How To Calculate Cash Flow as a Coach

Have you had enough of seeing revenue go down the drain?

Have you been slapped on the face with a massive tax bill?

If yes, then this article is for you because this might be happening because of not calculating your cash flow correctly.

The basis of this article is my discussion with a female coach who was not hitting her income goal.

When she told me about this, I asked her to show me her cash flow calculation. Which she did.

I noticed that although she said that she collected $18k in four months or an average of $4.5/month, she was only making an income of $1.4k /month.

This was happening because she was not calculating her cash flow and showed her a step by step process to do it. I am sharing that same step by step process in this article.

Step by Step Process to Calculate Cash Flow

While going through her cash flow calculation, I noted the following numbers.

This was done over 4 months. So she thought during these months she earned ~$18k.

Here’s the problem with that.

First of all, she hasn’t delivered her service, so it’s not earned yet.

Furthermore,

$18k cash collection has to cover:

• FB ads costs
• 66 hours worth of time just to be on the call.

These are just the costs incurred to acquire the clients.

There’s the cost of delivery in terms of the number of sessions — a few 1:1 and then on group calls.

There are also fixed expenses to take care of items like subscriptions, coaching, admin costs

Then there’s tax to pay.

She told me that she was sick of seeing her revenue down the drain and on top of that getting a big tax bill.

So if you are experiencing similar challenges in your business, then you need to calculate cash flow at each stop of its journey.

Here’s how to calculate cash flow as a coach in 5 simple steps, so that you have cash flow clarity on what’s happening in your business.

5 Steps to Calculate Cash Flow

STEP 1: Keep track of how much cash you are collecting month by month.

STEP 2: Corresponding to the cash collection in STEP 1 keep track of spending on ads acquiring the client month by month — campaign by campaign.

STEP 3: Then account for sales commissions, if you are paying someone to do the calls for you. If you are doing it yourself as a coach, then account for the opportunity costs.

STEP 4: Next up, calculate how much you pay for fixed expenses like subscriptions, training, coaching, accounts, and admin every month.

STEP 5: Then you need to pay taxes on what’s remaining. After paying taxes, what remains is your income.

Next up I’ll show you how we used these 5 steps to calculate the cash flow of the women coach who I shared about in the beginning.

Using the 5 Step Process To Calculate the Cash Flow of a Coach

So in this case:

The coach whose I was looking at collected $18k in 4 months on average of $4.5k a month. That’s her cash collection.

For this, she had to pay $5 to get one webinar registration. So for a total of 661 registrations, she spent $3,305 (661*$5)

Then she had to pay a 10% sales commission on sales of $1,800.

So just the costs of acquiring the clients were $5,105.

Next, we need to calculate the costs of delivery.

Last year, she’s made a revenue of $77k — so her hourly rate (based on 260, 8-hour days worked was) 77000/260/8 = $37/hour

She had to give at least 10 hours of 1:1 support and followed by a group session for 12 weeks.

So, if we calculate the costs of 1:1 sessions only 37*10= $370

So the costs now add up to $5,475.

Looking at her expenses, she was paying on average $750/month and so for four months, it was $3k.

So her earnings before paying tax come to — $18,000 — $5,475 — $3,000 = $9,525

Then we calculated tax on that (Business and personal tax come to 40%) which is $3.8k.

This left her with an income of $5.7k over 4 months — or $1.4k/month.

When we went through the cash flow calculations in detail, she was really surprised and said, if I work full time for someone, I will earn much more than that.

Now it’s your turn.

Based on what you learned today, what does your cash flow calculation look like?

Go ahead and do this exercise, when you can.

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If you like videos more than words, then I published a video with the same content, you might want to check it out below.