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What does a vegetarian community restaurant “Lentil As Anything” in Melbourne, Australia, have to do with my coaching fees? Simple. The restaurant uses Value Based Fees rather than setting prices for their dishes. “Our Philosophy is that the customer decides what they want to donate for the food they’ve eaten – they decide what it’s worth and give as they feel.”
I’m looking at how this could be applied to Coaching fees.
I wrote a “Value Based Fees – Thinking Out Loud” post about this recently on my own site. The feedback, both in the comments and via email and twitter, was very interesting and thought provoking.
The basic premise is that instead of telling the client ‚ÄúI charge $250 per hour, paid in advance,” the client receives the coaching and then pays the Coach whatever they feel the session was worth.
Overall, the comments were of the ‚Äúdon’t do it, you’ll be taken advantage of” or ‚Äúdon’t do it, it makes it too hard for clients” type. However I feel the idea still has merit (that or my inner child is standing here saying ‚ÄúCan so do it if I want to!”)
I think the answer lies in educating clients about the process and ‚Äòaverage’ rates of coaching fees, helping the client recognise the value in the sessions, following up after the session – more than once, and making it as easy as possible for the client to pay.
I am intending to try this in June with three clients. Only three, just to limit the damage if all the naysayers are right. (They’re not right I tell you! This can work!)
I’ll be posting on my blog and emailing my list to ask for three clients to work with on this for four sessions each. These three people will receive a document outlining the value-based fee non-structure, how the trial will work, what they can expect, and how I will be following up. This document will form the basis of the web page if the trial is successful and I adopt it for all or most clients in the future.
The clients will be followed up via email the day after a coaching session, and at the end of that month and the following month. These emails will be a reminder of how many sessions they had that month, the value-based fee premise and will include a Paypal ‚ÄòDonate’ button or link.
I will also be putting a ‚ÄòDonate’ button in the sidebar of my website during this time. I think making it easy for clients to pay and also reminding them of the Coaching and the value they received is a major key to making this successful.
I will be keeping very careful notes during the trial and will be happy to share the results, good or bad, afterwards.
Please share your comments about this experiment.
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There are 13 Responses so far...
I think this is interesting. I am a UK based business coach and have a client who engaged me using a grant she secured. That work is coming to an end and she wants to continue working with me. I had decided to take this approach to payment by asking her to pay what she feels it is worth to her. She knows what she had been paying, the outcome will be interesting…..
Rob
I avidly look forward to reading about your brave approach
This is great! We don’t often see a new approach to business. You believe in it, that’s enough to make this approach work. I hope this works out better than you expect. Looking forward to reading about it in the near future
@ Rob, thanks Rob! It’s nice to hear that it can work.
@ Kare, it’s going to be an interesting experiment, no matter how it turns out!
@ Samar, Thanks Samar.
Intriguing premis…I believe that it could work out…I’ve not done fee based coaching but I have traded services a time or two in special cases. Would be interested in discussing further
@ Kristin, I have also traded services previously as well. That worked out quite well for both of us.
Very interesting idea. One I’ve thought of pursuing when I begin my own coaching business down the road, at least until I get enough experience to feel comfortable asking higher fees.
The closest thing to this in my personal experience is grading yourself. I’ve had some teachers and also a supervisor at work have people grade themselves and for the most part the people give themselves harsher grades than the teachers or supervisors would have. So I think this might translate to coaching and you might find (if people are educated to the value of coaching, which the average person may not grasp at first)that the clients volunteer higer fees than the coaches would have asked. It probably won’t happen that way, but it will be interesting to see. In either case, you’ve found one more way of creating interesting possibilities.
Let us know your results!
I hope you prove us naysayers wrong Mel I genuinely do. I think you’re on the right track with your comment “the answer lies in educating clients about the process and ‚Äòaverage’ rates of coaching fees, helping the client recognise the value in the sessions”.
Good luck Mel!
Melinda, I LOVE this experiment! I have been coaching professionally for about a year and contemplated taking this exact approach when I started. I have tried it with two clients thus far; in both cases, I feel it was worth the risk. To me, it’s adding a dimension to the co-creative nature of a coaching partnership. And by giving the client transparent information, context and ease of payment, you are really empowering them and reinforcing the mutual exchange of benefit.
Please keep us posted on what you learn!
Melinda,
I know it’s only been barely a week into June and your experiment with “pay what I’m worth” pricing, but wow would we all like to know how it’s going! (Okay, when journalists say “we” or “some” or “people are wondering,” often they are speaking for themselves. Let me be more clear. I want to know how it’s going!
I wonder if it’s interpreted as charity or not–as in, times are tight, pay what you can–or whether it’s seen as a way of breaking free of rigidity and exploring the true value of what you do?
I believe clients, where possible, should have the options on how they can ‘value’ our coaching services, whether based on per hour basis, on a fixed sum contract basis, or a hybrid of compensation formulations.
One scheme where we operate is what we call the Pay-For-Service-Performance compensation scheme (PFSP). A brief description of the proprietary PFSP scheme is provided below as an example (please note, information provided may not be reflective of actual practice).
The client remunerates the coach based on a pre-agreed scale tied directly at the attainment of KPIs. For example, a client KPIs are set at the 85% performance mark to be achieved and to be reviewed in 6 months time. A fixed coach fee is pre-agreed, say USD 6K. It is then up to the coach to set up the ‘logistics’ to coach the coachee to reach or exceed the 85% performance mark, and NOT fall below the minimum performance benchmark. Upon reaching the review, the coach fee will be based on the average results of KPIs attained by the coachee.
Let say, the coachee meets the 85% performance mark, the coach will be paid the full coach fee of USD 6K. If for example, the coachee could manage only achieving at 60% performance mark. In this scenario, the coach fee payable will be only USD 4.2K (60%/85% X 100 = 70% X USD 6K = USD 4.2K). There is a pre-agreed minimum coach fee rate no matter what is the performance level achieved by the coachee, though any performance mark below 60% will automatically subject the coaching contract becoming non-renewable (evidences of coaching ineffectiveness).
However, if during the review, the coachee’s performance mark exceeds the 85% performance mark, a pre-agreed scale of bonus payment is dued to the coach (incentive to motivate the coach to coach to the highest potentials – mutually beneficial to both the coach, coachee, and the Organization/stakeholder). Of course, there will always be the intricate task of pre-determining and calculating the ‘monetary value-added’ as a result of exceeding performance benchmarks.
Although it may sound ‘complex’, as long as there are pre-agreements, there is at least some measurements to gauge on the coach’s effectiveness, and the client does not have to hassle with the per hour or per contract dilemmna, where the coach could ‘get away’ with ‘ineffective coaching’.
However, we do have a caveat that the acceptance of a coachee will have to go through a screening process for coach-coachee chemistry, mutually agreement on the KPIs and payment structure/scale, and the mandate for either party to ‘terminate’ the coaching contract on ‘fair grounds’ (and be paid a minimum reimbursement for work already done) within the first month of the coaching contract. Thenafter, the coaching contract will have to be fulfilled by both parties.
Anyone willing to share the ‘skeletal framework’ on how their coaching services are valued or priced?
Meta-cheerio.
Billy C H Teoh
Malaysia.
Reference to my previous posting, USD 4.5K should read USD 4.2K. Apologies for the typo error.
Meta-cheerio.
Billy C H Teoh
Malaysia.
Melinda, I think that in today’s economic down turn that we as coaches need to be serving our clients in the most effective ways possible – be that incetive based fees, trading services etc etc. If we help our client to achieve the goals they initially set forth (with proper fee education) I have to believe that most would readily pay for the value you delivered. There will always, in my opinion, be folks who will take advantage…the somethin for nothing folks…it comes with the territory.
I’ve recently started a new guarantee with propective clients -We define goals to be achieved and if at the end of 90-days you are not statisfied a portion (depending on the level of goal achievement)or all of the coaching, then the fees are refunded. I’ve been split testing several levels of pricing for this concept and with this type of no risk investment, price is almost a moot point.