Why Hiring An Executive Coach Is More Expensive Than You Think
Coaching is way more expensive than you think - but also way more powerful, if deployed correctly. Learn how to make the most out of your coaching experience!
When you start working with a coach, the hour you spend in session with them every two weeks is not the only time commitment you make: you also spend time preparing, reflecting, and implementing changes and strategies. When you decide to work with a coach, you're investing your most valuable resource as an entrepreneur—your time. In fact, a “cheap” coach in terms of fees should be a warning sign that you are undervaluing your own time!
Coaching as an investment decision that needs to produce a positive return for your business:
Investment into Coaching < Return from Coaching
As an entrepreneur, understanding your true value is vital in determining how you allocate your time and resources to different tasks and investments, including coaching. The earlier you manage to increase your internal benchmark of your own hourly rate, the better. It reflects a shift in identity, and a shift in attention. It will make you look for ways of scaling earlier, which means the company can scale. In that way, your hourly rate serves as a proxy for increasing confidence and self-worth as an entrepreneur.
Many of my clients have 100+ employees, a few millions in monthly revenue and potentially investor money in the bank. Their decisions impact both lots of employees as well as capital allocation within the business. I’ve polled my clients on the perceived value of their time and received answers in the range of 3,000 € to 10,000 € per hour. They are aware of their high leverage - more about that below.
Here are a few reasons why you, too, should choose a high hourly rate: you are making the most valuable decisions in your business and you hold the vision of where you want to go. As a founder, you are at the center of your team and your actions have the highest impact on everyone else’s time. For better or worse, all eyes are on you and how you spend your time.
For simplicity, I use an hourly rate of 5,000 € in my examples. This number might seem totally arbitrary, but I am trying to make the point here: as an entrepreneur, you need to be extremely conscious of the value of your time.
The equation therefore becomes:
Time investment + fees < Return from Coaching
So, the real question you need to answer is: what challenge is so incredibly valuable to solve that it justifies the true cost of hiring a coach?
“Return on coaching” is defined by the value of the topic you chose to work on and your commitment to turn the insights into action. This applies to any advisor relationship in which the advisor is not creating any work product or deliverables outside of their session with you.
In this context, the equation for entrepreneurs becomes:
Time investment + fees < high-leverage topic * commitment
You can find a simple, exemplary coaching ROI calculation at the end of this piece.
Photo by Sonika Agarwal / Unsplash
What To Work On: High-Leverage Issues
When evaluating the investment required to engage in a coaching relationship, it's essential to consider the topics and issues that you need to address to justify this investment. Reflect on the high-impact areas of your business where coaching can provide substantial returns, and ensure that the coaching sessions focus on those critical issues.
Use the following question as a gut check:
Is this problem a 50,000 € per month issue that is worth your time?
Do you have the feeling that this coach in front of you has the ability to help you identify your 50,000 € challenges?
What are other topics that you know about but might not address without a coach?
What is your feeling about unknown unknowns? For these questions, you’ll need to hire a coach with expertise in your niche.
Let me point out two areas that have consistently produced the highest “return on coaching” for my clients.
You can calculate this example also using the size of your team: your organization represents a form of leverage that can amplify the impact of your coaching investment. As your company grows and your team expands, the improvements you gain from coaching can ripple through your organization, leading to increased productivity and value creation.
There are a number of ways my clients work to increase their team leverage:
Organizational development, or in other words, putting the right people in the right seats. Interestingly, most think this is a hiring challenge but the real value is in figuring out what the right seats are. Meaning: how do I structure my organization correctly given the unique challenges we are facing? What are the roles and areas of responsibilities I need to combine to make someone effective? How do I measure success in these roles?
Communication, meaning how do I keep my team aligned to our plans and motivated to do their best? This has many, many levels and includes questions like “how do I communicate that I am firing an entire team?” as well as “how will we create an engaging offsite for our c-level?”
Relationships, focusing on improving trust and alignment in your direct reports, immediate team (as a group) or improving your cofounder dynamics. This is a great challenge to pull your coach in and have them evaluate the situation for you. I love it when my coaching engagements expand to the team.
Holistic work is the foundation of my coaching philosophy. All my clients go through an onboarding deep dive in which we map all their challenges and how they connect across the personal, team and business levels. Working on personal leverage can mean:
the core work, ie. reviewing limiting beliefs and attitudes as well as uncovering values, deriving principles and understanding how they turn into virtues.
For example, this could be how one of my clients started to really grow into his role as the chief decision maker in his company, finding purpose and joy in taking the big decisions and enabling his co-founder to focus more on vision and outside communication.
the functional work, which often means personal productivity and goals, reviewing your roles, skills and capabilities as well as personal branding.
For example, this would be realigning one of my founder client’s time with technical contributions to the company’s architecture - an activity that he is uniquely positioned for and enjoys more than anything else.
Working on increasing your personal leverage is the most valuable work you can do. How? It will impact both the people you work with (team leverage) and the business you lead. Ultimately, it should also make you a more confident, happy and balanced person.
The True Value Of Your Time
Coaching is way more expensive than you think - but also way more powerful, if deployed correctly.
When considering working with a coach, it's essential to factor in not only the coaching fees but also the time you'll invest in coaching sessions, reflection, preparation, and implementing the insights gained into your business. This investment of time, when utilized effectively, will contribute to your personal and professional growth.
With this in mind, ask yourself: "Is it safe enough to try coaching for three months and see if my assumptions about its effectiveness hold true?" You should always have the option to reassess your coaching arrangement and discontinue if it's not providing the expected results. Do not let coaches manipulate you into a 12 month commitment. In my experience, the average engagement lasts between three and five months.
By giving yourself a trial period, you can evaluate the real-world impact of coaching on your business and make informed decisions about whether to continue the relationship long-term.
There are also several ways to not waste those three months–how a coaching relationship can be effective. Because help shouldn’t take forever. An effective coaching relationship feels like being pulled along by insight and meaningful discussions that leave you with a strong urge to continue this work. Good coaches will help you see underlying patterns and valuable problems right away. Here are a few things to consider:
First, the quality, clarity and experience of the coach is paramount. Why? A skilled and experienced coach can better help identify what the real challenges are, your 50,000 € topics. This also means that the coach needs to be able to adjust their approach to your needs. Most inexperienced coaches try to stick to some framework. But you care about results, not frameworks.
Second, your coach needs to build a trustful relationship with you from day one. If you do not feel comfortable sharing what’s truly going on for you, you’ve just blown 50,000 €.
Third, making the most means being completely transparent and vulnerable, blocking off time to work on homework and potentially integrating others - co-founders, executives or your life partner - in the process to increase leverage.
Fourth, you will likely save time by working with a facilitator who (1) asks the right questions and supports you in generating insights, next steps and continues to hold you accountable. A coach might also help you to (2) identify and face some of the questions you would not dare facing yourself. Those tend to be the realities we are running away from but inevitably cannot escape. It is hard to measure the value, yet in my experience, those are the insights that are most transformative in my clients’ lives, and arguably the most valuable topics to work on.
Finally, you as the entrepreneur need to commit to change. Your mindset and willingness to learn are essential. A proactive attitude, openness to feedback, and a genuine desire to develop both personally and professionally can lead to more fruitful coaching outcomes.
The real value of coaching lies in your hands - your commitment to change, your investment of time, and your readiness to focus on the right challenges. That's how coaching brings about real, meaningful progress. It starts with a solid relationship between you and your coach, but it's your commitment to change and your investment of time that fuels the process. You have to be ready to dig in, to commit your energy and effort.
As an entrepreneur, it's important to determine the true value of your time. Be mindful of how you spend it with coaches and advisors who will be highly influential on you and your business. By approaching this decision as a strategic investment, you can make informed choices that maximize the value of your time and resources.
Appendix: Running The Numbers
I always find it helpful to use real numbers, so here’s an example calculation: Suppose that for every hour of coaching, there are approximately two hours of additional work required on your part. If you work with a coach for around 3 hours per month, this means there's an additional six hours of work outside of your sessions. Using your hourly rate, this comes down to opportunity costs of 9 hrs x 5,000 € = 45,000 € per month. For simplicity, let’s assume coaching fees of 5,000 €.
This makes your coaching purchasing decision a 50,000 € investment decision - per month!
Let’s use a simplified, exemplary case in which you have a company with a 50 € million valuation. We’re making two assumptions: working with your coach results in a 10% improvement in your output and value to the business. Your current contribution to your company, as measured by its valuation, is 20%.
By analyzing your specific situation and the potential impact of coaching, you can make an informed decision about whether this investment is right for you and your business.
1. Founder's Value Increase:
Assuming the founder's value contribution to the company is 20% of the total company value, this equates to 10 million € (20% of 50 million €). With a 10% improvement due to coaching, the founder's value increase would be 1 million € (10% of 10 million €).
2. Coaching Investment:
Assuming a coaching retainer of 5,000 € per month, the coaching fees add up to 60,000 € per year (5,000 € x 12 months). Adding your opportunity cost of time (45,000 € x 12 months) will bring you to a grand total of 600,000 € investment.
(This assumes you’d work in a rather intensive coaching relationship for an entire year; most of my clients work in three to five month sprints.)
3. Return on Investment (ROI):
In this example, the coaching investment leads to a total value increase of 400,000 € for the company. To calculate the ROI, we'll compare the total value increase to the annual coaching investment. The ROI would be 167% [(1,000,000 € / 600,000 €) x 100].
Ultimately, you need to realize: coaching that’s worth your time needs to not only be phenomenal, but focus on the right issues that are likely to return your investment.