Despite everything you might hear to the contrary, most business coaching franchisors charge a flat monthly royalty (as opposed to a percentage of revenue) for one simple reason: they’re determined to get paid even if you don’t.
Cynical sounding, but absolutely true, I assure you.
In the franchising world, it’s well-known and understood that good, reputable franchise systems survive and thrive based on a win-win business model. Their franchisees make money because the economics of the model make sense. Accordingly, the franchisor deserves to be paid a portion of the earnings. That’s why most reputable, quality franchise brands charge royalties based on a percentage of revenue generated.
Most reputable, quality franchise brands charge royalties based on a percentage of
But what about the business coaching franchise systems where the franchisee failure rate is well above 50%?
Well, business coaching franchisors have developed a great method of making money, even if their business model doesn’t work very well for the average franchisee. It’s called the flat monthly royalty! And because the majority of business coaching franchises have extremely high franchise failure rates, most business coaching franchisors charge a monthly royalty.
It doesn’t take a rocket scientist to realize that a flat monthly royalty of $1,000 to $1,800 is a WIN-LOSE deal. Win for the franchisor, lose for the franchisee.
What their sales reps tell you is that “the royalty fee is set at a flat rate so you’ll be motivated to get out and generate cash flow to become cash positive as quickly as possible.” But if you’re not motivated to be successful already, you’ll fail even faster with a cash burn rate like that staring you down each day.
Percentage-Based Royalties vs. Flat-Rate Royalties
Assuming a $1,500 monthly royalty, the only way you even break even with a flat rate royalty is if you bank $120,000 per year. That’s because $120,000 is the mathematical inflection point above which it pays better to be liable for a flat monthly royalty as opposed to a percentage, assuming a standard 15%.
Your sales reps will do everything they can to help you believe that you’re one of the few who will be on the far right side of the bell curve. And who knows, perhaps you will be. But I always tell my clients that when it comes to financials, you need to plan for the worst-case scenario and work for the best-case scenario.
Quite frankly, a lot of business coaching franchise prospects remind me of folks who play the slots in Las Vegas. You’ve seen them hunched over the slot machines, right? Most of them actually believe they’ll win big if they just keep playing long enough. “I’ll be the one to beat the odds!” they tell themselves.
Make no mistake. Flat monthly royalties are collected by the franchisor to make sure they get paid even if you don’t. This system benefits them, not you!
As you’re researching whether or not to buy a business coaching franchise, please look for options with a percentage-based royalty structure. This will incentivize them to work for their money instead of leaving you on your own to struggle. That’s the win-win approach.
For more important insights into conducting due diligence into business coaching franchises, please download our FREE ebook, The Business Coaching Franchise Buyers Guide.
Perhaps you’ve heard the statistic that only 5% of franchises fail within five years. But how does this compare to the business coaching franchise failure rate?
Before you buy this statistic hook, line, and sinker, keep in mind that the majority of franchises sold in the United States are what franchise expert Robert Purvin calls “blue chip” franchises–solid, respectable, enduring brands. This statistic originated in a study of those systems.
In contrast, most smaller franchises–including every one of the major business coaching franchises–are not in that category.
To put it bluntly, anyone who attempts to convince you to buy their business coaching franchise based on this statistic is twisting and misappropriating it.
Anyone who attempts to convince you to buy their business coaching franchise based on [the 5% franchise failure rate] statistic is twisting and misappropriating it.
After nearly two decades in the business coaching industry, I’ve seen business coaching franchise failure rates as high as 80 to 90%–something you probably haven’t heard from your franchisor’s sales rep! So before you buy into all the far-reaching claims about the success of franchises in general, make sure you investigate the particular franchise you’re considering…and ensure the numbers presented truly represent reality for that particular system.
And that means doing your due diligence.
Business Coaching Franchise Due Diligence
Before you make a huge investment in a business coaching franchise, consider the following due diligence steps:
1. If you’re talking with a business coaching franchise, evaluate their franchisees’ failure rate. See Section 2, Chapter 3, the third “checkbox” in the Business Coaching Franchise Buyer’s Due Diligence Checklist.
2. Pick up your own copy of Robert Purvin’s book, The Franchise Fraud: How To Protect Yourself Before And After You Invest, on Amazon. If you’re seriously considering a business coaching franchise, this book is definitely worth the read.
3. Grab our FREE ebook, The Business Coaching Franchise Buyer’s Guide! It’ll walk you step-by-step through everything you need to know before you invest.
Hate cold calling?
Yeah, me too.
(Actually, I don’t cold call anymore…I leave that to an outsourced firm these days.)
But even if you’re not in a place where you can hire a firm, there’s another way to generate warm leads from cold propsects.
Email Still Works
Despite claims to the contrary, email still works.
People open, read, and respond to emails — especially when they come from a single person, not a mass broadcast.
And you can still use email effectively to touch base with cold prospects and warm them into interested leads.
Here’s a simple and effective email sequence my clients and I have used to generate sales from cold lists.
Email #1: Neutral and inquisitive
Subject line: speciality
Hi FIRST NAME,
What does your business specialize in?
The trick here is to be short, simple, and to the point — with a quick question that hopefully yields a quick response. Express interest in them and learning more about their resume. Don’t reveal yet if you’re a buyer or seller.
Email #2: The quick follow-up
When they respond, WAIT A DAY before hitting reply. Then say:
Hi FIRST NAME,
Thanks for connecting. What makes you different than others in your space?
Email #3: Sharp USP and reveal
When they reply (or if they don’t within three days), say this:
I ask because I’m a business coach — insert your one-sentence short bio. in the last XX years I’ve advised businesses just like yours. We’ve seen revenues grow from A to B and profits from Y to Z. Would you be open to chat about any of this?
Email #4: The invitation
If they are, shoot them back this quick message immediately:
Chat for 15 mins? Here’s my calendar: LINK
That’s it! You’ve gone from cold prospect to scheduled conversation in just four emails. And yes, it really does work! Give it a shot in your business and let me know the results.
And for more swipe-able strategies like this, get a FREE 30-day trial of our comprehensive business coaching system.
So what are you doing all this for?
You know what I mean: the early mornings, the hard work, the pounding of the pavement. The new clients, the problem clients, the missed appointments.
Why are you doing all this work to grow your business coaching practice?
I hope the answer isn’t relegated to just one thing. Yes, you’re doing it to make a living, but there’s more to life than finances. In fact, if your sole focus is on the financial aspects of your life, you’re missing out on a lot of important depth and texture that makes life worth living!
So today, let’s talk about how you can be sure to keep a holistic view of just what you’re working for: real fulfillment. There are seven areas of a successful life — what I like to call the seven “f’s” of fulfillment.
Here they are.
Maybe you’re not a religious person. Maybe you’re thinking, why does this top the list? But the fact of the matter is, whether or not you subscribe to a particular set of beliefs, you have something that roots you in meaning. What are your highest values? Where do you place your ultimate hope? How do you discern what is ethical and worthy of pursuit? While religious traditions provide powerful answers to these questions, everyone needs to know why it matters that they do what they do. So spend some time reflecting on what it is for you.
Here I mean fidelity to a spouse. Most people are partnered, and tending to your relationship with your spouse is one of the most important ways you can build a fulfilling life. So if you’re letting work get in the way of your marriage, stop, re-evaluate, and do some work. A good marriage has been proven to be one of the most important contributors to happiness and prosperity.
Are you surprised we haven’t hit finances yet? That’s because our families matter more. If you have kids, being able to spend time with them, talk with them, play with them, support them, is of paramount importance. Maybe you’re tending to an ailing parent. Maybe you want your life full of laughter and relationships. Tend to your family relationships and your fulfillment will increase.
And we’re still not talking about money! Friendship is one of life’s most beautiful gifts — the ability to walk through life with someone you’ve chosen. Friendships change and morph over time, but it’s important to invest in them. So be sure to carve out time for experiences with friends.
Ah, here we are. Yes, yes, money is important too. But notice that it comes after the issues of ultimate concern and meaning. Money isn’t as important as faith, fidelity, family, and friends — but it can impact those relationships in meaningful ways. The better you’re able to manage your finances, the more you’ll be able to contribute and enjoy the time you spend focusing on what matters most. So tend to your financial wellbeing, so that you can be freed up to invest your time, talents, and treasure were you can make the most impact.
Nothing can derail fulfillment faster than a health crisis. Sometimes these things are impossible to control; other times, they’re the predictable outcome of being overworked, underslept, and running on junk food and caffeine. Take care of yourself. Exercise, eat well, drink plenty of water, and get enough sleep. It sounds so basic, but your health is the building block of everything else.
Finally, fun. Life isn’t all just duty and obligation. Take time to yourself to do what you love. Recharge your batteries. Let yourself escape. Fun is important for creativity, productivity, and collaboration, so be sure to find ways to enjoy yourself!
When you do it right, business coaching is a fantastic lifestyle business that can give you the time and financial freedom to live a truly fulfilling life in each of these seven critical areas. Want to learn how? Download our FREE ebook, How to Become a Business Coach.
What are business coaching clients buying?
No, really. Think about it.
When you sit down with a prospective client to convince them to sign a contract with you, what are they spending their hard-earned revenue on?
Yes, it’s business growth. Yes, it’s more freedom and less stress.
But at the end of the day, prospective business coaching clients are buying one thing:
That might make you feel uncomfortable, but it shouldn’t! After all, you’re the one with the insight and expertise to help them get the results they’re seeking. If they don’t trust you, there will be no sale.
So what are clients looking for?
I like to say they want to know three things about you:
First, they want to know that you’re for real; that you’re not a charlatan or hypester, but that you know what you’re talking about and can guide them successfully through their business challenges and landmines.
That’s why I also suggest that your business coaching bio include a summary of the major periods of your professional life, significant awards and recognitions you might have received, and any education, certifications, or accreditations you’ve earned.
What’s in it for them?
Be sure to include details that will help your prospective clients see themselves in your bio. If you’ve worked in their industry or with businesses their size, include it. If not, that’s okay, just be sure to frame this in terms of achievements vs. mere activity. By this I mean tell them the actual results you’ve driven. Use numbers and statistics to be as precise as possible. It’s much more powerful to say that you helped increase revenue $1.2M than something generic like “significant growth.”
You’re not just some numbers on a screen—you’re a human being. And your prospective clients want to get to know you as a person. Here’s where you can highlight aspects of your character. Briefly mention your family life, significant adversities you may have overcome, and/or what you stand for morally and ethically.
Before / After
Check out this before and after example.
- 20 years in the Electronics Industry, including product research, marketing, field service, product development, and human resource development.
- Experience in government, defense, petroleum, convenience store, and power generation industries.
- Electrical Engineering degree from University of Notre Dame.
- 20 years as a successful business executive with experience in marketing, sales, team leadership, engineering, quality improvement, training, management, and human resources.
- Responsible for $7M profit center for Fortune 500 company managing 65 personnel on multi-disciplinary teams in 5 locations world-wide.
- Reduced unit costs of product development by 25% and saved over $1.6M using Six-Sigma improvement processes.
- Responsible for multiple QS9000 and ISO9001 certifications.
- Electrical Engineering degree from University of Notre Dame.
- Left the world of big business to become a business coach and have been awarded for his achievements in growing small businesses in Indiana and Southern Ohio.
- Happily married, father of two daughters, and owner of over 10 pets!
See the difference?
Now do it yourself! Use our sizzling hot bio template to craft your own. And while you’re at it, get more business-building tips and tricks in our popular FREE ebook, Secrets of a Business Coaching Rock Star!