What’s Your Coaching ROI? Find Out Here

What would the ROI (Return On Investment) be for your investment in coaching? Maybe coaching sounds expensive to you, and you wonder if it’s worth it. Well, you can actually calculate the tangible return on your coaching investment. Use this process to find out how much your ROI would be.

Here’s how to do it:

Step One: Define the results you want. What is the reason you are thinking of hiring a coach? What are the problems you are facing that you believe a coach can help you solve?

Example: I want to make more money, I want to stop having to micromanage my employees so much, I procrastinate and spend too much time on busy work instead of on important and urgent work, and I want my employees to be inspired to do great work and be happy working for me.

Step Two: Get very clear on the tangible results you want and make it a Story Problem*.

Example: I am thinking about budgeting $7,000 for coaching (this is a hypothetical number; the cost for each of my packages is different).

What I want to accomplish through coaching is:

• increase revenue by 10% 

• reduce my micromanaging time by 50% 

• reduce my procrastination and busy work from 3 hours to only 2 hours per day

• support my employees to be 3% more productive

• decrease my employee turnover 50% by inspiring them to be happy and do great work. 

What would be my return on investment if I could accomplish all those things?

Step 3: What information do you need to know and how can you find that information?

Result 1: Increase revenue by 10%?

To find that out as a mathematical expression you need to know what you are currently earning. Let’s say that you currently earn $175,000 per year and you want to increase your earnings by at least 10%.

$175,000 x 1.10 = $192,500 per year

Annual income X 1 and the amount of increase desired 

Or, an annual increase of $17,500

OK – that one was easy.

Result 2: Reduce micromanaging time by 50%.

To find this out you need to know how much time and money you are wasting through your micromanagement. There are 2 parts to this.

Result 2, Part 1: How much is your time currently worth?

Break down your annual income into a monthly income and an hourly rate. If you currently earn, for example, $175,000 per year, then to find your monthly income you divide that by 12.

$175,000 / 12 = $14,583 per month

How many hours per month do you work? As a simple example, let’s say 50 hours a week on average.  50 hours per week is approximately 200 hours per month. Divide your earnings per month, $14,583, by the number of hours you work per month to find your hourly rate.

 $14,583/200 = $73 per hour

(All that work for only $73 per hour?) 

Result 2, Part 2: How much time, on average, do you spend micro-managing your employees?

Let’s say you spend an hour a day, and you work 10 hours a day (assuming a 50 hour week). You want to cut that by 50%. That means a savings of 30 minutes a day. (This doesn’t even count what more you can produce when you’re not micromanaging everyone else). With this simple math, you will save:

$73 / 2 = $36.50 per day

$36.50 x 20 (assuming you work only weekdays, 20 weekdays in a month) = $730 per month

$730 x 12 = $8,760 per year

That’s a lot of irritation saved (for everyone) and that is a fair chunk of change!

Result 3: Reduce procrastination and busy work by 33%.

To find this out, you need to know how much time, on average, you spend on procrastination and busy work per day (this is really worth tracking separately – you’ll be amazed!)? Let’s say you spend 3 hours a day, and you want to cut that by 1/3, down to 2 hours a day. Not even counting what more you can produce in that extra hour a day, you will save: 

$73 x 1 hours per day = $73 per day

$73 x 20 days = $1,460 per month

$1,460 x 12 = $17,520 per year

It’s starting to look really good, isn’t it?

Result 4: Support my employees to be 3% more productive.

Let’s say by having happy, engaged employees (a product of great leadership), productivity could increase by 3%, resulting in 3% higher revenue. What does that mean to your revenue? First, you need to know what your annual revenue is. Let’s say it is currently $680,000.

$680,000 x .03 = $20,400 per year in additional revenue

Result 5: Decrease employee turnover by 50% by inspiring them to be happy and do great work.

First, you need to know what the real cost of turnover is to your bottom line. Let’s say you have 5 employees, and on average, you have 1 leave per year (20% turnover). 

According to the US Department of Labor, the cost to lose, rehire and retrain an employee costs an additional 30% (!!) over and above their wages. By creating a culture in which employees are happier and more content, you believe you will reduce turnover to 10%, or 1 employee leaving every 2 years.

To see how this would affect your bottom line, you need to first know how much you are spending on annual payroll expenses. Let’s say it is $250,000.

$250,000 / 5 (number of employees) = $50,000 (avg annual cost per employee)

$50,000 x .30 (avg additional cost per lost employee) = $15,000

$15,000 / 2 (because it is now only 1 every 2 years) = $7,500 per year

Wow! Let’s keep those employees happy and engaged with their jobs!

Step 4: The final equation, your Return on Investment (Return (benefit) gained – cost)/ Cost

Revenue increased by 10% $17,500

Micromanaging reduced 50% $ 8,760

Reduced procrastination/busy work $17,520

Employees 3% more productive $20,400

Turnover reduced 50% $ 7,500 

Total Annual Return Gained $71,680

$71,680 (Return Gained) - $7,000 (budgeted coaching cost) = $64,680

$64,680 / $7,000 (budgeted coaching cost) = 9.24

*Remember story problems from grade school? “If one train is going north from Manhattan to Boston at 60 miles per hour and a second train leaves on the same route going 45 miles per hour……” Yeah, those problems. Weren’t they awful? They scarred most of us for life! The problem was, back then, our brains weren’t developed enough to tackle these kinds of problems without some help. And our teachers in the 3rd and 4th grade didn’t know how to explain how to think about these problems in a way we could understand. So, the problems terrified us. But really, they aren’t so hard. It’s just breaking down the problem into smaller questions and doing the simple math to solve them. One step at a time. Really, 4th grade math is all you need. 

**In addition to the Fortune Magazine article cited earlier, according to the International Coach Federation, the largest (and greatly respected) coaching organization in the world, the median return on investment for executive coaching is 700%! A 2009 study conducted by Price Waterhouse Coopers and the Association Resource Centre finds that more than 25% of coachees received 10 X (1000%) to 50 X (5000%) or more return on their investment! Yes, you read that right!

Time to get a coach!