Find out if your business will make money
Are you considering starting your own venture? Great, congratulations. If you have started the process already, I am sure you are quite aware of your initial investment. You could even have calculated what you expect your income and expenses to be, at least for the first year. But are you sure your business will really make money, long and short term?
Optimism vs pessimism
As life coaches, we make a significant portion of our income helping people be more optimistic about life, have less fears and focus on the positive. But when you are planning a huge transition, considerable investment and basically yours (and your family's) financial future, be as pessimistic as possible. Go over your calculations and think them over one more time. Are you sure you will be able to attract this many clients with this amount of money invested in marketing? Have you included taxes and insurance in the expenses? How long you will be able to combine your day job and your business? If you have left your job, for how long will your savings really last? Do this now - it will save you so much stress in future.
Products and services
Try to be as crystal clear as possible about what you will offer people, because, guess what, you will want them to pay you for it. And people are not stupid. What is the value of your product and/or services against:
1) your clients doing nothing
2) your clients choosing your competitors?
How can you best describe this value? Find at least three of your friends, who honestly say they would pay for it. If you can't (or it's too difficult), don't give up on your business. Just look over your products and services again and make them clear and desirable. This is a must if you ever want to see your wallet full again.
If you have even sort of tried to do a business plan (and you should), you have predicted a certain amount of sales. Now go over this prediction and really think about it. When I first started my coaching business, I estimated that I needed about eight clients per month to be happy, and 15 to be absolutely fully booked. Then I said to myself "Well, that's not too bad. Only eight people!" Guess what happened? I got three clients over the next six months.
What happened? I knew how many clients I needed. I had no idea where they would come from. A website or a shop does not magically bring you millions - there is hard work and marketing investments involved. Do your homework on that one - sales can make you or break you.
Let's talk prices. What many young entrepreneurs do is choose a price midway between what their expenses are and what the competitors are charging. Sound about right? Wrong! While costs and competition are factors you should keep in mind, the single most important question you should ask yourself is "What can my clients pay me?" In order for you to have that answer, you need to know who your target market is (look at next paragraph). Don't get me wrong - clients often say they can't afford something, which they can afford. It's just that you have not explained the value well enough. But at the same time you can't expect students to pay as much as executives, regardless of how high quality your products/services are.
I was recently involved in a business consultation for a friend's friend, who had just opened a wine store. It was a beautiful store, great interior design. There was a space for wine tasting with leather sofas and a vast selection of wines. The guy on the counter knew all about the product and was wearing a black apron over an elegant shirt. The owner was keen on attracting high-end clientele, he was planning to organise events and to offer wine consultation and delivery services. At the same time, he had put a huge sign with a very affordable promotion on his window and had advertised in a group-buying website.
Do you see where the contradiction is in that? When you work for everyone, you work for no one. People with limited budget would think the store looks too fancy and would be afraid to go in, even with the promotion on the window. They'd just think it's a catch. High-end clients would see the promotion or the deal in the group-buying website and think this is not their place either. Target market is important, because different target markets are reached in a different way. So why do you think he set up a high-end business and put a promotion on his window?
Prepare for it now. Your business will start, you will be excited for a while, but then you will realise that you have a business, you haven't won the lottery. You have costs and responsibilities and these are adding up quickly. At the same time, clients are building up slowly. So you will panic and take some decisions against your better judgment. Now, being flexible is important. Marlboro was initially a brand for women - so the change they did worked out well. But at the same time try not to be an all over the place, nobody knows what the hell they're about type of business. Think over your decisions and be consistent about your strategy. If you change it - change it. If you keep it - keep it.
After looking through all these points, you may start rethinking about opening your business. Don't! This is what will make you happy - if not, it's too much work. Just rethink how you'll go about it, so that you know you have planned and prepared in the best possible way. After that just dive in and who knows - you might just be the next Richard Branson.
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Lorna Payne - LMP TherapyNovember 7th, 2017