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Is there a worst way of setting fees for a training business?

There's a fair amount of advice on setting fees for the training seminars you offer, but one in particular is very commonly suggested as a means for calculating fees particularly for people setting up a new training practice.

There are variations, but basically, you start by figuring out how much money you want/need to earn per year. Then you factor in number of days in a year, or anticipated number of working days, do some division, calculate expenses, and figure out a rate per day or per hour to get you to that goal.

There is a use for this (see below). However, consider what is left out of these equations for calculating fees. What is left out? Actually what is missing is a customer focus. No part of this approach addresses the going rates for training in your region and your speciality. Neither does it take into account customer expectations of what is a reasonable price.

Case Example

I know a trainer who was paying alimony and child support to his first family, remarried and had a young baby, and also had mortgage payments. When he lost his training job he decided to open up his own training and consulting practice, but it turned out that he simply needed to generate too much income, too fast, and set his fees too high. The result was that he failed badly, and had to take a regular job. When he lost that one he tried again, making the same mistakes. To add to this, his prospective clients say him as deperate for business, which put them off. He hadn't prepared properly, and was not positioned properly to succeed, and it affected his economic security, and eventually contributed to a second divorce and the loss of his house. A sad story.

So, by focusing on YOUR needs as a trainer, you are quite likely to end up pricing yourself too high or too low. You simply can't ignore the marketplace, or customer comfort.

There Is A Use

There is a use for this approach, but it's not to determine your fees. When doing a business plan, formally or informally, you can use this approach to assess whether you can actually expect to make a go of your business. If, for example, your cost of living is very high (ie. your income need), doing this analysis before starting your business can tell you if it's even possible to meet those needs. You calculate what you NEED to charge, based on your requirements to survive, and then compare your fees to the marketplace. If you need to charge 5,000 per session, and the going rate is 2,000, and you have nothing special to justify that difference, you need to reconsider operating a training business BEFOREHAND.

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