Top 5 Business Mistakes Health Coaches Should Avoid
Starting a health coach business is an incredibly rewarding venture, but like any business journey, it comes with its own set of unique challenges. For wellness entrepreneurs, there’s a lot of focus on coaching techniques, client acquisition, and marketing strategies. However, one area that often gets overlooked—but is crucial for long-term success—is financial management.
Overlooking key expenses and underestimating the complexity of taxes, are just a couple of many financial missteps can eat away at your hard-earned revenue and stall your business growth.
Whether you're a seasoned entrepreneur and have built businesses before or you’re just starting to build your health coach business, learning how to sidestep these common mistakes can save you from a lot of unnecessary stress and help you create a more profitable and sustainable practice. Good news is that it’s much simpler than many believe to avoid these mistakes.
Here we’ll dive into the most common financial mistakes health coaches make and offer practical solutions to avoid them. By addressing these challenges head-on, you’ll be setting your business up for steady growth and long-term success.
Grab a cup of coffee and take a few notes—this might just be the most valuable blog post you bookmark this year!
Mistake 1: Neglecting Financial Planning
Most people are bored or afraid of their finances. Sad but true. It’s easy to get caught up in the excitement of building your health coach business, focusing on client sessions, marketing, and growth strategies. You deserve to be excited about those things. But without a solid financial plan in place, it’s like navigating without a map—you may be moving, but not necessarily in the right direction. Many health coaches underestimate the importance of financial planning, and this oversight can lead to unpredictable cash flow, missed opportunities, and, ultimately, lost profitability.
A comprehensive financial plan isn’t just about tracking income and expenses; it’s about setting clear goals for revenue, planning for seasonal fluctuations, and building a safety net for unexpected expenses. Take a little time to map out a detailed plan that includes:
Revenue Projections: Estimate how much income you expect to generate month by month, based on your service offerings and pricing models.
Expense Tracking: List all of your costs, both fixed and variable, including software subscriptions, professional development, marketing efforts, and even taxes.
Savings Goals: Plan for future investments, such as business expansion or advanced certifications, and ensure you’re putting aside a percentage of revenue for these goals.
Maximizing your health coach business's profitability often comes down to revisiting your financial plan regularly—at least quarterly—and adjust it as your business grows or pivots. This kind of proactive planning keeps you in control of your finances and prevents unnecessary stress when unexpected costs arise.
Mistake 2: Underestimating Business Expenses
One of the biggest (and most easily avoidable) financial pitfalls wellness entrepreneurs face is underestimating the true cost of running a health coach business. It’s easy to focus on the revenue coming in while losing sight of the less visible, yet equally important, expenses that quickly add up. Everything from those software subscriptions and marketing tools to continuing education, certifications, and dreaded taxes can silently (or not so silently!) eat into your profits.
Many health coaches, particularly those just starting out, make the mistake of only accounting for obvious expenses—like rent or website fees—while forgetting recurring costs such as client management software, marketing tools, or ongoing education. This can cause financial strain, especially when these costs seem to pile up all at once.
To avoid this, it’s critical to:
Identify and Track Every Expense: Create a detailed list of both fixed and variable costs. Use accounting software like QuickBooks or even start with a simple spreadsheet to categorize and track each one. This will give you a more accurate picture of your business’s financial health.
** Plan for Hidden Costs: Be proactive about setting aside funds for less frequent but significant expenses, such as annual certification renewals, professional liability insurance, or quarterly taxes. Budgeting for these upfront helps prevent cash flow problems when those bills arrive.
Review Regularly: Don’t just set it and forget it. Unfortunately, it doesn’t work like that. Review your expenses monthly or quarterly to identify any areas where you can cut costs or reinvest strategically to grow your business.
The key takeaway here is that running a profitable health coach business requires vigilance over your financial habits. By understanding and properly managing your expenses, you’ll ensure that more of your revenue stays in your pocket.
Mistake 3: Failing to Set Aside Money for Taxes
Taxes—often one of the most overlooked and underestimated aspects of running a health coach business, or any self-employed business arrangement for that matter. Everyone hates paying taxes and they’re often your biggest expense.
Failing to plan for taxes can leave you in a bind when filing season rolls around. Many health coaches are caught off guard by their tax obligations, leading to stressful financial shortfalls and even penalties.
As a self-employed individual, you’re responsible for not only income tax but also self-employment tax, which covers Social Security and Medicare. Unlike traditional employees, there’s no employer to automatically withhold these taxes from your paycheck, which means you need to plan ahead.
Here’s how to avoid this common pitfall and significantly reduce your stress:
Set Aside a Percentage of Your Income: It’s recommended to set aside at least 25-30% of your income for taxes. This ensures you have enough to cover federal, state, and self-employment taxes when they’re due.
Quarterly Payments: As a self-employed health coach, you’re required to make quarterly estimated tax payments to the IRS. Missing these payments or underpaying can result in penalties. Consider working with an accountant to help calculate the right amounts and figure out the deadlines. At the very least, do a quick review of the IRS guidance on estimated taxes.
Separate Account for Taxes: Open a separate bank account specifically for tax savings. Every time you get paid, transfer your tax percentage into this account, so it’s out of sight and earmarked for tax payments. This could be even be a separate high-yield savings account that could help offset some of the tax expense.
Planning for taxes throughout the year, rather than scrambling to come up with the money in April, you’ll reduce stress and avoid financial surprises that could derail your business.
Mistake 4: Not Separating Personal and Business Finances
Mixing personal and business finances is one of the most common mistakes health coaches make, especially when starting out.
It’s tempting to lump everything into one account, but this practice can lead to financial confusion, missed tax deductions, and unnecessary headaches when it’s time to organize your finances. Don’t do it! Failing to separate personal and business finances not only muddies the waters for tax reporting but can also make it harder to track your business’s actual profitability.
Here’s how to avoid this mistake:
Open a Business Bank Account: The first step is to open a dedicated business bank account. This simple move helps keep your business income and expenses completely separate from your personal finances. It also makes it easier to track profits, calculate taxes, and report business earnings accurately.
Use a Business Credit Card: Similarly, using a business credit card for all of your business-related purchases creates a clear paper trail. This not only simplifies your bookkeeping but also helps you take advantage of potential business-related tax deductions that may otherwise be overlooked.
Consistent Record-Keeping: Keeping detailed records of all business transactions (income and expenses) allows you to manage your business finances with clarity. Use accounting software to automate this process and make tax preparation much easier.
Stick To It: This requires forming a habit and sticking to it. Make sure all subscriptions that are business related are paid with business accounts. Purchasing a bunch of office supplies? Make sure you use that business credit/debit card, not your personal Amex card.
Mistake 5: Ignoring Profit Margins
You may read this and wonder who in the world would ignore profits. That’s not what we’re talking about here.
Many health coaches fall into the trap of focusing solely on revenue without paying close attention to their profit margins. While it’s exciting to see income rolling in, revenue alone doesn’t tell the whole story—what truly matters is how much of that income stays with you after covering all expenses. If your profit margins are too slim, even a high-revenue month can leave you feeling financially strapped.
Ignoring profit margins can lead to overspending or underpricing your services, both of which undermine the profitability and sustainability of your health coaching business.
A few tips on how to avoid this mistake:
Regularly Calculate Your Profit Margins: Track both your revenue and expenses meticulously. Subtract your total expenses from your total revenue to calculate your profit, and then divide that profit by your revenue to determine your profit margin percentage. Your accounting software can also handle this much more easily. Regularly review this figure—ideally, monthly or quarterly—to ensure your business is on track.
Analyze Your Pricing Strategy: If your profit margins are too low, it may be time to revisit your pricing. Are you charging enough to cover your costs and still make a reasonable profit? Look at what other health coaches in your niche are charging, and don’t be afraid to adjust your rates to reflect the true value of your services. Most coaches are surprised by how much they are able to successfully charge. Remember the value you bring to your clients, many of them may be willing to pay more than you think.
Reduce Unnecessary Expenses: Keep a close eye on your business expenses and identify areas where you can cut costs without sacrificing quality. Maybe it’s time to downgrade a software subscription you’re not using much, or perhaps there are marketing strategies that aren’t yielding the best returns on investment. Time spent on fruitless marketing strategies can be spent generating revenue.
Wrapping Up
Knowing these simple mistakes that many health coaches (and other business owners, frankly) make all the time can be incredibly important. Successful people learn from the mistakes of others.
Running a successful health coach business requires more than just passion and expertise—you need a solid understanding of your financials to ensure long-term profitability. By avoiding these common financial mistakes, you can build a business that not only serves your clients but also supports your financial well-being.
To recap:
Neglecting Financial Planning can lead to unpredictable cash flow and missed opportunities for growth.
Underestimating Business Expenses can erode profitability, so it’s crucial to track every dollar and budget for hidden costs.
Failing to Set Aside Money for Taxes can cause stressful financial shortfalls, but regular tax planning can prevent that.
Not Separating Personal and Business Finances leads to confusion and missed deductions, while a dedicated business account makes life easier. Your accountant will thank you!
Ignoring Profit Margins leaves you blind to your true financial health, so always keep a close eye on how much of your revenue turns into profit.
The best way to ensure your health coaching business is successful, both for your clients and your bottom line, is to stay proactive with your financial management. Consider working with a financial advisor or accountant who understands the unique needs of wellness entrepreneurs. This added expertise can help you stay on top of your finances and allow you to focus on what you do best—helping others on their health journey.
