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3 Tips to Know Before Negotiating Your Next E-Learning Contract

RichardWatson's avatar
RichardWatson
Super Hero
8 years ago

Making a living as a freelance instructional designer can be challenging, especially when it comes to negotiating new projects.

Depending on the health of your sales pipeline, you may be tempted to just say Yes! to any opportunity that comes your way. But it’s important to negotiate each project so that both you and your client are happy with the agreement.

I’ve negotiated several e-learning projects and learned a few things along the way. Here are my three tips for managing e-learning contracts that will set you up to thrill your clients and earn the compensation you deserve.

Tip 1: Know What Makes You Valuable

E-Learning designers bring a lot of unique skills to the table. Starting from scratch, we magically create courses that educate and excite learners. It’s unfortunate that many of us don’t realize the value we bring to our clients. As a result, we tend to sell our services short when negotiating projects.

This is bad news for several reasons. Chronic low-balling can lead to burnout over time, cause your client to regard your work as less valuable than your competitors, and even send the message that you’re desperate.

It’s your job to communicate your value clearly. Start thinking about the qualities you bring to the table. What value do you communicate to your potential clients? What is unique about you, your company, and your products and services?

If you don’t know, take some time to figure it out before you negotiate your next gig. Your answers will come in handy later.

Tip 2: Make Good Estimates

Once you’re clear on why you’re an awesome e-learning developer, you’ll want to put a dollar value on your services.

Estimating a project rate can be a challenge if you’re just starting out. There are several factors you’ll need to consider before you can come up with an accurate number:

  • Timeframe of the project
  • Complexity of the course
  • Type of interactions the course requires (e.g., custom vs. built-in)
  • Length of the course
  • Audio and video needs of the course
  • Type of design approach you think you’ll use (e.g., click-and-read vs. branched navigation)

When I understand the course requirements, I like to break down my e-learning projects into the following categories and tasks:

I use information from past projects to estimate the average time it takes to complete each task. (Pro tip: Always track your time on projects!)

By using a spreadsheet, I can quickly make adjustments as needed. For example, if the client provides a storyboard or has completed a front-end analysis for the project, I remove those calculations from my quote.

You can download a copy of this spreadsheet to use in your next project.

Tip 3: Share the Workload with Your Client

Once you know your costs, you’re ready to write and deliver your quote. It would be great if, at the end of every project pitch, our clients said, “That sounds great! Where do I send the check?” But the reality is sometimes you hear, “That’s a little more than we were thinking.”

Pricing is a sensitive topic for many e-learning designers, but if you know the value you bring to the relationship, it doesn’t have to be.

Everyone wants a deal, but it’s never a good tactic to enter into a price war. There will always be someone who is willing to charge less than you. Instead of lowering your prices, see if your client is willing to take on some of the responsibilities of the project.

Since you have an estimate of what each task costs, you’re in a position to helpfully say, “Would you be willing to do task X or task Y? That would decrease the project cost to X amount.” By delegating some of the project tasks to the client, you’re able to provide a “discount” without devaluing your work.

When using this strategy, make sure you have a well-written, crystal-clear statement of work that states your expectations. You may choose to charge a fee if your clients don’t shoulder their share of the work. I usually charge an hourly rate when I’m required to step in and help a client with something they offered to do originally.

If delegating doesn’t work, here are a few things you might consider in order to lower the overall quote without reducing your rates:

  • Look for ways to shorten the course
  • Reduce the number of interactions in the course
  • Replace custom interactions with built-in standard interactions
  • Use a standard player instead of a custom player for Articulate Storyline
  • Use in-house narration in place of a professional narrator
  • Use a template-based approach instead of designing from scratch

Using these strategies, you’ll be able to negotiate a contract that keeps your rates in place without losing the client.

Win-Win Negotiations

If you spend the time up front identifying the value you bring to the business relationship and understanding your client’s needs, you’ll be able to settle on a project fee that meets everyone’s expectations. It’s a win-win: happy client, happy freelancer!

Helpful Resources:

Published 8 years ago
Version 1.0
  • ChrisWirick's avatar
    ChrisWirick
    Community Member
    Great article, thanks! But I am dismayed to see we, as eLearning developers, aren't pricing our work as valued work. $25/hour for project management? Your plumber charges triple that rate to unclog your toilet. $50/hour for development? Your auto dealership charges more than that rate to change your windshield wipers. I've had the misfortune of seeing what some big corporate eLearning vendors charge for this type of work, and we're talking $200 an hour (!!!). Sure, freelancers can't get into those sweet levels of corporate insider arrangements, but $25 an hour? Good luck making a living after paying your self-employment taxes, your skyrocketing health insurance costs, your unpaid marketing time, your software and hardware costs, and on and on and on.

    Hey, I get it, we want to price our work to the point we can get work. But if everyone is racing to the bottom on pricing, no one will survive. How will anyone ever consider us as instructional designers as professional specialists if we don't price our work like professional specialists? We have a rare skill that's developed over countless hours of study and experience and we need to price our services accordingly!!!
    • RichardWatson's avatar
      RichardWatson
      Super Hero
      Chris,

      You make some excellent points and I agree.

      Note: If you look closely, you will see that these are sample numbers. They are not meant to be "industry standard" rates. I just used them to show calculations in the spreadsheet.

      With that being said, I do see a lot of people charging $20-$30 per hour which I think is sad. I've even seen some overseas "e-learning designers" offering to create courses for what calculates out to be $10/hour. If you do that enough, you will go out of business and/or burn out.

      I'm a strong advocate of encouraging people to charge competitive rates in the industry as doing anything less devalues what we bring to a business transaction. Of course, you have to have the knowledge/skills to deliver that value as well. That's why I encourage people in this article to know their value.

      It's great to be a creative in the field of eLearning but you also need to be business savvy as well. It starts with knowing your value, being a good estimator of what things cost and knowing how to price your work competitively.

      Thanks for sharing your thoughts.

      Richard





  • ChrisWirick's avatar
    ChrisWirick
    Community Member
    "I do see a lot of people charging $20-$30 per hour which I think is sad"

    Not only sad but dangerously close to minimum wage after removing the extra taxes and expenses of self-employment. :(

    I do some freelance work on the side, mainly for creative exercise, but work full-time as an instructional designer for a large organization. I've been fighting this stigma for many years. Management often doesn't deem us a highly-skilled trade worthy of equivalent compensation, yet they'll sign a contract (without blinking an eye) with an outside vendor who charges $200 an hour for a fixed-price contract where even the number of hours is grossly overinflated. It's just baffling. And infuriating.
    • RichardWatson's avatar
      RichardWatson
      Super Hero
      So true.

      The question is...

      Who is creating this image?

      Until people in the L&D field start to see and present themselves as something more than "order takers", it's going to last for a lot longer in my opinion.

      Too many people at senior levels of management (e.g., those that control the budgets), look back to their college days and think that training is just delivering information and ANYONE can do it.

      I once had a friend that worked for a company that spent millions on training videos but could care less if they actually made a difference in how employees performed in their day to day jobs. Of course, we all know that Training is the first department to cut when things are going bad.

      I too have always been amazed at how many times I've consulted (while working as an employee in a company) about changes that could be made to improve performance, only to have it fall on deaf ears. Weeks later, they would pay out thousands of dollars for an outside consultant to tell them the EXACT same thing.

      Your turn. :)


      • ChrisWirick's avatar
        ChrisWirick
        Community Member
        I once had a manager say "Why should we pay eLearning developers $X just to do this **simulates typing on a keyboard** all day?" As if we are just doing clerical data entry or equally menial.

        Hmm, last time I checked, programmers, attorneys, accountants, and **gasp** managers also do this **simulates typing on a keyboard** all day. Yet somehow they're worth the big dollars. Bizarre.

        You're right, we're doing a terrible job of marketing our skills, and advertising our work for low hourly rates does not help the situation.

        I actually exiled myself from eLearning work in my organization for a few years because I had a major clash with my manager regarding an outsourced work project. It was an existing paper-based course that needed to be turned into a basic page turner. Cost per the vendor? $98,000!!!!! I could have done that same work in less than 100 hours. Easily. The vendor's fixed-price contract included 600+ hours (!!!) of work at various rates for the various roles (PM, ID, programmer, multimedia specialist, etc. (each well over $100/hr). AND WE PAID IT!!! I flipped my lid. I argued it was a fraudulent contract and we were getting taken for a ride. Because it was, and we were. But my opinion (I had just spearheaded the formation of our own internal eLearning development group and we were just getting started) was not taken seriously at that time. The fallout with my manager was tremendous, and I didn't return to eLearning development work until she was retired and gone.

        Sorry for the long anecdote, but it dovetails with your experience that outside vendors always know more and are always worth far more $$$ as far as management is concerned. It's an outrage.

        Yet on the flip side small-shop freelancers are torpedoing themselves by offering to do work for $30/hour. We're destroying the occupation, people.
  • Jerson-Campos's avatar
    Jerson-Campos
    Community Member
    Great post Richard. I use a spreadsheet developed by Owen Holt, but I like the way you present your time and costs so it can be shown and understood by the client. One thing that I have been looking for is estimating "per slide" development. It seems most of the work I get, clients have no idea how long the course is, they just have a powerpoint presentation that has for the most part been vetted for content and they wanted converted to an online course.
    • ChrisWirick's avatar
      ChrisWirick
      Community Member
      I think "per slide" is a worthless measurement. Some slides might have 2 lines of narration and need a couple of simple interactions. Some slides the client provides really should be split into a half-dozen because they've included so much narration and on-screen activity on a single slide. They will balk at paying $X for the simple slides while you'll be making a pittance by charging the same $X on the more complex slides.
      • Jerson-Campos's avatar
        Jerson-Campos
        Community Member
        Not if done correctly. Ask to see the powerpoint and figure an average. I usually take a look at the slides before I give my estimation and break down how many are Level 1 type of interactions, how many are Level 2 type, and so on. It's the same thing with developing a "1 Hour" course. It can vary by complexity, graphic production, audio, and design.
  • Thanks for the great article. It's a useful reminder that it is important for us to not only remember our value to the client, but to make sure we clearly articulate that value to them.
    • RichardWatson's avatar
      RichardWatson
      Super Hero
      Tehmina,

      Agreed!

      As eLearning freelancers, we need to communicate the value (e.g., the benefits we provide) to our clients and how we can help them solve their BUSINESS problems. We are not people who make things "pretty" but people who have the skills/knowledge to help them cut their costs, save time, increase their revenue, etc.

      Thanks for commenting!


      Richard
  • KarinPfister's avatar
    KarinPfister
    Community Member
    This was a fantastic article and I also learned a lot just reading your dialog here. Thank you for this pertinent information!
    • RichardWatson's avatar
      RichardWatson
      Super Hero
      Karin,

      Thank you so much for stopping by to comment. Much appreciated!

      Richard
  • Great Article and discussion, as well. I have also been privy to (and in the center of) the disconnect that exists between "those who do and know how to do" and management/senior leadership. It's a very difficult barrier to surpass, especially when they band together in a grossly unified front.
    • RichardWatson's avatar
      RichardWatson
      Super Hero
      Amanda,

      Unfortunately, working with senior management is a skill that has to be developed over time. To me, it comes down to picking your battles. If you are the only person on staff who has the skills and expertise, then it means you have to become the voice of reason. That being said, carrying that responsibility can be well.... tough! Believe me, I've been there, done that and have the T-shirts!

      I've heard it takes about 15 minutes to change an organization's culture in the wrong direction and more like 3-5 years to transform it in a positive way.

      One step in the right direction is for L&D professionals to understand the value they bring to the table, understand what the business drivers are for senior management, and then execute accordingly.

      Most Business Execs are not that interested in the technology you use, your learning objectives, or learning theories (e.g., andragogy, cognitive dissonance theory, cognitive load theory). Perhaps if L&D professionals talked about how the new set of courses will increase the company's market share, and/or increase their revenue or even decrease operating expenses, it would be a step in the right direction for this industry.

      Of course, there will always be cliques and power plays that will get in the way of progress as well as the occasional executive who "knows more about creating content then you do" because, remember, "Training... anyone can do it!"

      To leave this on a positive note, "It's not a sprint, it's a marathon!".

      Thanks for commenting!

      Richard


      • AmandaJohnso271's avatar
        AmandaJohnso271
        Community Member
        Agree on all counts! Well said-and thanks, Richard, for the stimulating topic.
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  • mikemcdonald's avatar
    mikemcdonald
    Community Member
    Great dialogue there guys! Fundamentally, it's the difference between the 'cost-plus' vs the 'value-based' approaches. Freelancers will always take a battering on the former, as the $/hr is tangible and easy for a client to get '3 quotes' on!
    • RichardWatson's avatar
      RichardWatson
      Super Hero
      Mike,

      Thanks for sharing. I agree.

      It's also important to note that other freelancers have the ability to either hurt or help their peers in regard to working with clients. If a freelancer's goal is always to quote the "lowest" price and "win" the deal, it is the freelancer that will lose in the end.

      Again, thanks for taking the time to read/comment on the article.

      Richard