Business Sense: Choosing a Payment Model

For most coaches, there are two basic payment models to consider: You can either have a client prepay for coaching or have a client pay after you provide coaching services. Understanding the pros and the cons of each model can help you choose the best fit for your business.

I coach clients around the world and I charge for coaching ahead of time. My website’s design makes it easy to choose the right amount of hours based on the type of coaching and what the client would like to achieve. I list all prices and have ensured that the checkout process is simple. Still, it would be naive to assume that a prospect halfway around the world would simply reach for a credit card and enter his or her information without some reassurance that the payment is refundable. I address this by prominently displaying a clear written cancellation and refund policy at checkout.

Another option favored by many consulting professionals is a free consultation offer. For coaches, a complimentary coaching conversation, or discovery session, is a great way to allow you and your prospect to get to know one another. As a part of the discovery session, a 15-minute laser coaching session—delivered with explicit permission from a prospect—is a great way to let the prospect experience your style of coaching. The discovery session is also a great opportunity to prequalify your prospect early on.

Nevertheless, even with full transparency and a free trial offering, the prospect bears the financial risk of making upfront payment. Be prepared to discuss alternatives, such as frequent incremental prepayments and/or discounts. The obvious pro of this model is liquidity from funds collected upfront; the cons are potentially having a hard time acquiring clients and increased risk of a credit card chargeback.

Alternatively, you can collect payment after you deliver coaching services. While this model makes it easier to enroll new clients, you bear the financial risk.

You may ask why it would make sense to take on such risk. What happens if the client refuses to pay? One option is to turn the receivable over to a collection agency. A coach may also decide to take the client to court. Depending on your country’s laws, a third option might be to write the uncollectable receivable off as bad debt. However, quite often, providers of professional services, such as coaching, simply choose to take the loss. 

The pro of collecting payment for services already rendered is that it makes it somewhat easier to get new clients; the con is a risk of late or no payments. It’s also important to keep in mind that third-party collection and litigation cost time and money.

You can choose to stay with your current model, consider switching or even combine the two. In any case, make sure you are well-supported by an attorney and an accountant. The first is instrumental in drafting your coaching agreement and any modifications necessary to reflect changes in the way you do business. Take time and do a bit of your own research to firmly understand all aspects of your coaching contract. Should you choose to switch from one payment model to another, especially after you have been in business for a few years, talk to your accountant about applicable accounting methods. Finally, liability insurance might be a good idea to explore as it provides protection regardless of your business model.