As a coach, your income is somewhat capped by your time. It makes sense that you want to maximise the time you have to spend on the most profitable parts of your business. Identifying those most profitable parts of your coaching business is another ballgame. We recommend using the Pareto Principle, sometimes known as the 80/20 rule to inform your decision-making. Here’s how coaches can apply the Pareto Principle.
What Is the Pareto Principle
The Pareto Principle is a concept that shows the imbalance between inputs and outputs. It states that, on average, 80% of the results come from 20% of the input. In your coaching business, it means that 80% of your profit will come from 20% of your business. For example, 80% of your profit may come from one coaching program or one low-ticket offer. You may also find that 80% of your profit comes from 20% of your clients.
The 80/20 rule has been shown to be true time and time again in many areas of business. Knowing that it is true allows coaches to optimise their business operations, so they are allocating their time and resources effectively. Here are some other ways the Pareto Principle will be present in your coaching business:
- 80% of your leads will come from 20% of your marketing efforts.
- 80% of your complaints or problems will come from 20% of your client base.
- 80% of your business will be producing only 20% of your profits.
- 20% of your time will be spent on tasks that produce 80% of the results.
- 20% of your business will give you 80% of the joy and fulfilment.
- 80% of your suppliers are serving 20% of your needs. (20% of them will be serving 80% of your business needs)
The Benefits of the Pareto Principle for Coaches
The benefit of the Pareto Principle for coaches is that they can evaluate their resource allocation and the ROI of each allocated resource.
In a coaching business, the most precious resource is the coach’s time – that is what brings in the majority of a coach’s profit. If you were to use the 80/20 rule, you will likely see that you only spend 20% of your time coaching and spend 80% of your time on other activities. This sparks questions about what you could do to increase the time you spend coaching. For example, you may choose to automate certain tasks or hire someone to handle tasks for you. Reclaiming 5 hours per week could give you the capacity to take on 1-2 more clients in your coaching program.
Another benefit of the Pareto Principle for coaches is that it allows you to check if your theories are correct. When you start a coaching business, you pick a primary coaching topic and related areas. Your theory is that your primary coaching topic is the most compelling problem and, therefore will be most profitable.
Let’s say you are a marriage coach. You may pick a coaching topic like adjusting to parenthood as your primary focus. This is what you build your coaching course around. You may also have related topics that you create resources or masterclasses around. These could be about things like communication, breaking free of limiting gender roles, and dealing with in-laws.
By applying the 80/20 rule to your coaching business, you can look at your profit per topic. What is your profit for adjusting to parenthood, including any lead magnets and low-ticket offers related to your coaching program? What is your profit for communication? What is your profit for limiting gender roles? What is your profit for dealing with in-laws?
The benefit of the Pareto Principle here is you can see if you were correct in your theory and why or why not. That information is very powerful because you can go on and fix the issues you identify. You might notice that you tend to promote your new products at the expense of your coaching program and established offers. That is why they are more profitable than your main coaching program. You might realise that the revenue your coaching program brings in is high, but it’s not as profitable because of the expenses. This knowledge will allow you to make the changes you need to become more profitable.
How Coaches Can Apply the Pareto Principle
Apply the Pareto Principle to every aspect of your coaching business that you can. It is a good way to take stock of what is going on in your business so that you can make decisions moving forward.
Here are some ways coaches can apply the Pareto Principle:
- Identifying which marketing avenues are most effective for your coaching business so you can double down on those.
- Uncovering the supplier or suppliers that your coaching business is reliant on. This allows you to decide what steps you need to take to protect your business.
- Discovering which aspects of your sales messaging or benefits are most compelling to your dream coaching clients.
- Realising which types of clients result in complaints or problems so you can adjust your niche and marketing to avoid working with those types of clients. The opposite is also true. You can identify which types of clients are your favourite to work with and make adjustments to attract more of those.
- Identifying which problems or topics are the most popular so you can create more resources (free and paid) for your ideal coaching clients.
- Cutting or reducing expenses that do not provide much benefit to your coaching business in order to allocate more resources to areas that do.
- Deciding whether your efforts creating content on a particular social media platform are worth it or if there are other platforms that would benefit from that time and energy instead.
Let’s look at how we can apply the 80/20 rule to different products and services in your coaching business.
How to Apply the 80/20 Rule to Coaching Programs
If you have multiple coaching programs, the first step to applying the 80/20 rule is to establish the following numbers for each coaching program:
- Number of sales
- Number of cancellations
- Revenue
- Profit
Apply the 80/20 rule to those numbers. Which coaching program has the majority of sales? Which program has the majority of cancellations? Which coaching program has the highest revenue? Which coaching program has the highest profit?
Was there anything unexpected in the results?
Then, apply the 80/20 rule to how you market the coaching program. Which coaching program do you market more? Which platform does your marketing for each coaching program perform the best? Which types of content promoting your coaching program get the most engagement or clicks? Which benefits seem to get the best engagement for each coaching program?
Finally, apply the 80/20 rule to your actual coaching program. What are common points of frustration for you in each coaching program? Where in each coaching program did you see a fall off in engagement or complaints/cancellations? Which type of coaching client represents the majority of your clients? Which type of coaching client represents the majority of the issues you’ve had with clients?
From there, you can use the learnings from the Pareto Principle to make changes to your coaching program as you see fit.
How to Apply the Pareto Principle to Low-Ticket Offers
You can apply the Pareto Principle to low-ticket offers in the same way. Start by looking at the numbers for each low-ticket offer.
- Number of sales
- Number of cancellations
- Revenue
- Profit
Identify which low-ticket offer(s) account for the majority of sales and which for the majority of profit. Also, group your low-ticket offers by topic and see which topic accounts for the majority of sales and which for the majority of profit. This will help you with product development in the future.
Then apply the Pareto Principle to how you market each low-ticket offer. Where do you market each low-ticket offer? Which ones are the most effective platform for each offer and topic? For example, list the number of sales from your lead magnet upsell, from your email list, from each social media platform, and from your blog. Which sales messaging has been most effective?
Then look at the types of clients purchasing your low-ticket offers. Which types purchase each different low-ticket offer? Which types of coaching clients tend to cancel or complain about aspects of your low-ticket offer? For masterclasses, which types of coaching clients engage and ask questions? (If that is something you value).
Applying Learnings from the Pareto Principle for Coaches
How you act upon what you learn by applying the 80/20 rule is up to you. There may be areas of your coaching business that aren’t profitable but benefit you and your coaching business in other ways. There may be areas where you’re satisfied with making slight improvements because they have a huge impact on your business. There may even be areas you want to completely overhaul because things were not as you thought they were.
Our advice is to choose up to 3 learnings from applying the Pareto Principle to your coaching business that you want to act upon. It can be overwhelming to change too many things in your business at once. You can always use the Pareto Principle again when you do your next business review to evaluate where further improvements can be made.