When is a Business Coach Worth the Price?

To answer this question, it might be helpful to think of yourself as a professional athlete. If you were a professional athlete (or even a motivated weekend warrior), you would weigh the benefit of improved athletic performance against the cost of the coach.

For most professional athletes, this is a pretty easy calculation. The promise of improved athletic performance (with the associated fame and fortune), almost always outweighs the cost. This is why every professional athlete has one or more coaches in her orbit.

Is the calculation any different for a business owner or executive? For many, it is not. The worldwide coaching industry is reported to generate $9 billion in revenue annually–clearly many business professionals are calculating that improved performance in business outweighs the cost of hiring a coach.

But what are business coaches providing that justifies their cost?

Professional athletes seek coaching to help them break through to the next level of performance whether it be by adopting new training tools or by correcting bad habits (physical or psychological) that limit performance or cause injury. “Business athletes” seek coaching for the same reasons: improved performance for themselves or their organization through the adoption of new tools or the correction of bad habits.

So, do you have bad habits (in your business) or might new tools increase your business performance? Some of the symptoms of bad business habits and old tools that we notice are: 1) underperforming employees staying employed, 2) the best employees being frustrated or leaving, and 3) employees not getting the most important things done.

What is the cost of these bad habits? It depends on the size of your organization and the degree of dysfunction caused by the habits. The only thing we can say for sure is that there are direct costs and opportunity costs (for example, respectively, salary paid to underperforming employees and revenue missed because of one or more underachieving employees).

These direct and opportunity costs accumulate pretty quickly. One recent client, estimated $50,000 in coaching increased his revenue by $2,500,000. A fantastic return on his investment and certainly worth the cost.

What, for example, if coaching helped you or your organization weed out weak or bad employees (the bad habit being to not weed out such employees)? What might the return be on an investment in coaching for this challenge?

One source (Calculating the Dollar Costs of a Bad or Weak-performing Employee by Dr. John Sullivan Jan 6, 2014) suggests the cost of a weak employee is, at minimum, 33% of the average annual revenue per employee (total organizational revenue divided by number of employees) and, at a maximum, 300% of the average annual revenue per employee.

This means, with an average annual revenue per employee of $150,000, weeding out one minimally weak employee would save $50,000. If the weak employee was at the extreme end of weak (lots of absenteeism, several missed sales opportunities or a cause of accidents, etc.), the annual savings would be $450,000 (or $37,500 for every month of continued employment).

Most coaches can help with the process of weeding out weak employees in a couple of hours of work. Thereby delivering another fantastic return on an investment in coaching.

Not all fixes are as quick as this example suggests. For instance, getting employees to focus on the most important priorities takes time to setup and additional time to make part of an organization’s DNA. But, any coach worth her fee, is going to introduce tools and break habits that can improve performance for the long-run.

It’s almost a given that a professional athlete will benefit from coaching when his performance is stalling because of a bad habit (physical or psychological) or because he’s not staying up with the techniques and tools used by his competitors. The same is true of business athletes. In both cases, when performance is lagging, the clear answer is that coaching is worth the price and an investment that, more often than not, brings a fantastic return.