Last week we concluded with a coaching business owner that they were losing 20% on every sale of their best-selling program.
They’d been celebrating growth for two years.
The problem wasn’t their pricing strategy or their market positioning. It was their unit economics assumptions.
Assumptions vs Reality
They’d built their entire business model around best-case delivery time. Coaches spending 45 minutes per student session. Clean handoffs between teams, and minimal follow-ups required by the team.
But in reality: coaches were spending 2-3x longer per client than projected.
“I think we underestimated the time they spend on delivery.”
This business had scaled to multiple seven figures thinking each new client added to profitability. In reality, each new client was destroying value because the actual delivery cost exceeded the revenue per student.
Owner time has to be priced in and allocated appropriately.
Delivery team data is one (critical) part. Another part that often goes wrong: Owner time in the business.
The key reason this matters: When the owner time is not allocated in the right parts of the business (mostly client delivery and marketing & sales), you are misleading yourself.
With owner time and costs missing from client delivery – you are overstating profitability.
With owner time and costs missing from marketing & sales – you are understating customer acquisition costs.
What typically happens is: you grow. At some point you will hire a full time professional at market rate to take over your part of delivery or your part in marketing & sales.
At that point you will see the actual costs. If owner time was not in there yet, it will all of a sudden look like an (unexpected?) drop in performance/
In the case of the coaching business – after the realization how far reality was from their assumptions, they pushed on delivery efficiency. They automated 60% of the coaching touchpoints. Hired delivery specialists at lower cost than senior coaches. Built systems that made the 45-minute assumption actually achievable.
Now they are on track to actually hit the margins in their forecast.
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