The simple, easy way to justify the ROI of executive coaching fees

Following is the transcript for the video about calculating the return on investment of executive coaching and justifying your fees:

This is an important topic, because prospective clients will want you to help them sell coaching to their managers and other sponsors. Enjoy!…..

Many coaches ask, “How do I show clients the Return on Investment (ROI) of coaching?” or “How can I help my prospective clients justify the cost of coaching to their managers/sponsors?”

The smart way to show clients the ROI of coaching is to coach them through the calculation.

First, you have some headwinds because there are lots of studies now that have documented the value of coaching.

The international Coach Federation (ICF) has provided a number of studies showing the coaching usually generates a ROI of between $4 and $8 for every dollar invested.

Benefits of coaching reported by companies include: increased productivity, quality, improved customer service and reduced customer complaints, improved retention (especially by those receiving coaching), and bottom-line profitability.

Benefits reported by individuals receiving the coaching include: improved working relationships with direct reports, immediate supervisors, peers, and external clients/relationships; better teamwork; greater job satisfaction; reduction in conflicts; and greater organizational commitment and loyalty.

With that foundation, the prospective client often still needs a custom ROI for their situation so that they will invest in coaching.

Because you can’t read the client’s mind, the best way to make the case is by coaching them. Ask them questions about what their challenge is costing, and about what the value would be to them if their challenge went away. For every solution you offer, you should prepare a list of cost questions and value questions so that you and your prospective client can drill down into the potential returns from coaching.

Here are some high level questions to ask:

“What outcome do you expect from the coaching?”

“What will become possible when this outcome is achieved?”

“What is this worth to you?”

“What is it worth to the organization?”

“What happens if you don’t fix the problem? What will that cost you and the organization?”

If the client doesn’t know the answers to these high level questions, help them to get more specific, depending on the situation. For instance:

“What will it cost you if the team doesn’t deliver on time and on budget?”

“What would be the value of seeing the team’s deliverables come through on time and under budget?”

“How much does it cost to replace someone in your organization? Given your answer, let’s calculate the cost of your current turnover and the value of hitting your reduced turnover goal.”

“How much is this strategic initiative worth to the organization? What is the cost if it doesn’t happen?”

“What is the gap between the performance of the sales team now and the performance you expect?”

“How might your compensation increase if you get that next position?”

“How much could the organization grow if it had additional leaders grown from within?“

The above are only examples, depending on the problem that client is facing. At the Center for Executive Coaching we work with you to develop in-depth questions so that you can drill down and get a clear picture of the ROI.

Sometimes, the most valuable parts of coaching are intangible. For this reason you should also ask the client about these areas, too. For instance:

“How would you feel if you had more time, and could leave the office earlier?”

“What would it mean for your peace of mind if you reduce the conflicts happening on your team?”

“How much stress are you feeling about this issue? What would it mean to you if we could eliminate this stress?”

“What would it mean to you if you and your manager were on the same page?”

“What will your manager think about you when you make this change?”

“How will you feel when we achieve your goal?”

Once you get the hang of asking these questions, it becomes simple to know whether the client should hire you, and whether you want to be hired. I won’t accept a coaching engagement unless the client and I agree that there is at least a 5 – 10 x return on my fees. This includes both tangible and intangible benefits.  I learned this rule of thumb when I worked in a big consulting firm, and we were selling engagements with price tags of $200,000 up to $2 million. If we could justify a ROI at those fees, coaches can definitely do it, too.

As I speak to the client, I have the image of a scale in my head. Each time we uncover a new cost of the current challenge or benefit from coaching, I add it to the scale until I know that I can justify the cost of coaching.

This process also makes it easy to set up metrics to track progress and results during the coaching engagement.

If I get the sense that there isn’t value in the coaching I am open and honest about that with the client. I say, “I have to be candid. I don’t hear too many costs that you want to eliminate or too many benefits that you expect from the coaching. Are you sure you have a big enough problem to hire me?”

That question gets the prospective client thinking harder. If they can’t answer my question, odds are pretty good they aren’t going to invest in coaching. That’s not as good as getting hired, but at least I don’t have to waste my time trying to sell an engagement that’s never going to happen.

The key to calculating the ROI on your coaching is to get the client involved. We can’t read minds. It is not up to us to pitch them, chase them, or guess. If the client can’t come up with a case for coaching with your help, then move on.

If they can, then congratulations! You are likely to have a great coaching engagement where you can deliver fantastic value to your client, and also a terrific case study about the value you can bring to other clients.

At the Center for Executive Coaching, we give you the tools and guidance you need to delight clients with a return on investment, and be able to attract them in the first place. Whether you are a new or seasoned coach, we have a program for you. Visit us at CenterforExecutiveCoaching.com

We have more resources for you! Whether you are a Seasoned Coach or looking to become a Certified Executive Coach. The Center for Executive Coaching has you covered.

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