#206 - Why Business Coaches Get It Wrong...
Something quite concerning that I see almost weekly in my business is when business coaches overstep and get it wrong.
A great business coach is invaluable for growth and strategy but when it comes to legal advice, there is a hard line and they should not be crossing it. More often than not, business coaches inadvertently step into legal territory with good intentions and a desire to help their clients, but a great business coach will know when they are stepping beyond their areas of expertise. At this point, the best way to help their clients is to refer them to a business lawyer or accountant.
Today I’m sharing 5 areas where I see business coaches overstepping and providing legal advice and the red flags you should look out for.
1. Business Structure Decisions
"Just stay as a sole trader" might sound like simple advice, but it's far from it. Your business structure affects everything from tax obligations to personal liability. This isn't coaching territory - it's a decision that needs both legal and accounting expertise.
2. Employee vs. Contractor
The distinction between employees and contractors isn't just about work arrangements - it's about legal obligations, rights, and responsibilities. With laws constantly changing, this is one area where well-meaning coaching advice could lead you down a costly path.
3. Late Payment Penalties
Your business coach wants to make sure you get paid what you deserve but before you implement that late fee system they suggested, pause. Under the law, you cannot impose payment penalties for late payments. Getting this wrong could make your entire contract void. This is where you really need to work with a business lawyer to create payment terms that protect your business while meeting your legal obligations.
4. Termination Clauses
Since November's legal changes, termination clauses have become more complex than ever and this isn't something you want to get wrong. While a coach might understand business relationships, the legal intricacies of contract termination need professional legal oversight. Your business deserves protection that stands up in court.
5. Templates
Templates might seem like a money-saving shortcut, but generic solutions do not provide the protection that your specific business needs. Every business is unique, even within the same industry, and your legal documents should reflect that. This is something I consistently get asked about and my answer is always the same - it is absolutely vital that your legal documents are properly tailored to your unique business.
Great business coaches know their area of expertise and build networks of legal and financial professionals who can provide expert advice where needed. It's not about undermining the role of a business coach - it's about ensuring your business has the right support in the right areas.
Business coaching is about growth, strategy, and development. Legal advice is about protection, compliance, and risk management. Both are crucial, but they serve different purposes.
So, if you are working with somebody or considering working with somebody who might be veering into areas that are outside their expertise, my advice, business owner to business owner, is to stop there. Pay attention to the red flags and move on before any real damage is done.
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[00:00:20] Tracey: Welcome back everyone to another episode of the podcast. Thank you for being here. I'm going to address something in today's episode that I am seeing almost weekly in my business. I. And that is when business coaches overstep and get it wrong. I wanna start by saying, I think there are some incredible business coaches out there and business coaches have their place, all coaches have their place in fact, And I have so many connections with some incredible coaches in the online space, and some of my very dear friends are coaches. I love a good business coach, and I think that with the right coach, business owners can make really inroads into their business and they can achieve great things.
[00:01:03] So the ripple effect of the impact that the right business coach can have is immeasurable. Truly, I say that hand on heart. But, like all things, there are coaches and there are coaches. I talked about this on an episode in the podcast last year and I've spoken about it a lot on social media, and that is business coaches who overstep, and I've talked about it in the context of coaches who misrepresent their qualifications, of coaches who make promises they can't keep.
[00:01:34] Today, I wanna dive in and really explain the dangers of coaches who give legal advice. And when I started planning this episode, one of the titles that I was playing around with was "why most business coaches give terrible legal advice." And then I thought, well no, because they shouldn't be giving legal advice at all. Full stop. That's really the end of that episode, isn't it?
[00:01:59] And that [00:02:00] wasn't going to deliver much value for you. So instead, I wanna explain why business coaches get it wrong when they overstep into the space of providing legal advice. And not even joking, this comes across my desk once a week, sometimes more. Clients will reach out to me and they'll start with, my business coach told me this, or they'll start with, huh, I'm in this tricky situation and I did all the things my business coach told me to.
[00:02:32] And sure enough, as soon as I scratch the surface and dive in, they're legal issues. And sometimes I actually genuinely don't know if the coach even knew they were overstepping. Probably not in many of the cases, but sometimes I find that coaches have had certain experience and expertise and they are trying to add value.
[00:02:51] They are well intended and they're trying to help, but they've overstepped and it's really dangerous, and here's why. When a coach oversteps into the realm of giving legal advice, not only are they doing their clients a disservice because they're not lawyers. They're not supposed to be giving legal advice.
[00:03:12] They're not expected to know all the things attached to set advice, so they're doing their client a disservice. They are also though, leaving themselves really exposed in the context of risk because if a coach gives legal advice and a client relies on it and the client suffers a negative impact loss or damage, it is very possible that that coach is exposing themselves to an action in negligence seeking damages. they could be leaving themselves exposed to a claim for a lot of money, depending on the circumstances, depending on the scenario, the exposure is real.
[00:03:52] I am gonna share with you the top five areas that I see business [00:04:00] coaches overstepping and giving legal advice when they really ought to be staying away from it. The first is business structure. I cannot tell you the number of times clients have said to me, I am a sole trader because my business coach told me not to change to a company.
[00:04:16] My business coach told me I shouldn't change to a company until I'm earning seven figures. My business coach told me that because my industry is low risk, I don't need a company. There's a whole host of reasons that I've heard surrounding business coaches giving advice on business structure. Friends, let me just tell you this.
[00:04:36] You should be taking advice on your business structure from your accountant and from your lawyer. No one else. Truly, there's so many complexities attached to different business structure options and to what's going to best suit a client and we need to take into account a whole range of things, not just our own personal experience or what we reckon is gonna be best.
[00:04:58] So number one, business coaches giving advice on business structure. Red flag The second area that business coaches tend to give advice on, and this is shocking, is employees and contractors. I have had endless conversations with business owners who have been steered down the garden path by their very well intended business coach because the business coach is not familiar with the law, the legal implications, and how the courts are determining what's a genuine employee and what is a genuine contractor in a business arrangement. I kid you not, there is so much case law on this, it's not going to stop anytime soon. So there's constant changes and as lawyers practicing in this space, we need to keep our finger on the pulse consistently.
[00:05:45] I work with barristers who appear in many of these cases in the federal court just so that I can make sure that I'm keeping up to date with what's actually happening in real time. So the legislation changes are one thing, fair work guidelines are one thing, but [00:06:00] knowing how the courts are applying it is a whole other kettle of fish.
[00:06:04] This is where business coaches should be saying, you need to get legal advice. In fact, all of these points that I'm sharing with you is when business coaches should be saying you need to get legal advice. But a business coach needs to know when to pull up stumps and say, okay, that's not my area of expertise now. This is something that's really important that you need to consider. Go and talk to your lawyer. That's absolutely what should be happening. And tell you the best business coaches absolutely do that. So the difference between employees and contractors, the times the clients have come to me, sometimes being proactive, but sometimes being reactive because they're in a tricky situation saying, oh, I've got this contractor and my business coach told me that this person is really a contractor for this reason.
[00:06:48] So this is what I've done and we need to retrospectively look at that and say, well, actually, that person's not a contractor according to law. Or even worse, they are a genuine employee, but they're a contractor for superannuation purposes. That's complex in itself. The business owner is saying, my, my business coaches told me this, therefore I've done this.
[00:07:10] When really when we look back, we can go, okay, you've actually left yourself exposed now 'cause they're not actually a contractor truly according to law. That's a genuine employee through and through and you now have to look at back pay of this. So it's a really unpleasant conversation to have, but it's something that happens.
[00:07:28] Because as I say, well-intended business coaches delve into that space when they really, really shouldn't. The third is penalties for late payments. Business coaches seem to be providing advice and guidance around payment terms and wanting you to get paid because they absolutely want the best for their clients, and they want their clients to get paid, of course, but they overstep and they delve into the area of, well, you should impose this penalty for late payment.
[00:07:56] And the truth is, you can't impose penalties for late [00:08:00] payments. You can have interest provisions, you can have consequences, you can cease providing services. You can't impose a penalty. That'll be an unfair contract term and what it could mean is that your whole contract could be void. So that leaves the business owner really exposed.
[00:08:17] The fourth is the law around termination clauses. So my goodness, business coaches want you to do well. They want you to have consistent cash flow. They want you to be able to say to people that you're bringing to your coaching container, or your mastermind, or your one-on-one service offering, you can't terminate early.
[00:08:38] So they want you to be able to say, plan ahead, get the clients in, deliver amazing value. Oh, but they can't terminate early. Guess what? As of November 23, the laws changed. So yes, in fact, they can terminate early. Business coaches can't be expected to keep up with legal changes because they're not lawyers.
[00:08:57] But equally, business coaches shouldn't be giving legal advice because they're not lawyers. So that's a tricky one. And whilst again, best intentions at heart, the advice and guidance well intended, business coaches are overstepping and getting it wrong when it comes to the guidance and advice they're giving around what clients can and can't put into their contracts dealing with termination or early termination. Everyone needs an exit strategy and it's gotta be tailored for your business, it's gotta be carefully drafted so as that it complies with the law and so as that it meets the business's needs. And the fifth area that I see a lot is templates.
[00:09:35] Huh. Business coaches who either offer clients to buy from them their own templates. Here, this is my template. I use it for my coaching business. You should use it too. that's the first thing.
[00:09:45] Or secondly, you don't need a lawyer drafted contract. Go and buy a template from X, Y, Z or worse, here's my affiliate code. Go buy these templates. Templates have no place when it comes to legal contracts.
[00:09:58] I talk about that so much [00:10:00] on this podcast and over on social media. I talk about that in my email to my list, which goes out fortnightly. FYI if you're not on my email list, we'll put the link in the show notes and you are so welcome to subscribe and hear from me fortnightly.
[00:10:15] Templates are not suitable for legal contracts because they're not tailored. Every business is different. It's a cookie cutter solution that has so much risk associated with it because of what it doesn't include, and we don't know what we don't know. So if you're buying a template from somebody you don't know if it does all the things it needs to do, and you're not going to know until you need to rely on it.
[00:10:38] And by then, if it doesn't hold water, then it's all too late. There are so many reasons why templates shouldn't be used for legal contracts and business coaches who are giving advice to say that they should are again, doing their client a disservice, but leaving themselves exposed for the reasons that I mentioned earlier.
[00:10:54] I really could go on, but I'm not going to, you get where I'm going here. They really are the five most common areas that come across my desk in the context of business coaches providing legal advice when they shouldn't.
[00:11:09] As I said earlier, the good business coaches are going to say to you, that's not my wheelhouse. It's important. Go and talk to your lawyer, or, that's not my wheelhouse. I'm not going to talk to you about tax. Go talk to your accountant as they rightfully should, and the excellent, most excellent business coaches are going to do exactly what you've engaged them to do, support you, challenge you, give you the guidance, provide the framework that you need to move the needle in your business, to grow, to meet your objectives, to achieve what it is that you wanna achieve in working with a coach for a particular purpose in your business.
[00:11:45] That is where the magic happens when working with a coach, and I think that when you work with the right coach, you can achieve incredible things in your business. The business coaches who don't stay in their lane and [00:12:00] who overstep in the context of giving advice that they're not qualified to give because they're not lawyers, they're not expected to know in and outs of the law. They're not expected to be able to apply the law, and they're not expected to keep up with case law and recent court decisions. When they overstep into that space, they're doing their clients a disservice and they're leaving their own business really exposed.
[00:12:24] So those are red flags. If you are working with somebody or you are thinking about working with somebody and you have a conversation and you find that they're overstepping and delving into areas that are not their expertise, my absolute best advice, business owner to business owner, is stop there. Pay attention to the red flags, and move on before there's some real damage done.
[00:12:47] That's the truth.
[00:12:49] Your business lawyer wants to keep you protected. They wanna keep you compliant with the law so that you are protected. Your business lawyer wants to support you to achieve sustainable business growth with solid legal foundations in your business. Absolutely hand on heart. That is one of my main drivers in my business to support business owners develop that legal architecture for sustainable business growth. That's my role. That's my job. I'm qualified to do that. That's what I do. Absolutely. Your business coach isn't qualified to do that. It's not their role, it's not their job.
[00:13:24] What I love is when business coaches work with other professionals to develop a really holistic, all round, fabulous support network for a business owner. So coaches who connect with lawyers, accountants, bookkeepers, PR agencies, graphic designers, all the moving parts can be really well managed and connected and supported from a really fabulous business coach who knows their worth, who's solid in their expertise, and who's committed to supporting the client in the right way.
[00:13:57] all of that's undermined when the coach oversteps. [00:14:00] That's what I want to share with you in today's episode. As I say, it's coming across my desk more and more. It shouldn't be, but it is. That's the reality, and I wanted to jump on today and share with you the areas that I see coaches overstepping the most.
[00:14:15] Keep a lookout. Their red flags. Now you know. First is business structure. Coaches shouldn't be giving you advice on what business structure's gonna suit you best. The second is the difference between employees and contractors. You really do need an expert for this. The third is penalties for late payments, and the fourth is the law around termination clauses.
[00:14:34] Honestly, the law is changing so constantly in these spaces you can't afford to get this wrong. And the fifth area is templates. Business coaches either supplying templates or recommending templates be purchased for the use of legal contracts. DIY is for Bunnings, not for your legals. Templates have no business being used when it comes to legal contracts.
[00:14:56] I hope you have found this insightful. Now, as I'm finishing all of these episodes in this season of the podcast, answering two questions that are coming up from clients that I know will benefit my lovely listeners. Staying on theme are two questions that I get asked a lot in relation to coaches.
[00:15:12] The first is my business coach gave me their contract template that works for everyone in my industry. Why isn't it okay to use it? So it's, as I say, in relation to templates, DIY is for Bunnings, not for your legals, and no two businesses are the same. So whilst you might have a contract that your coach is using and saying that everyone in the industry is using it.
[00:15:32] First of all, that doesn't mean it's right. It doesn't mean it does all the things it needs to do, and your business is different to the person down the road, even if you are in the same industry. So you might be operating in a way that's inconsistent with that template, leaving yourself exposed. There might be provisions that are required industry specific that are missing from that template, and you just don't know.
[00:15:53] So whether it's industry specific or not, my view on templates remains unchanged. It's very clear. [00:16:00] Second question is, my business coach said I don't need lawyer drafted contracts until I'm making six figures. Is that true? No, that's not true. It's not true for all the reasons I've just discussed, but I kid you not.
[00:16:11] Those questions that are framed in almost identical ways come across my desk so often, and I can't tell you the number of times in the last six years of running this business where I've answered questions just like that around templated documents that are industry specific provided by, or recommended by coaches.
[00:16:29] So now you know that's my answer on that. I hope this has been helpful. If this has triggered anything in you or if it sparked a question or a conversation that you'd like to have, please don't hesitate to reach out. I love hearing from my listeners and I love hearing your questions. So if you do have questions that you would like to have me answer on the podcast, please reach out and shoot those through email, website, Instagram, dms.
[00:16:52] It's all perfectly fine, and I'll get all of those. But if you'd like to have a conversation about your specific business in relation to anything that I've shared today, I would love to hear from you. As always, thank you for listening. I'll catch you next time.
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