Is the Coaching Industry’s Bubble About to Burst?

Patty Lennon
Jan 16, 2018 · 12 min read

Someone I deeply respect posted on Facebook that she is fed up with coaches who take money from clients with little regard for the results they create. I reached out to her to better understand what lead her to write that post.

She is a thought leader. If she was taking time to give this attention I knew something pretty bad must have happened. In private she shared that she and some colleagues had invested five figures each with a coach who never showed up for those clients and refused to refund their money.

Shame and guilt had kept her silent, but she recently discovered that the very same coach had pulled this same stunt with more people. That’s why she decided to speak out.

Sadly, I’m hearing more of these stories. I’m also seeing proof that a bubble has formed in the coaching industry. And more importantly, I think it’s popping.

If you are a potential client of coaching services, this is good news. This type of financial reckoning always benefits the buyer.

If you are a coach and you aren’t prepared, it can potentially be financially painful for your business and your livelihood.

What do I mean by bubble?

A bubble occurs when the price range of an asset or product being offered in the market far exceeds the inherent value of that asset.

You may have heard this term before related to housing. It was part of the 2008 economic downturn in the US. The bubble became so large, it was no longer sustainable. Here’s a great example of how that happened.

My husband and I had our first child in 2005. That’s when we decided to get a bigger home. As part of the process, we applied for a mortgage pre-approval and were told we could borrow up to $1 million. My immediate thought was “you are on crack.”

At the time I was a VP in a global bank and my husband was a sales manager in a large company. We probably could have managed the mortgage payments assuming nothing would ever go wrong. That meant neither of us would get sick or lose our jobs. And it meant our growing family would never run into unexpected expenses.

To believe $1million was an appropriate amount of housing debt to incur would have required a delusional view of our future.

I’m an optimist, but I’m also a realist.

The lending practice that would have allowed me to take on more debt than was sensible is one of the practices that led to the housing bubble that impacted so many.

Common sense protected me from taking the advice. But I could have easily seen this as an expert telling me this risk was acceptable and embracing their judgment over my own.

Six years later I left the banking industry and started my own coaching business. Some of that common sense flew right out the window when I hired my first “high priced” coach. I handed over $5000 in exchange for two days of her time with her promise that she would give me the keys to the wealth kingdom. (Spoiler alert: She didn’t, and I later learned she was wanted for fraud in another country.)

Having 7 years distance from that relationship I can say I was lucky. $5000 is a drop in the bucket to some of the bad investments my colleagues have made with coaches.

The lesson: don’t believe everything written on a sales page or spoken in a sales pitch. Trust but verify. Do your research. Get a second opinion. A reputable coach won’t mind if you do your homework. They also won’t bully you into making the investment before you can check out the details.

Use common sense. Pay attention to your intuition.

I’ve since spent many multiples of that $5000 on coaches. Some of those investments paid off big. Some not so much. But all of them were made with my eyes open. The 5K lesson gave me a common-sense re-set.

Unfortunately, too many who have invested in the coaching industry have not been as lucky. The stories of people being let down, manipulated and taken advantage of by coaches who claim to have their best interests at heart are growing.

That’s why I believe we are facing a coaching bubble.

The housing bubble was accelerated by lending practices that led many into mortgages that were more than they could handle. Often, they were based on a nothing-can-go-wrong attitude that required a belief that houses would always appreciate at 10% a year. Every year. No downside.

Finely tuned sales pages and pitches have done something similar in the coaching industry. They’ve led people to believe that if they have the courage to invest big they will win big.

The concept has been perpetuated that the investment itself, is all that’s required for success.

This is true for some, but they are the minority. Most people need time to create success. The sales and marketing practices embedded in the coaching industry have convinced many clients that making large investments will naturally pay off because all you need to achieve big goals and dreams are steps or a system. Those finely crafted sales pitches neglected to mention that those steps don’t always work.

Those sales pages ignored the fact that the biggest impediment most people have in creating success is fear. And fear is not something that is erased with information. Fear is dissolved over time with support, encouragement, motivation and a dash of tough love.

Whenever a bubble forms in any industry, it is there as a wakeup call. It is the clearest sign to me that there is Divine design even in our capitalist economy.

I appreciate my banking background now more than ever. I learned how to identify the signs that a bubble is building, and the coaching industry is showing us it is headed for a big re-set.

Here are 3 signs to watch for.

First come the crazy eyes. You’ve seen it. The fervor and hype of missing out on the next big thing. The marketing sizzle that makes us feel like our business will never be successful if we’re not part of the new mastermind or attending the next amazing event.

When coaching is being sold as a limited, one-time only opportunity, it’s almost always to ramp up the crazy. Which leads directly to the second indicator.

The lack of common sense. Or rather, our willingness to ignore solid business practices. Is anyone worth $10K a month? Yes, and many companies will see a good return on that investment. Should someone in start-up mode put all their resources here? Probably not.

Should this be marketed as a magic bullet or secret-sauce formula to success? Absolutely not. We know this intellectually, but when we’re in that scared/excited mode and being encouraged to believe, rational thinking gets pushed aside.

Number three is significant. For a bubble to be created, the money folk must be agreeable to the inflated conditions. Banks and other financial institutions look the other way in the run up to the pop. They’re profiting from the bubble too, and they’d love to see it continue, but they are also in the business of managing risk. When costs start rising, they will quickly adjust.

In the last 3 months I’ve started to see complaints about payment processors amongst my colleagues. Credit card companies are no longer honoring coaching contracts and are processing refunds at much higher levels.

The lenders are no longer willing to play. When the money dries up the bubble pops.

It’s time to face today’s reality.

There are many great coaches creating incredible successes for their clients that far exceed the price of their coaching. Is this the industry standard? Sadly, I believe the answer is “no.”

Most coaches have spent more time and money learning how to get people to buy their stuff rather than investing in how to create success for their clients.

At first this was a necessary evil. Most people drawn to the coaching industry get here because they want to help. They love people. They want to make their lives better. That was certainly my motivation.

Being a good coach doesn’t mean you’ll automatically create financial success. Being a good salesperson is what creates financial success.

Creating a high converting sales page became a badge of honor among coaches.

Sales pages are playing the role that sub-prime mortgages played in the last housing bubble. They are convincing people they can afford more. They are selling the idea that a 5 or 6 figure investment will always pay off. Business fundamentals aren’t mentioned. Demonstrations of a clear return on investment aren’t either.

As an industry, that’s how the price range of today’s coaches far exceeds the actual intrinsic value.

How did we get here?

As a coach inside the industry, I don’t think most coaches set out to deceive their potential clients. I think it happened slowly over time.

The sales pages and pitches we consumed led us to focus more on the money we were making than on creating a body of work that matters.

Many coaches stopped seeing our craft as something to be nurtured and developed. An investment of time, skill and expertise; the marathon. Instead, they began treating it as a winner takes all sprint to the finish and forgot the whole reason we showed up for the race in the first place. To help people.

It’s not what any of us signed up for.

Here’s how I know things are changing.

I am starting to see people speaking out about the egregious practices of coaches in larger numbers than ever before (i.e. the crazy eyes are going away, and people are seeing reality as it is.)

Sales practices that used to work are no longer working.

Two months ago, I sent an email out to my list letting them know that I made less money in 2017 than I did in 2016. The first time in 8 years of business. I wanted those struggling with their own set-back to know they weren’t alone.

I started getting private messages and calls. Colleagues and former clients sharing that the same thing happened to them. They were embarrassed to admit it and were grateful to have someone to talk to. There was relief knowing they weren’t the only ones.

I also noticed multiple complaints from fellow coaches about a credit card processor many of us use returning money to their clients, even when a legal contract said they had the right to keep their money.

Some coaches are furious about this shift. My banking background tells me that the payment processor isn’t trying to be difficult. I suspect, the coaching industry has been flagged as having a high level of risk for scams. If I’m right, refunds will continue to climb.

Another shocking indicator? A former client confided in me that a high-level coach she is working with recently contacted her for a loan. He explained that the IRS is coming after him and may put a lien on his business. This was a coach that sold her on his ability to show her how to make millions.

Another 7-figure coach just admitted she is so far in the red and may need to declare bankruptcy.

Coaches I thought were doing well are packing up and heading back into a corporate gig.

These 7 and 8 figure coaches are not the outliers, they are the warning bell. The chink in the armor is now exposed.

Is coaching going away? Is the business model broken?

I don’t think so. What I do see is a shift in how we market and deliver to ensure that clients understand the value and the risk/rewards.

What should coaches do now?

When a bubble bursts, values fall. Does this mean you have to lower your prices? Maybe. Maybe not. Even in a bubble when an asset is priced to value it generally retains its value.

How much value comes with your service?

1. Determine if your offer price is = to its value. If it isn’t, you can add more value or lower your price.

The question you have been asking yourself about value needs to change though. You may have been trained to ask yourself “Am I worth it?” You now need to ask, “Am I worth this much to my clients?”

If one client out of 20 saw a significant ROI on your services, it does not mean you are worth it to every client. If a reasonably sane individual was reviewing the results of all your clients against what you charge would they say “Yeah, that rate makes sense?” Or would they conclude they were sitting in the presence of a scam artist no matter how unintentional?

It is time to put your big girl (boy) panties and admit the truth. First to yourself. Then to your clients.

2. Put controls in place to identify people that will not succeed with your product or service. This is your reputation at stake, not just that of your client.

Stop bullshitting yourself. We can say “All I can do is offer what I offer. If the client doesn’t take action that isn’t my fault.” It’s time to ask — why not? Why isn’t their lack of follow through part of your responsibility?

Isn’t inspiration and motivation part of the job description of a coach? Aren’t results our calling card? Nothing is 100% foolproof. Lackluster results happen to everyone now and then. I’m not talking about that.

I’m talking about selling services in the five figures and having a 10% or 20% success rate. You’ve got to own that and put controls in place to weed out those that reasonably can’t or won’t succeed.

Stand behind your work. Even better, stand in front of it!

3. Create contract terms that give new clients a safety net. Maybe that is an opt out clause. Maybe it is a way to sample your work before they buy in big. Maybe you can provide a free offer that gives them a strong enough sample of your work so it’s easy for them to see your value and decide on its merits. Maybe it’s a guarantee. A legit refund policy that you stand behind.

Do I think overpriced coaching services are going away? No. Even if every person on the planet figures out how NLP works and manipulative selling practices at live events become ineffective something else will replace it. Another technique will be developed that will convince an unsuspecting hopeful client to purchase a service that can’t possibly deliver what’s being promised. I do think anyone who uses those techniques is going to have a much harder time holding on to their clients’ money.

That’s good news for the rest of us who work hard to make sure our clients see real, quantifiable results.

What do we do now?

When hiring a coach, clients will pay more attention to their gut instinct rather than being lulled into submission by a good sales page.

Clients will be looking for proof of value and where none exists they will demand guarantees.

Low dollar services will be easier to sell, and creating demand for high value services will take longer.

Remember I said I’m an optimist?

That’s still true and it’s why I’m sharing the hard-to-hear message. Because if you are a coach your work matters. There are people who need your help, and who will appreciate the opportunity to invest in you and in themselves.

Am I seeing what I want to see? Maybe, but my hope is that our industry will experience a correction much like the housing industry.

There’s always going to be a place for coaches who provide value and a return on investment.

The best news is that honest, reputable coaches and consultants will be able to regroup and see better results sooner and faster. They’ll be recognized for their willingness to do right by their clients and rewarded with loyalty and referrals.

This is my tough-love talk.

If you are a coach it is meant to provide you with a way back to the successful practice you’ve enjoyed. A setback can become an opportunity because we get a new perspective to solve an old problem.

Create a body of work that matters to your potentials clients and that matters to you.

Take advantage of the bubble. Set yourself apart from those who operate from a place of fear and lack. Move forward from a place of service, and abundance.

Remember the million-dollar mortgage? We didn’t do it. Not even close. We had patience and eventually found a beautiful home we love. That we can afford.

And for those of you reading this that may have invested with a coach that let you down or took advantage of you, I’m sorry. My gut told me I should have spoken out against these practices long ago.

It’s never easy to admit when someone we trusted took advantage and let us down. I encourage you to be honest about your expectations, and allow yourself some grace knowing it wasn’t your fault. You weren’t wrong to trust, someone else was wrong to promise what they couldn’t deliver.

Don’t let a bad experience make you wary to believe in yourself or your judgement. Start with a clean slate today and move forward with confidence in your work, and in your ability to connect and collaborate with others.

Patty Lennon

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Coach, writer and speaker helping purpose driven people tap their intuition to create lives & businesses they love.