7 Financial Mistakes to Avoid When Scaling Your Online Coaching Business

October 16, 2023

May at ZDM

7 Financial Mistakes to Avoid When Scaling Your Online Coaching Business

Hooray! You've built your online coaching business from the ground up. You're helping clients achieve their goals, and it's time to take it to the next level. But wait a moment! Coaches like you have visionary ideas for growth and expansion, which is admired and encouraged. However, let’s pause the daydreaming about your mansion on a private island for now, and let's talk about something equally important first – your finances.

Scaling your online coaching business can be daunting work, but it's important to avoid making financial faux pas along the way. Here are seven of the most common financial mistakes that online coaches make when scaling their businesses, and how you can avoid them. 

Mistake #1: Neglecting a Detailed Financial Plan:

You know what they say, failing to plan is planning to fail. Neglecting a detailed financial plan is like wandering into the wilderness without a map. Here are some quick and easy tips on how to make a financial plan for your future:

  • Set your financial goals. Think about what you want to achieve in the short term and the long term. Be specific, realistic, and measurable with your goals. For example, instead of saying “I want to save more money”, say “I want to save $10,000 for a down payment on a house in three years”.

  • Assess your current financial situation. Gather all the relevant documents and information that show your income, expenses, assets, liabilities, and net worth. You can use online tools or apps to help you track your cash flow and budget. 

  • Create a plan to reach your goals. Based on your income and expenses, determine how much you can save and invest each month towards your goals. You may need to prioritize your goals and adjust your spending habits to free up more money. 

  • Implement your plan and monitor your progress. Follow your budget and stick to your savings and investment plan. Check your accounts regularly and track your performance against your goals. 

  • Review and update your plan periodically. Your financial plan should be revisited annually or after major life events like marriage, parenthood, or job loss. Adjust your budget, savings, and investments accordingly to stay aligned with your evolving circumstances and goals.

Mistake #2: Ignoring the Importance of Budgeting:

Budgeting may not be as thrilling as binge-watching your favorite series, but it's the backbone of financial sanity. Ignoring it is like trying to cross a tightrope blindfolded – you're bound to fall flat on your face. There are many online budgeting tools or apps that can help you manage your money better. Here are some of the top ones based on user ratings, features, and reviews:

  • You Need a Budget (YNAB): This app is designed for people who want to plan ahead for their financial goals and follow the zero-based budgeting method. It syncs with your bank accounts, tracks your spending, and helps you create a budget that gives every dollar a job. You can also set up goals, track your progress, and get personalized advice. 

  • Empower: This app is ideal for people who want to build wealth and invest smarter. It connects with your bank accounts, credit cards, loans, and investments, and shows you your net worth, cash flow, and spending habits. You can also create a budget, automate your savings, and get personalized recommendations. 

  • Goodbudget: This app is suitable for people who want to use the envelope budgeting system and share their budget with others. It lets you create virtual envelopes for different spending categories and allocate a certain amount of money to each envelope every month. 

Mistake #3: Failing to Monitor Cash Flow:

Your cash flow is like a river. If you dam it up too long, things get stagnant. If it flows too fast, you'll be swept away. So, be the captain of your cash flow ship and keep those financial waters flowing smoothly. Here are some of the best apps and tools that can help you track your cash flow:

  • Float: This app focuses on generating cash-flow forecasts for businesses that use Quickbooks, Xero, and FreeAgent. It connects with your accounting software and automatically updates your cash flow based on your transactions. You can also create scenarios, budgets, and reports to plan ahead and manage your cash flow effectively.

  • Pulse: This app allows small businesses to monitor cash flow (on a daily, weekly, or monthly basis), forecast cash flow, and generate visual reports so you can quickly see how everything looks. You can also create multiple projects, set up recurring or one-time income and expenses, and sync with your bank accounts.

  • DryRun: This app helps you track your cash flow, compare scenarios, and collaborate with your team or clients. You can import data from Quickbooks, Xero, or FreshBooks, or enter it manually. You can also create custom charts, graphs, and dashboards to visualize your cash flow and make better decisions.

  • Agicap: This app is ideal for businesses that want to optimize their cash flow management and growth. It connects with your bank accounts, accounting software, and other data sources to provide you with real-time cash flow visibility and forecasting. You can also create scenarios, set up alerts, and access insights and recommendations.

Mistake #4: Not Diversifying Income Sources:

Relying solely on one income source is like putting all your eggs in one basket – a risky move unless you're a professional egg juggler. Instead, explore multiple income streams like the ones listed below:

  • Online courses: This is a great way to share your knowledge and expertise with a wider audience, and it can be a very passive income stream once the course is created. You can sell your courses on your own website, or through a platform like Udemy or Teachable.

  • Consulting: This involves providing advice and guidance to individuals or businesses on a specific topic. You can offer consulting services in person, over the phone, or through video conferencing.

  • Group coaching: This is a great way to reach a larger audience and help more people at once. You can offer group coaching sessions in person, online, or through a combination of both.

  • Speaking engagements: This is a great way to build your brand and reach a new audience. You can speak at conferences, workshops, or other events.

  • Affiliate marketing: This involves promoting other people's products or services and earning a commission on each sale. This can be a great way to generate passive income, but it's important to choose products or services that you believe in and that you think your audience will benefit from.

  • Books: Writing a book is a great way to showcase your knowledge and expertise to a larger audience, and it can also generate passive income for you. You have the option to self-publish your book or collaborate with a traditional publisher. Our clients have successfully marketed their expertise with their best-selling books, such as Steven Kotler’s The Art of Impossible, Ed Mylett’s #MaxOut Your Life, and Candy Valentino’s Wealth Habits.

  • Webinars: Webinars are a great way to share your knowledge and expertise with an audience, and they can also be a source of passive income. You can charge a fee for people to attend your webinars, or you can offer them for free and then promote your products or services to the attendees.

  • Membership sites: A membership site is a website that provides exclusive content or services to members. This can be a great way to generate recurring income from your coaching business.

Mistake #5: Neglecting Taxes and Legal Compliance:

Ignoring taxes and legal compliance can lead to more trouble than a toddler with crayons and a freshly painted wall. Get legal and tax advice from professionals who know their stuff. It's like having a superhero lawyer on speed dial – you'll thank yourself later. Here are some ways to find accountants and financial advisors who specialize in helping online coaches:

  • Ask your network. Talk to other online coaches you know and ask them who they use for their accounting and financial planning needs.

  • Search online directories. There are a number of online directories that list accountants and financial advisors who specialize in working with online businesses. Some of these directories include:

  1. The National Association of Personal Financial Advisors (NAPFA)
  2. The Financial Planning Association (FPA)
  3. The XY Planning Network

  • Contact your state's board of accountancy. Your state's board of accountancy can provide you with a list of licensed accountants in your area.

  • Contact your state's securities regulator. Your state's securities regulator can provide you with a list of registered financial advisors in your area.

Mistake #6: Not paying yourself a fair wage.

Not paying yourself a fair wage means that you are not valuing your own work and time as a business owner. You might think that by paying yourself less, you are saving money for your business or being more competitive in the market. However, this is a short-sighted and unsustainable strategy that can have negative consequences for both you and your business.

Mistake #7: Scaling Too Quickly Without Profitability:

ZDM believes that scaling too fast without profitability is like trying to ride a bike before you've learned to balance – you're setting yourself up for a crash landing. Before you expand, ensure that you have a profitable and sustainable business model. 

At ZDM, we can help you conceptualize your model with our 4-Phase Road Map, where we assist you in creating a clear vision of your target market, your unique value proposition, and your competitive advantage. You should also have a solid financial plan that projects your revenue and expenses and a realistic growth strategy that aligns with your goals and resources. Scaling business should be a deliberate and strategic decision, not a hasty and desperate one.

Key Takeaways: 

In the world of online coaching, financial mistakes can happen quite often. However, with the right financial plan, budgeting, and a dash of patience, you can navigate these treacherous waters and keep your online coaching business afloat. 

Now that you're armed with the knowledge of these financial pitfalls, it's time to take action. Share your thoughts, experiences, and any financial tips you've picked up along the way. And if you're ready to take your online coaching business to new heights, book a call with us for personalized guidance – because even financial planning can be fun when you've got the right team by your side.

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