

So what does good pricing for a coaching plan look like? 

Retainers avoid time-based considerations but create other problems in that you are available to the client at a broad set of hours. Many won’t take advantage of it. Some will, and it will make your life difficult (and complicate calculating costs). 

Package pricing is recommended for several reasons, including

  • It is result-oriented, teaching clients to pay for the impact of your efforts and not the hours put in. 
  • It establishes further credibility without breaking your boundaries. 
  • It’s measurable and can be balanced over a long period of time to avoid imbalances in your schedule or revenue. 

How do you price a coaching package then? There are several ways to go about this. 

  1. Start low to build your client pool. A low rate, at the floor of the industry rate (3-6 months at $1,500-$3,000) can help build your client pool and establish word of mouth. 
  2. Understand your goals and what you need to earn for your time. How much work will you need to put in to get a new client? What kind of time is needed once you have them? How many hours a day do you want to work? These are all important questions you’ll need to answer. 
  3. Focus on the transformation or change you can help your clients achieve. Be specific and help them envision what their future will look like with you on their side. Now, charge for that result, not the effort or time that goes into achieving it.

High-end coaching packages can cost thousands of dollars, and allow you to establish yourself at the top of the value ladder, but to do it successfully, you need to build credibility, show prospective clients what you have to offer, and allow them to build up to that level. That’s what a good pricing structure does. 

About DepositFix

DepositFix is a trusted resource for coaches across all industries, helping them accept payments at each stage of the value ladder for courses, memberships, and coaching packages. Learn more about how DepositFix can help you build a nimble, responsive value ladder and pricing structure for your coaching business. 

Ready to start
accepting payments
with your HubSpot forms?
Start
a Free Trial