How To Calculate Cash Flow as a Coach
Have you seen revenue go down the drain?
Have you been slapped in the face with a massive tax bill?
If yes, then realize that such things happen because of not calculating your cash flow correctly.
By the end of this section, you will know exactly how to calculate cash flow as a coach.
Learning cash flow calculation will help you increase your take-home income from the business.
Over a call, a female coach I was talking to said, “Shishir, I am not hitting my income goal.”
I asked her to show me her cash flow calculation.
When she showed me that, I noticed that although she collected $18k in four months at an average of $4.5/month, she was only making an income of $1.4k /month.
She was not doing it right.
If you are curious about what was wrong and how you can calculate your cash flow correctly, keep reading.
So she was running a webinar and ads to get people to register for her webinar. In one webinar, she was prompting the attendee to book a call, and while on call, she was sold her coaching program.
Here is what the numbers looked like when calculating her cash flow together.
- Webinar registrations – 661
- Calls booked – 81
- Calls done – 66 (1 hour each)
- Coaching Programs Sold – 9
- Price per person – $1,997
- Total cash collected – $17,973 (about $18k)
She did it over four months and thought that she earned ~$18k during this time.
Here’s the problem with that.
First of all, she hasn’t delivered her service, so she has not earned it yet.
Furthermore, the $18k cash collection has to cover:
- FB ads costs
- Sixty-six hours’ worth of time just to be on the call.
These are just the costs that the coach incurred to acquire the clients.
Her delivery cost is her time on 1:1 sessions and group calls.
She also needs to cover fixed expenses like subscriptions, coaching, admin costs.
Then there’s tax to pay.
She told me that she was sick of seeing her revenue down the drain and, on top of that, getting a big tax bill.
If you are experiencing similar challenges in your business, calculate cash flow at each step of its journey.
Here’s How To Calculate Cash Flow As A Coach In 5 Simple Steps So That You Have Cash Flow Clarity On What’s Happening In Your Business.
step 1
Keep track of how much cash you are collecting month by month.
step 2
Corresponding to the cash collection in STEP 1, keep track of your marketing efforts acquiring the client month by month – campaign by campaign.
step 3
Then account for sales commissions if you pay someone to do the calls for you. If you are doing it yourself as a coach, then account for the opportunity costs.
step 4
Next up, calculate how much you pay for fixed expenses like subscriptions, training, coaching, accounts, and admin every month.
step 5
Then you need to pay taxes on what’s remaining. After paying taxes, what remains is your income.
In this case, the coach whose accounts I was looking at collected $18k in 4 months on an average of $4.5k a month. So that’s her cash collection.
She had to pay $5 to get one webinar registration. So for a total of 661 registrations, she spent $3,305 (661*$5)
Then she had to pay a 10% sales commission on a sale of $1,800.
So just the costs of acquiring the clients were $5,105.
Next, we need to calculate the costs of delivery.
Last year, she earned $77k – so her hourly rate (based on 8-hour work every day for 260 days) 77000/260/8 = $37/hour.
She had to give at least 10 hours of 1:1 support followed by a group session for 12 weeks.
So, if we calculate the costs of 1:1 sessions only 37*10= $370
So the costs now add up to $5,475.
Looking at her expenses, she was paying on average $750/month, and so for four months, it was $3k.
So her earnings before paying tax comes to – $18,000 – $5,475 – $3,000 = $9,525
Then we calculated tax on that (Business and personal tax come to 40%) which is $3.8k.
So she was left with an income of $5.7k over four months – or $1.4k/month.
When we went through the cash flow calculations in detail, she was shocked and said, if I work full time for someone, I will earn much more than that.
Summary
Now it’s your turn.
Based on what you learned today, what does your cash flow calculation look like?
Here’s the cash flow calculator you can use to calculate your cash flow
