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Written by: Mark Stewart
Mark Stewart is the in-house Certified Public Accountant, an accomplished author and financial media specialist.
Published on July 28, 2021
Investment range
$2,000 to $7,000
Revenue potential
$47,000 - $187,000 p.a.
Time to build
0-3 months
Profit potential
$37,000 - $75,000 p.a.
Industry trend
Growing
Commitment
Flexible
Here are the most important things to consider when starting your financial coaching business:
Like any major project or life decision, you should spend some time considering this opportunity before diving in. For any business to be successful, there must be full buy-in on the part of the entrepreneur. You need to be sure this is the right opportunity for you and pursue it with passion!
Spend some time considering the pros and cons, as well as industry trends, and potential earnings. This information will help you decide if it is the right opportunity for you.
There are pros and cons to creating a financial coaching business, which should be carefully considered before moving forward.
Following the massive layoffs that resulted from pandemic-driven lockdowns, many people turned to financial coaches to help them deal with their financial hardship.
US consumers have learned in recent years that financial coaches can help them build and sustain access to credit and solidify their financial future, which means demand is likely to remain steady for the foreseeable future.
Trends shaping the financial coaching industry:
Challenges in the financial coaching industry:
Startup costs shift significantly based on preferences, location, and the assets you already own. The average start-up cost of a financial coaching business runs from $2,000 to $7,000.
Aside from computers and video equipment, the costs of starting a financial coaching business are mostly inexpensive.
| Start-up Costs | Ballpark Range | Average |
|---|---|---|
| Company incorporation, licenses, and permits | $100 - $100 | $100 |
| Insurance | $150 - $150 | $150 |
| Computers and IT equipment | $0 - $1,500 | $750 |
| Camera, lighting, and accessories | $800 - $2,000 | $1,400 |
| Paper and stationery | $50 - $100 | $75 |
| Branding, marketing, and advertising | $500 - $2,000 | $1,250 |
| Website and software | $250 - $750 | $500 |
| Miscellaneous | $150 - $400 | $275 |
| Total | $2,000 - $7,000 | $4,500 |
With a financial coaching business, your revenue depends on your ability to attract new clients and your capacity to simultaneously manage multiple clients. As a result, your earning potential increases significantly with experience. Here are some numbers to consider when you’re just starting out.
The average fee of a financial coach is $250/hr, though as a new coach you’ll start at a lower price, maybe $100, and then $150.
In your first year or two, you could work from home and start with as little as six hours of work per week, or just 15% of your full-time capacity. This would mean 312 hours of work over a full year. At $150 per hour, you could bring in almost $47,000 in annual revenue. This would mean $37,000 in profit, assuming an 80% margin.
As your brand gains recognition, you could increase your rate to $200 and clock in 936 hours of work. At this stage, you’d rent a commercial space and hire staff, reducing your profit margin to around 40%. With annual revenue of $187,000, you’d make a tidy profit of $75,000.
The barriers to entry in the financial coaching business are not high, but will likely include:
You’ve now considered the pros and cons, looked at the financial opportunity, and have decided that starting a financial coaching business is the right step for you. The next step is to hone your idea and examine the details.
Market research will give you the upper hand, even if you’re already positive that you have a perfect product or service. Conducting market research is important, because it can help you understand your customers better, who your competitors are, and your business landscape.
The low barriers to entry in this industry mean that it is a saturated market with significant competition. You need to be able to identify the right opportunity to launch your business and determine your “why”. Why do you want to start a financial coaching business?
The simple answer is that Americans need financial help. Americans’ number one stress factor is money. Looking at the following statistics, it’s not difficult to see why:
There are coaches out there for just about every challenge in life. A fitness trainer can push you to get in shape, while a career coach can help you find your perfect job. Many Americans facing financial difficulties turn to a financial coach.
Particularly in the pandemic era, the number of people who have lost jobs and dug deep into their savings and are now in need of financial advice has steadily increased. The availability of financial resources has exploded in recent years, and the opportunity is there for financial coaches to jump in and serve financially distressed people, helping them overcome their challenges.
Due to the high demand for financial advice, there has been an explosion of new financial resources over the last few years, including coaches, blogs, and other services.
Like most entrepreneurs, a financial coach wears a number of different hats. It’s important to understand the various roles a coach will play because this is not the type of job with a singular, specific, or repetitive job. Instead, a financial coach will fill many different roles at any given time.
Here are some of the main roles of a financial coach:
A client’s goals could include achieving a desired income, determining spending or savings targets, exploring investment opportunities, and more. A coach will then mentor and assist clients in achieving their goals and overcoming financial challenges.
To best help your clients, you’ll want to offer services and products that fulfill their needs. Some examples of financial coaching services and products are:
Similar to counselors, financial coaches tend to meet their clients at regular intervals, usually weekly or bi-weekly. This relationship may last anywhere from a few months to several years.
Many financial coaches sell their services in bundles of 8-10 hours of consultation, though individual sessions can range from just 15 minutes by phone to a one-and-a-half-hour meeting.
You can charge based on financial service or product, but most coaches operate under an hourly rate, which simplifies the process. Depending upon their experience, financial coaches charge $2,000 to $3,000 for 10 hours of financial coaching, or an average of $250/hour.
Depending upon their experience, financial coaches charge anywhere between $2,000 to $3,000 for 10 hours of financial coaching, or an average of $250/hour.
Once you know your costs, you can use this Step By Step profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.
Since there are so many people who need financial coaching, it can be helpful to focus on just a small segment of the population. This makes it easier to build expertise and market your services to a certain demographic.
A financial coach may work with all market segments or decide to focus on one particular niche and gradually expand to others over the time period. Regardless of your target market strategy, here are some examples of market segments:
When considering a target market to work with, think about your area of expertise, what sort of people you feel comfortable with, and to whom you can easily market. For example, if you live in an area with a lot of retirees, you could focus on retirement planning because it will be easier to get the word out and network. If you try to market to young families, you might be out of luck! So, be strategic when choosing a target market.
In the early stages, you may want to run your business from home to keep costs low. But as your business grows, you’ll likely need to hire workers for various roles and may need to rent out an office. You can find commercial space to rent in your area on sites such as Craigslist, Crexi, and Instant Offices.
When choosing a commercial space, you may want to follow these rules of thumb:
Here are some ideas for brainstorming your business name:
Discover over 260 unique financial coaching business name ideas here. If you want your business name to include specific keywords, you can also use our financial coaching business name generator. Just type in a few keywords and hit “generate” and you’ll have dozens of suggestions at your fingertips.
Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool below. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these.
Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. Your business name is one of the key differentiators that sets your business apart. Once you pick your company name, and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.
Here are the key components of a business plan:
If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist to create a top-notch business plan for you.
Registering your business is an absolutely crucial step — it’s the prerequisite to paying taxes, raising capital, opening a bank account, and other guideposts on the road to getting a business up and running.
Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business!
Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you are planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to financial coaching.
If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state.
Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your financial coaching business will shape your taxes, personal liability, and business registration requirements, so choose wisely.
Here are the main options:
We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have.
Choose Your State
The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN.
Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.
The IRS website also offers a tax-payers checklist, and taxes can be filed online.
It is important to consult an accountant or other professional to help you with your taxes to ensure you are completing them correctly.
Securing financing is your next step and there are plenty of ways to raise capital:
Bank and SBA loans are probably the best options, other than friends and family, for funding a financial coaching business.
Starting a financial coaching business requires obtaining a number of licenses and permits from local, state, and federal governments.
Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits.
You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more.
You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.
This is not a step to be taken lightly, as failing to comply with legal requirements can result in hefty penalties. If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.
Before you start making money you’ll need a place to keep it, and that requires opening a bank account.
Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your coaching business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.
Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account.
Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.
Here are some types of insurance to consider:
As opening day nears, prepare for launch by reviewing and improving some key elements of your business.
Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks.
You may want to use software and websites that could boost your coaching business such as customer relationship management tools Redtail and Wealthbox, and budgeting tools YNAB, Intuit Mint, or Simplifi by Quicken Best to help clients manage their finances.
Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism.
You can create your own website using website builders. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.
They are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. These are steps that help pages rank higher in the results of top search engines like Google.
Here are some powerful marketing strategies for your future business:
Unique selling propositions, or USPs, are the characteristics of a product or service that sets it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your financial coaching business meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire.
Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your coaching business could be:
You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a financial coaching business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working as a financial coach for years and can offer invaluable insight and industry connections.
The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in financial coaching. You’ll probably generate new customers or find companies with which you could establish a partnership. Online businesses might also consider affiliate marketing as a way to build relationships with potential partners and boost business.
If you’re starting out small from a home office, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for a coaching business would include:
At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need.
Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent.
Keep in mind that unlike financial advisors, a financial coach will not manage a client’s money or investments, nor will they guide them on investing capital and managing their portfolios. Discussions about investments and investment objectives may, however, be within the scope of a financial coach.
Coaching also differs from counseling and mentoring as it does not require any specific expertise. A financial coach is a partner and motivator who constantly pushes for positive, long-term change in a client’s financial behavior.
You’re now ready to start coaching and making good money!
To attract clients for your financial coaching business, first understand your target market. Determine where they are most active—be it specific social media platforms or certain events—and identify their common challenges. Tailor your content marketing and advertising strategies to these insights to effectively engage and attract your ideal clients.
Being a financial coach can be extremely profitable. Unlike financial advisors, financial coaches work on a fee-only basis. You don’t have to manage the client’s investments and monies to charge a commission percentage on it. Financial coaches make anywhere from $200 to $300 per hour.
Financial coaches are in great demand. The statistics show that two-thirds of Americans don’t have more than $1,000 in savings. While this indicator is alarming, it is also an indication that most people will be working with financial coaches as their financial situation worsens.
Yes, you can become a financial coach without certification. Many financial coaches come from various backgrounds, like music, engineering, or technology, and not necessarily from business or finance. What’s essential is a passion for helping others, strong interpersonal skills, and a basic understanding of money management and personal finance. Your expertise will develop further as you gain experience in financial coaching.
Yes, there is an excellent resource for upcoming financial coaches: “Financial Coach Master Training” provided by Ramsey Solutions. It will give you a clear idea of the fundamentals of financial coaching. They will also help you get equipped to resolve your clients’ needs.
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