Don’t Let Your Success Be Your Downfall
For startup coaching practices, growth is often heralded as the ultimate indicator of success. Yet, as many entrepreneurs discover, expansion brings its own set of challenges, often trapping businesses in complexities they weren’t prepared to handle.
“The Success Trap” sees growing businesses encountering hurdles that grow as their revenue increases. These challenges are not limited to devoting more time to meeting with clients but span across legal liabilities, client management, marketing, and general business administration.
Legal and Liability Challenges
You have more exposure to liability
When a business starts, the limited number of clients helps to contain the liability risk of advising on people’s finances. As that client base expands to tens or hundreds, the exposure to potential lawsuits grows correspondingly. Each client brings their own set of risks and the potential to be sued (even wrongly) by not just the client but also by their interested family members. And with increased visibility and increased value in the business, your larger business naturally becomes a bigger target for legal actions.
A big part of responding to this liability is hiring attorneys to draft more comprehensive contracts and provide consistent legal advice. Your contracts not only safeguard a business’s interests but also ensure clarity and trust between the business and its clients. And regular communication and advice from an attorney can help to mitigate actions that might give rise to legal action.
Additional regulations likely apply
Many laws exempt smaller businesses from needing to comply with their requirements in order to avoid an unnecessary burden on resource-strapped businesses. But as revenue or employee count grows, these exemptions fade. Unfortunately, each law has its own threshold for when revenue or employee growth triggers the regulatory requirement.
For instance, states now are able to impose sales tax on businesses located outside of their state based on the business done with state citizens. This means if enough clients live in a state, you may be responsible for collecting sales taxes on your services even if your only connection is your clients’ state of residence. Each state has distinct criteria that determine sales tax compliance, and as businesses expand they increase their exposure to needing to collect sales tax based on each state’s unique laws.
You may need to be licensed all of a sudden
Most financial coaches/counselors operate (legally) without any financial services licenses. But if your state or the state of residence of clients changes its laws, you may find yourself illegally operating an unlicensed business within the state. A few states already require financial coaches/counselors to be registered as Investment Advisors and other states may follow suit. As your business grows, you increase your chances that a sufficient number of your clients live in a state that requires registration, exposing your business to fines and civil liability.
Maintaining the Client Experience
Keeping up with client communications is more complex
With an expanding client base, maintaining effective communication becomes increasingly difficult. Gone are the days when personal notes or spreadsheets suffice. Growing businesses need robust Client Relationship Management (CRM) systems that can automate and streamline communications. From scheduling meetings to sending reminders and follow-up emails, having a robust CRM is critical in ensuring nothing falls through the cracks.
Delivering a consistent client experience becomes harder
A key challenge with a growing coaching/counseling business lies in maintaining a consistent experience for clients. Miscommunications or mishandled meetings with clients can deteriorate trust and tarnish your reputation. Businesses must invest in systems that not only automate communications but allow personalization, maintaining the individual touch essential in client relations.
Each coach’s threshold for needing a more robust CRM is different. You may hit your limit at 10, 15, or 20 clients. But you will hit it long before you expect. When you start struggling to keep track of your clients and their details, you likely need a CRM, and you need it quickly!
Marketing and Advertising: A New Paradigm
You need more complex and sophisticated marketing
Early-stage marketing often targets low-hanging fruits, straightforward campaigns to get your first 10 clients. As businesses scale, marketing needs to evolve beyond simple tactics to sophisticated strategies that sustain growth. Developing intricate advertising campaigns and creating systems that generate a consistent flow of new prospects becomes crucial in maintaining a consistent revenue.
Marketing windows may be short
Clients are generally more open to beginning working with a coach/counselor during specific times, and often are unlikely to even consider hiring a financial helper when the window closes. Marketing windows may occur seasonally (e.g., taxes) or sporadically (e.g., the first few months of high inflation), but these are critical times to connect with prospects when money is top of mind.
Unfortunately, as your business grows, the time you have available to recognize and respond to these windows shrinks. Failing to capitalize on current events due to time constraints can hinder growth. Not taking advantage of these short windows is a missed opportunity to help more clients.
General Business Management
Maintain accurate financial records
For larger businesses, meticulously keeping financial books can be the difference between success and costly audits. Many enterprises fall short in this regard, underestimating the intricacies of professional bookkeeping. Keeping up with tax related filings also becomes more complex as your business grows. As the scale increases, so do the repercussions of financial inaccuracies, highlighting the necessity for professional accounting.
Navigating cash flow may become more important
Cash flow management gains prominence as businesses grow, especially with increasing obligated business expenses including technology, insurance, rent, payroll and more. Unfortunately, business revenue is rarely as consistent as expenses with distinct high seasons and low seasons for hiring. Businesses must balance these financial rhythms to avoid cash shortages and ensure stability despite variable income.
Don’t let strategic planning take a backseat
Amidst the operational bustle, it’s easy for strategic planning to take a backseat. Yet, setting aside time for long-term strategy is imperative for sustainable growth. Businesses need to regularly assess their overarching strategies to adapt to market changes, adjust for your niche’s needs, and maintain competitive advantages.
Embracing Technology and Systems
To help financial coaches/counselors navigate these challenges, Financial Coaches Network is introducing innovative solutions, ‘Biz-in-a-Box’ and ‘MoneyCoach Network. Each helps you facilitate these complexities of growing businesses.
Introducing Plug-and-Play and Done-For-You services from FCN
These services support businesses by setting up essential technologies, advertising platforms, and client management solutions, effectively freeing entrepreneurs to focus on high-value tasks like client interaction and strategic planning.
Biz-In-A-Box offers coaches an out-of-the-box solution for their coaching business with pre-built systems needed to run a successful business:
- A fully built, customized, and automated CRM system
- Pre-developed client communications
- Automated workflows for client meetings and follow-up
- Syndicated monthly pre-written marketing blog
- Pre-built marketing campaigns
- Robust website
- And more
MoneyCoach Network takes it a step further handling all the ‘running-the-business’ details for coaches so they can focus on bringing clients in the door and working with them. Coaches are effectively ‘hired’ as independent contractors to work under our Financial Coaching business. Contracts, operations, technology, collecting payments, and more are handled for you by FCN.
FCN will be opening a beta on one of these two services at the beginning of 2025. If you’re interested in learning more about the Beta of these two services, apply for the beta test group. Whichever has more coaches/counselors interested in it will be the service we’ll launch first.
Authors:
Josh Escalante-Troesh, CFP® | MBA
Amelie Riendl, AFC® | PMP®