This transcript was generated from the episode audio and may contain minor errors.
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Service businesses can hit a pretty hard ceiling in the sense that your week only holds so many billable hours. Like if you are charging a fee for a service, even if it's a good fee, a good rate, you can only bill so many hours of the week, right? You have to sleep, you have to do other things. So when your calendar is close to full, growth comes down to choosing the right lever. Do you charge a bit more?
Do you try to squeeze in more sessions? And maybe you do a little bit of both, but ultimately you do need to make some kind of decision. So this is a good problem to have. When you're in this situation, today's caller, for example, they're gonna explain their numbers, they're gonna explain what they do. They don't need a rebrand or a sales funnel necessarily.
They need some clear math and a real world test. So we're gonna show them how like a little bit of a fee bump can lift their profit per hour without sacrificing quality. It's always interesting to go into these situations because as I say, it's a good problem to have, but you do wanna pay attention and make sure you are adjusting as you go along and not just doing things the way you always have because here is some potential for growth. Let's see if we can take advantage of it. I always encourage you listeners as well to pursue growth whenever you can, even just a little bit, 1% a day can really get you far.
So today's question, should I raise my coaching rates or add more clients? That question from our caller and my answer right after this. [Music]
Hey team, I'm a lifestyle improvement coach billing around 20 client hours a week at $100 per session. My calendar is already near capacity, so growth options feel limited. I keep debating, is it better to raise my rates by 10% for existing and new clients or poor effort into marketing to land 10% more people at the current price?
I'm worried a price increase triggers churn, but I also don't want to burn out chasing more clients for the same money. How do I figure out which lever, price or volume, will actually improve net profit fastest? [Music]
The quickest way to make this choice is using like a two minute kitchen counter calculation. Doesn't have to be in the kitchen. I just mean like something simple, okay?
Two minute calculation. So consider what you earn now, 20 sessions at $100 per session, that brings in $2,000 a week. You've got some costs and such. So let's say it's 1,800 net. So your first option is to raise the fee 10%.
Your new rate is now 110. Even if two clients out of 20 leave, you still have 18 sessions and basically the same amount of money for less work. And you probably wouldn't have more than two out of 20 leave, at least not just for that. A lot of coaches find most clients simply say, "Okay," and say, at least if they're happy and they've been there for a while. Option B is to add two more clients at the old rate.
So now you're doing more sessions. Now it's what, $2,200. So that's an extra $200, but it now takes two more hours per week and edges you even closer to overload. Like you can't just keep doing that, right? So I would say you ask yourself which resource is scarcer, hours or dollars.
And for most one-person service businesses, time is what goes away first. Like you can always rebuild a client after a price rise, but you can't reclaim hours lost to more and more calls or sessions. So I think that's kind of where I tend to nudge people, but you start with asking that question, what is your hard session cap? Like what is the most you could do without burning out trying to plan for sustainability? Still working hard, of course, but figure out what your hard session cap and when you get close to that, that's when you start your wait list.
That's when you think about scarcity because that does reinforce value and give you room for increasing prices yet further. So a modest price bump, it's gonna protect your time. It's gonna keep service quality high. It's gonna help you to not get burned out 'cause you're gonna be more excited. You're making more money, but you're not working as much.
Hopefully, I think that's usually the best way to go. But of course, let us know what develops and listeners. Let me know if you have a question or comment, sidehustleschool.com. On that website, you can access the complete history of episodes, more than 3,000, 3,200. In fact, download, stream for free.
New ones come out every day wherever you like to listen. Thank you for being part of this community. I don't take your attention for granted. I always want to improve and I hope we can hang out sometime. For now, my name is Chris Guillebeau.
You are listening to Side Hustle School. [Music]
From the Onward Project.
