Cost of developing 1 hour of elearning

I occasionally have clients ask me if there are any industry standards regarding elearning development, particularly around cost.

"Sean," they say, "How much should we be paying for an hour of elearning?"

"It depends," I say.

And honestly, they are never terribly happy with that answer. So I'm trying to come up with something a little more detailed. Obviously, there are any number of factors that come into play, but I was wondering if there were any quick and dirty estimates that you all use.

Thanks!

sean

104 Replies
Bruce Graham

@Adam,

Forgive me if I am missing something, (GREAT infographic by the way...), but it seems to be saying "...the more complex it is, the more it will cost you..." which is not exactly ground-breaking news

I appreciate it explains the components, but most people know those don't they, and want to know the cost?

Apologies if I am missing something.

Bruce

Adam Mastalerz

@Bruce.

I appreciate your input, to be honest there is clients that want e-Learning and may not even know what an LMS system is. For professional like us, sure this is old news.

I agree it doesn't really say how much 1 hour costs, but then again what does 1 hour really mean? (We attempted to show some of the components, that would go into determining the cost) that may be helpful to determine the length.

The link posted by @Tara is great, I use that quite often as well. But one hour can be really skewed at times, is it 1 hour for an average learner to complete? (everyone has a different way of learning). 

Thanks for the input Bruce.

No offence taken.

--Adam.

Alex Santos

Great article Adam, and great conversation thread in general with some very fine points made.  

After analyzing a project, I quote a price for a project based on a very high production standard employing instructional strategies we feel would be ideal for the skills to be taught.  That said, just because my team would like to shoot a custom-video segment of the target skills being performed doesn't mean the client has that kind of budget.  I am very straightforward with my clients and point out to them where major cost drivers for a project are, and working with the client to show where reductions could be made to fall within their budget.

Hope this helps,

AS

Adam Mastalerz

@Alex great point, we even took it further.

We developed a tool which helps clients determine how much it will cost. We are very honest with our clients as well and tell them right away what their dream course could cost based on their requirements.

Take a look when you have a moment and let me know your thoughts and if you think we missed anything.

http://www.scholarixsolution.com/pricing

Adam

Sheila Cole-Bulthuis

@Adam - what a great tool, really nice interface and ease of use, although I'm uncertain how realistic clients might be in assessing some of those factors.  I'd also be interested to know how the ID components are priced out; in my experience, this is one area where "cheap" bids differ most from "expensive" bids - when I was in a corporate position selecting vendors, the cheapest options usually did no/little actual instructional design.

While the calculation outcome wasn't in line with my own pricing, it certainly wasn't off by a factor of ten.  And of course in the end it doesn't matter if it's accurate for estimating my pricing, it just matters if it's accurate in pricing for Scholarix!

Sean Speake

I found that the prices weren't terribly off in some places, but were wildly off in others. As long as it works for you though. =)

I guess the biggest question I would ask (and that I ask clients) is - are you asking me to build what you already have without any instructional design or input (order taker approach) or are we working together to get this project to completion (partnered approach).

I prefer the latter - and often clients who feel that their content is ready to be cut and pasted into a tool are the furthest off.

Steve Flowers

I dig the tool.

Pricing really depends on the market. For government, in the middle of the range, it seems pretty close. Deviates a bit at the top and the bottom for gov't work. But this could be right on the money for Scholarix's market.

It's higher than I'd charge on all accounts but 1) undercharging for work is one of my greatest weaknesses and 2) I'm not a firm of folks with a ton of overhead. A different set of calculations apply to a firm that can handle a large scope / scale on a shorter timeline than a solo outfit can take on.

Bruce Graham

All interesting points. Like Sheila I would LOVE to understand a breakdown of those costs. On a positive note though - tools like this actually help some people who can use it as a "compared to me" site - thereby winning business.

I believe that "eLearning", (whatever that is now...) will soon split into "Corporate producing for corporate" (internal departments), "Corporate producing for other corporate" (bigger companies using bigger eLearning companies, who have higher overheads and in-house skills), and "Individuals/smaller operations working remotely via web-based infrastructure on a project-by-project basis", (the type of person I am - serving anyone who wants what we offer, or what we can project-manage using ourselves and others).

From what I see and hear, clients are increasingly shunning (or certainly questioning the prices of) the high-cost suppliers, and moving more and more to using more flexible, agile, lower-cost niche-skill supplier models when possible. Of course this is not the case in all scenarios, but I see it every day, more and more.

I have one great client who has me on annual retainer. Last year they used me to produce Storyline for them, and solve issues, based on the fact that they got more "bang for their buck" than from a larger supplier, and they got it faster. They used that larger supplier (with much higher costs...) when they needed some specific courses with a specific look-and-feel. Next year, they are bringing most work back in-house, and moving back to Studio '13, but I will be again there to provide expertise as their "Studio Superuser" across Europe.

Anyway - I guess my point is that savvy firms are finding other ways to do things, and I believe only a few of the larger eLearning companies will be around in 5 years, or they will have significantly changed their operating model, and teamed up with other companies/organisations - a bit like Kineo did with City and Guilds.

Ashley Chiasson

Adam Mastalerz said:

Hi,

Just wanted to post the calculator tool, because I think I linked to a blog post so perhaps it was hard to find.

In any case if anyone is looking for an e-Learning calculator to determine costs.

Please take a look here:

http://www.scholarixsolution.com/pricing/


Just used this tool to cost out a potential project, and I'm not sure how accurate it is, only because I couldn't imagine charging 12,000+ for 1 hour of eLearning based on the parameters I specified (all pretty low-level). Either that, or I'm pricing my services well below industry standard :P I tend to lean toward the Chapman Alliance estimates as they align more accurately with my service offerings.

John Moore

ELearning, Training Development, LMS and Course Development Cost 2014...

Okay, Everyone listen up...

I've been doing eLearning and multimedia work since 1999. You should charge $45 to $95 per hour to develop eLearning. Got that! You don't need a calculator. If you charge less than $45 your are not a professional developer.  To develop SCORM/TinCup quizzes, modules, WBT, CBT, online learning, job aids, etc... You should be charging at LEAST $45/hr. Period. 

The range is $45 to $95 per hour to do eLearning, Multimedia, Course Development, Training Development, LMS development, LMS Administration, HTML5/Flash/iPad/Android training content development and technical writing work.

Everyone got that? 

Stop undercharging for your work?!??! If you pay LESS than $45 to $95 per hour you are getting substandard work -- PERIOD.

PAY FOR GOOD WORK.  Not hard. Smh.

If you need a PROFESSIONAL eLearning developer or LMS Administrator contact me, stop dealing with amateurs.

John. G. Moore, Jr.

Sean Speake

In the 3 years since I posted the original question, I still haven't read a satisfactory answer.

You see, the answer is still - "it depends".

If a client wants me to take completed storyboards and convert it to Storyline, I like to say I'm not interested. (I don't always have that luxury, but in a perfect world...) Like I said in an earlier post, I prefer the partnered approach to the order taker approach.

If they want a simple conversion, they can do it off shore more cheaply than I can do it.

What I like to bring to the table is instructional design and adult learning principles. The flashiest course in the world doesn't matter if the content won't support it.

But that being said, I've found you need to price according to your client. A small non-profit is not going to have the same appetite as a large multi-national.

I guess what I'm trying to say is what I've found in the last three years is pricing is as much an art as a science.

I've looked through the calculator and to be honest, I still don't find it especially helpful.

Liberal use of custom interactions - "liberal" is not a term I can use for pricing. Does liberal use mean 25% of pages contain a custom interaction? 50%?

Define custom interaction. Something not natively built into Storyline? Custom flash?

And I'm not on board with how they define Multi-media complexity.

There's also the whole geography issue. What a head office in Toronto will pay for 1 hour of elearning may not be the same as what a small firm in Red Deer will pay. It could vary wildly in the US or in Europe.

Arbitrary figures or calculators just don't cut it. Pricing is something each person needs to figure out for themselves. And for me, ID is what costs.

Owen Holt

Here is what I use. I took the figures that Chapman put together but tried to make some meaning out of them for myself.in a handy spreadsheet.
Chapman provides some averages for three general course categories split into 3 levels of development effort across 12 development activities. While the breakdown is only provided for the average effort in each of the categories, I used the percentages derived from this to fill in the low and high effort buckets. Then, I use these numbers as a guide. For example, below you can see a course where I think my analysis will be:

  1. close to the basic course/average effort
  2. heavy on design
  3. light on storyboarding
  4. with graphics provided
  5. no video
  6. no audio
  7. Average authoring (thanks StoryLine!)
  8. Light QA Testing
  9. 0 Project management (I work alone)
  10. With a few reviews
  11. an average pilot
  12. and time for email back and forth with the client

My estimated time spent for one hour of training falls between Chapman's Low and Average effort for the basic course I am developing. (Even though I chose to put in a higher degree of time and effort into design).
Knowing the time you will spend is only part of the equation. You also have to know what you will charge. I've observed some make the rookie mistake of jumping out of the gate by charging what they used to make when they worked for a corporation. They forget that now they have all of the costs and overhead of their new business that they have to account for. So for example, assume a person had an annual salary of $65,000 as an ID, the hourly equivalent would be $31.25.

If they charged this, lost a few weeks for vacation (unpaid now), had business expenses of $10,000, and spent 25% of their time looking for clients, their effective hourly rate drops to about $21. If they had accounted for these other assumptions up front, they would have billed at a rate of $50 to reach their same prior salary, cover their business overhead, time spent engaging new clients, and their vacation. If I am just starting, and struggling to stay engaged (managing a 50/50 split between working and looking) my hourly rate would jump all the way to $75. Once I have a reasonable rate based on my desired income (what I think my work is worth - without being too greedy) adjusted for expenses and a reasonable work -v- work search split, the rest is simple math.

Attached is my spreadsheet you can use along with 3 screenrs that walk through it. My spreadsheet uses a modifier that is just a restatement of the cost per hour of training to a cost for each 5 minutes. This makes it easier for me to estimate courses that don't fit neatly into even hour buckets.

Part 1: https://player.vimeo.com/video/204931345

Part2: https://player.vimeo.com/video/204931355

Part3: https://player.vimeo.com/video/204931363

 

Ashley Chiasson

Owen Holt said:

Here is what I use. I took the figures that Chapman put together but tried to make some meaning out of them for myself.in a handy spreadsheet.
Chapman provides some averages for three general course categories split into 3 levels of development effort across 12 development activities. While the breakdown is only provided for the average effort in each of the categories, I used the percentages derived from this to fill in the low and high effort buckets. Then, I use these numbers as a guide. For example, below you can see a course where I think my analysis will be:

  1. close to the basic course/average effort
  2. heavy on design
  3. light on storyboarding
  4. with graphics provided
  5. no video
  6. no audio
  7. Average authoring (thanks StoryLine!)
  8. Light QA Testing
  9. 0 Project management (I work alone)
  10. With a few reviews
  11. an average pilot
  12. and time for email back and forth with the client

My estimated time spent for one hour of training falls between Chapman's Low and Average effort for the basic course I am developing. (Even though I chose to put in a higher degree of time and effort into design).
Knowing the time you will spend is only part of the equation. You also have to know what you will charge. I've observed some make the rookie mistake of jumping out of the gate by charging what they used to make when they worked for a corporation. They forget that now they have all of the costs and overhead of their new business that they have to account for. So for example, assume a person had an annual salary of $65,000 as an ID, the hourly equivalent would be $31.25.

If they charged this, lost a few weeks for vacation (unpaid now), had business expenses of $10,000, and spent 25% of their time looking for clients, their effective hourly rate drops to about $21. If they had accounted for these other assumptions up front, they would have billed at a rate of $50 to reach their same prior salary, cover their business overhead, time spent engaging new clients, and their vacation. If I am just starting, and struggling to stay engaged (managing a 50/50 split between working and looking) my hourly rate would jump all the way to $75. Once I have a reasonable rate based on my desired income (what I think my work is worth - without being too greedy) adjusted for expenses and a reasonable work -v- work search split, the rest is simple math.

Attached is my spreadsheet you can use along with 3 screenrs that walk through it. My spreadsheet uses a modifier that is just a restatement of the cost per hour of training to a cost for each 5 minutes. This makes it easier for me to estimate courses that don't fit neatly into even hour buckets.

Part 1: https://player.vimeo.com/video/204931345

Part2: https://player.vimeo.com/video/204931355

Part3: https://player.vimeo.com/video/204931363

 


Great breakdown and explanation! Thanks for taking the time to walk us through it

Owen Holt

Owen Holt said:

..... If they had accounted for these other assumptions up front, they would have billed at a rate of $50 to reach their same prior salary, cover their business overhead, time spent engaging new clients, and their vacation. If I am just starting, and struggling to stay engaged (managing a 50/50 split between working and looking) my hourly rate would jump all the way to $75.


I should point out that clearly other factors need to be taken into consideration and one should set realistic expectations. For example, just because I might need to charge a much higher rate to hit my annual income goals doesn't mean that it will be the right rate to win business or be a rate that is commensurate with my current skill level & experience. I use the excel sheet for guidance only, but there is not a form or calculation that I am aware of that replaces common sense and human intellect.