Life Coaching: Pyramid Scheme Or Profitable Business?
Aaah, to be a life coach…
Working from a beach in Bali, changing a few lives before lunchtime, watching the mu-la role in.
It’s a very seductive concept. And there are plenty of people who will sell you this dream.
How people imagine life coaching as a career
That’s one reason why more and more people are choosing to start a coaching business. The ICF estimates that there was a 33% increase in coach practitioners and a 21% increase in total revenue generated from coaching between 2015 and 2019.
The question is not whether it’s possible to succeed as a coach. Many people do. The question is: how realistic is it? And, even more importantly, what does success require of you?
Those are the questions I’ll be answering in this post. We’ll dig into the best available data on average life coach salary, explore what separates successful coaches from the ones who end up failing, and then discuss whether or not life coaching is a pyramid scheme. Finally, I’ll give my verdict on life coaching as a business.
If you want to skip ahead, click on one of the links below:
Table of Contents:
But first, let’s get on the same page about the definition of life coaching…
📝 Life Coaching Description and Definition
Here’s how the International Coach Federation (the ICF) defines coaching in general:
“ICF defines coaching as partnering with clients in a thought-provoking and creative process that inspires them to maximize their personal and professional potential.”
And here’s my life coaching description:
“Life coaching is a service where the coach uses questioning skills and domain expertise to help their clients get accelerated results in a specific area of life. This service can be offered through 1-1 sessions, group coaching, live events, and even online courses.”
For the sake of simplicity, I’ll include any type of non-sports coaching under the life coaching umbrella. This means that career coaches, executive coaches, business coaches, etc. are all considered types of life coaches in this article.
My reaction when I try to explain what I do and someone asks, “What type of sport do you coach?”
Now it’s time to answer the question: how much do life coaches make a year?
💰 Average Salary for a Life Coach
According to the 2020 ICF Global Coaching Study the annual revenue for coaching practitioners in North America is $62,500.
A few things to keep in mind when you look at this number:
It only takes into account money made from coaching services (not from courses, consulting, etc.)
It only takes into account coaches with active clients
It only takes into account coaches in North America (coaches in other countries make less on average)
It includes both in-house coaches and those who are self-employed
It represents revenue, which is different from salary (i.e. it doesn’t take into account other expenses)
Here’s another average revenue number to provide context:
According to the 2020 Sherpa Executive Coaching Survey, Executive Coaches with over 15+ years experience can expect to earn $160,000, while those with 10-15 years experience can expect to earn $122,000.
As you can see, there’s quite a spread in the average life and business coach salary, even among those with active clients. What accounts for this spread? First, there appears to be a correlation between time spent in business and average salary. The longer you coach, the more money you’re likely to make. Second, executive coaches usually make more than general life coaches because of their niche (more on this later).
Don’t listen to online gurus who promise an instant six figures from coaching. You can make money, but it takes time.
Now that we’ve covered the average salary for a life coach, let’s talk about the expenses involved.
💸 How Much Does It Cost to Become a Life Coach?
So, how do you become a life coach? And how much does it cost to get started?
Well, if you run a quick search on “how to start a life coaching business” you’ll see lots of articles about getting certified, creating an LLC, and setting up your home office.
But the truth is, you don’t need to do any of that in order to start making money as a coach.
You don’t need to get certified. In most cases, it’s a massive outlay of cash for a credential that no potential client will ever ask about. According to iPEC, coach training ranges from $2,000 USD for unaccredited programs to $14,000 USD or more for accredited programs. I recommend spending this money on your own coach instead so that you can learn by example. For more on this, read my article about why you shouldn’t do a coach certification.
You don’t need to form an LLC. I’m not a lawyer, and I’m not saying that you shouldn’t eventually set up legal protection for your business. But it’s not strictly necessary when you start out. You can simply operate as a sole proprietor for your first few clients to test stuff out and then pay between $50 and $500 (if you live in the US) when you actually need to limit your liability.
You don’t need a fancy office. When I started out, I installed a standing desk in my studio apartment for $429.70. Later on, I upgraded to a new home office and joined a co-working space. But none of this is necessary - you just need a phone or laptop with access to the internet.
You could start a life coaching business today for $0. Even if you invest in all of the optional things above, the expected start-up costs would still be small compared to most other businesses. This makes for a very different risk profile compared to, say, starting a restaurant.
Like most service businesses, the hard part of life coaching isn’t getting started. The hard part is getting clients. Because the lower barrier to entry means more competition from other coaches.
👨🏽💼 How to Get Life Coaching Clients
At this point, we know that there’s a big gap in income between the most successful coaches and the ones who are barely scraping by. The difference between these two groups isn’t necessarily their coaching ability…it’s often just how well they’ve learned to market themselves.
Here’s what high-income coaches do differently in order to get clients:
1. Commit to a niche. It’s very hard to market life coaching until you apply it to a specific problem that people want solved. That problem, combined with a target market, is called a niche. This is the foundation of every successful business. Here are the most profitable coaching niches. Most coaches are scared of pigeon-holing themselves by committing to a niche. These coaches often have trouble getting clients because what they sell is too vague for someone to invest in. No one invests in coaching - they invest in what they think it will do for them. So instead of calling yourself a life coach, focus on solving one specific problem for clients.
2. Play to your strengths. When it comes to marketing, most coaches feel like they have to learn every possible tactic in order to succeed. A better approach is to figure out your coaching archetype and use that to attract clients by focusing on one or two main marketing strategies. When you play to your strengths, you end up being more consistent and effective with your marketing. For example, blogging probably won’t be sustainable for you if you hate writing. Maybe you’d prefer to make videos, interview people on a podcast, or attend networking events.
3. Sell higher-end packages. If there’s one secret that all successful coaches have in common, it’s this: their coaching is simply more expensive. It’s really hard to make life coaching work as a business if you’re only selling one-off sessions at a low price. It just takes too many new clients to make the math work. Think about it: you can either generate six figures by selling 10 coaching packages at $10,000 or 1,000 coaching sessions at $100. To sell high-end packages, learn how to have an effective enrollment conversation and then raise your rates with integrity.
Getting clients isn’t always easy, but it’s a skill that you can learn.
Before we get to my verdict on life coaching as a business, there’s one more question we have to answer…
🔺 Is Life Coaching a Pyramid Scheme?
The New York Attorney General defines pyramid schemes as:
“a fraudulent system of making money based on recruiting an ever-increasing number of "investors." The initial promoters recruit investors, who in turn recruit more investors, and so on. The scheme is called a "pyramid" because at each level, the number of investors increases. The small group of initial promotors at the top require a large base of later investors to support the scheme by providing profits to the earlier investors.”
If life coaching isn’t legitimate, if it’s just a bunch of coaches coaching other coaches, then it would be no better as a business opportunity than joining an MLM.
(As a side note, multi-level marketing businesses and pyramid schemes are technically different things, but I wouldn’t recommend getting involved in either one. Even legitimate MLMs have notoriously low success rates for their participants.)
To figure out if something is a pyramid scheme, ask this question: “Is the only way to make money here by recruiting other people?” If no one is making money by selling the product or service itself (in this case life coaching), then that means the “opportunity” is actually a pyramid scheme.
Fortunately, we know that the vast majority of life coaches don’t work with other coaches. According to this 2020 ICF report, 52% of coach practitioners said that their clients are mostly managers or executives, and 19% said they worked with mostly personal clients. This mean that coaching fails the “pyramid scheme test” above.
Life coaching isn’t a pyramid scheme because the majority of people who invest in it aren’t other coaches.
So why does it sometimes feel like the only way to make money as a coach is working with other coaches? One reason is because when you become a coach, you start actively searching for advice on how to build a coaching business. Then, you read articles like this one and get served advertisements from coaches who work primarily with other coaches.
Because of a psychological phenomenon called the availability heuristic, it’s easy to assume that the coaching examples you see are representative of the industry as a whole. Think about it this way: If you were on the brink of divorce and searching for advice on relationships, you’d likely find yourself surrounded by relationship coaches.
It’s true that coaches tend to value and invest in coaching. But they’re not the only group to do so. Leaders, business owners, and even regular folks invest in coaching every day to solve specific problems that they have.
If you want to figure out whether or not coaching is the right for you, or what type of business to start, sign up for my True North Toolkit below:
✅ The Verdict on Life Coaching as a Business
Let’s recap what we’ve learned so far about life coaching as a business:
The average life coach in North America makes around $62,500 per year. This number is deceiving, because some coaches make much more and others are barely scraping by.
It’s easy and cheap to start a life coaching business, even if you decide to get certified (and without certification, there are virtually no start-up costs).
The hard part about life coaching as a business is getting clients. However, marketing is a skill you can learn given enough time.
Life coaching is legit. It’s not a pyramid scheme and you can build a sustainable business without having to coach other coaches.
Based on these findings, here’s what we can conclude about life coaching as a business:
“The idea of calling yourself a life coach and suddenly having a full roster of clients is a pipe dream. But it’s entirely possible to turn your coaching skills into a money making business, with low overhead, if you learn how to get clients.”
This conclusion squares with my own experience building a six figure coaching business spanning multiple niches. In fact, I used my own marketing course to get clients in the fitness coaching niche and documented the whole thing. This is further proof that you don’t need to work only with coaches in order to make a good living.
After helping the coaches we work with get over 256 clients while enrolled in our programs, I’ll tell you this: If you learn how to market yourself, life coaching can be a money maker. Here are some case studies that show what’s possible.
🤷🏽♀️ Next Question: “Should I Become A Life Coach?”
At this point, you might be wondering if coaching is the right type of business for your skills and passions.
Here’s a post to help you answer that: 16 Unmistakable Signs That You're A Coach
And here’s a free career toolkit if you’re still not sure: Get The True North Toolkit
Now, let’s say that life coaching is a perfect fit for you. You’re a big fan of personal development. You have specific wisdom to share with others. And you love the idea of spending each day in conversation with people, asking powerful questions and keeping them accountable.
Before you decide to pursue life coaching as a business, ask yourself these 3 questions:
Are you willing to do things other than coach?
People email me all the time and say things like, "I'm so overwhelmed with everything I have to do: write articles, make videos, create coaching programs, learn marketing, spend time selling...plus I'm a musician and a yogi and my crystals need to be charged so I don't have a lot of time. Can't I just coach people?"
The answer is no. You can't just coach people. Most of the coaches I know spend less than 50% of their time coaching, and the other 50% working on the business side of things.
If all you want to do is coach people, then you shouldn't have a coaching business. Instead, you should try to find a job somewhere and start coaching for that company as an employee or contractor. For a lot of people, this is the best option. But if you decide to do that, don't be upset when your income is capped and you can't take the day off whenever you feel like it. If you want to run your own coaching business, learn to love the entire process.
Don’t start a life coaching business and then complain when it’s time to market yourself.
Are you willing to stick with this for at least 1 year?
The real reason why most coaches fail is simply because they quit too early. Many of the highest-earning coaches you see worked hard for years before they truly cracked the code. There’s so much to learn as a new entrepreneur — marketing, sales, mindset, etc. — that it’s easy to get discouraged. This is true even if you invest in coaching and courses to help flatten the learning curve. It’s gonna take a second.
When most coaches start their own business, they feel like nothing works. And it's true: nothing does work...unless you stick with it for long enough to make it work. On the other hand: almost any marketing strategy will work, to a greater or lesser extent, as long as you stay consistent with it and keep making tweaks. For example, don't tell me that blogging doesn't work unless you've done it for at least 1 year. If it's working for someone else, it can work for you.
Here are 12 ways to get inspired when you feel like quitting your coaching business.
Are you willing to be uncomfortable during that time?
What are you willing to go through in order to have a life coaching business? If the answer is “not much” then it may not be worth starting. As awesome as it is to have a coaching business, you have to realize that it includes:
1) Having a personal brand where you are in the spotlight and will probably be judged;
2) Claiming you have skills and wisdom that can really help people while sometimes feeling like a fraud; and
3) Working with clients who have paid you a bunch of money to support them through real problems that have significant consequences.
At first, you're going to be uncomfortable in sales conversations. You're going to be uncomfortable sharing content. You're going to be uncomfortable before client calls. Either learn how to ride the rollercoaster of entrepreneurship, or don't even bother starting.
👉🏽 The Truth About Life Coaching As A Business
It might seem like I am trying to dissuade you from having a coaching business. And in some ways, I am.
For the right person, running a successful coaching business can be life-changing: you can make great money by sharing your gifts and having all the freedom in the world.
But for the wrong person, this business will be a living hell: it’s challenging to get clients at first and scary to put yourself out there. Only you can decide whether that discomfort is worth it for you.
As basketball coach Pat Riley said, "There are only two options regarding commitment. You're either in or you're out. There is no such thing as life in between.”
If you’re still not sure whether coaching would be the best type of business for you, I’d recommend signing up for my free True North Toolkit. It will take you through a series of exercises to help you figure out what type of business is the best fit for your skills and passions. Click the button below to get instant access:
If you do decide to start a life coaching business, I recommend these articles next:
How To Talk About What You Do (And Why You Shouldn't Call Yourself A Life Coach)
The Case Against "Pure" Coaching: Why I Give Advice When I Work With Clients
Why Less Talented Coaches Are Succeeding Faster Than You (And How To Change That)
(image credit: giphy)
