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

103 Replies
Bruce Graham

Agree with Owen - this is all very well, but it seems to leave out some of the more esoteric areas that one needs to consider when running a business:

a. "What's your budget?" - if it allows for 4 x your rate, then charge at 3 x your normal rate and let them save some budget "....for future projects and post-implementation enhancements..." and you get a different answer.

b. Loss leaders on the basis of a major contract. I am currently creating 5 courses at a loss on the basis that eventual sale could potentially lead to 100 - 400 courses.

c. Payment in advance. In business - "Cash is King". I was more than happy to take a large upfront payment in one case, and burn it off over a year, because it happened to be tax-time, and it paid the bill.

Selling is more than having a figure, it is about your worth and your business goals, and sometimes the figures need to be shifted around to accommodate that.

Bruce Graham

Nicholas Ostheimer said:

John Moore said:

$45 to $95 per hour. Simple.


That applies across the planet to developers and IDs then?


No - it does not.

I have just done some work for $20ph, however, there is a much bigger payday on the horizon from that particular supplier, so for me, it counts as "Research and Development".

Anyone who thinks they can apply a nice, simple "one size fits all" approach is, in my view, probably missing the bigger business picture.

My largest ever project weighed in at the equivalent of many hundreds of $ per hour, and it is still going, for what is relatively simple learning, but with some particular nuances that have never been applied in that way, for that client, before.

Theories and ranges like this are just that, but they are in no way prime business directives, or to be necessarily believed. If they work for you, then fine, but it's all about what you want, what you feel is right, and how much you can sell yourself for.

If someone approaches me for a piece of (incredibly simple) work, (perhaps transposing from one piece of software to another), at $20ph and I can do it while watching TV, and still provide them with what they want, (and perhaps more...), it is pure arrogance for any observer to say that my work is of a "lesser" quality that someone charging a higher figure, and for me, it is earnings, so it is fair game.

OWEN HOLT

Well said, Bruce. As stated before, when you are free lancing, you are running a business. But this isn't a business where you just sell "products" out a catalog with a list of set prices. You are selling solutions and solutions can be simple or complex... and the effort to execute the solution may be minimal or take a lot of effort... and the future implications of doing it well and building a relationship may be great or small... and... and... and....

Holly MacDonald

Yes, unfortunately it depends.

My usual answer is to share a range. Really I think clients/prospective clients are looking for orders of magnitude. "Are we talking $10,000 or $100,000?" But, some people don't want to talk price too early, so would counsel you to not state a price. 

I think it's more important that you are serving a market and individual customers who value products and services that you offer. If you are worth what you charge, then there's no problem. I don't compete on price and if a prospective client feels I'm too expensive, then that's what's important to them. I'll encourage them to seek out someone that falls within their budget. Pricing is not just about matching competitors' prices, but involves many other factors. 

I would also say that you might COST your project on an hourly effort, it doesn't mean you have to BILL on an hourly rate. 

Hope that adds something to the conversation.

PS - Owen, really nice spreadsheet and set of screenrs. 

OWEN HOLT

@Nicholas - Yes, of course, it always depends. Life is not simple and every client's needs are different. That being said, using some standard tools, or rates, or having a set approach to pricing is almost always a great place to start. But the place you start is not always where you end - it really does depend on your knowledge of the client and their needs balanced by your own long & short term business goals.

@ Holly - Thanks. Hope someone can find it useful as they start their journey. 

Steve Graupner

Thanks for the really great info. It looks like this is all for original development though.  I wonder about the cost for RE development of e-learning.  With the everything else changing: user/org needs, technology (on both user and Org side), e-learning isn't static.  I understand there are variables, esp in re the availability of original materials, SMEs, etc.  If nothing is available, then a redevelopment can be priced as original work.  But there are a lot of parameters out there that can render previously working e-learning not suitable.  E.g.  an org wanting e-learning previously designed for a workstation to work on a mobile platform like a tablet or smart phone.  Or the constantly changing security parameters e-learning has to contend with to reach to end user.

Phil Mayor

Steve Graupner said:

Thanks for the really great info. It looks like this is all for original development though.  I wonder about the cost for RE development of e-learning.  With the everything else changing: user/org needs, technology (on both user and Org side), e-learning isn't static.  I understand there are variables, esp in re the availability of original materials, SMEs, etc.  If nothing is available, then a redevelopment can be priced as original work.  But there are a lot of parameters out there that can render previously working e-learning not suitable.  E.g.  an org wanting e-learning previously designed for a workstation to work on a mobile platform like a tablet or smart phone.  Or the constantly changing security parameters e-learning has to contend with to reach to end user.


In my experience sometimes rework in another program takes at least as long as the original development time.

Ashley Chiasson

Phil Mayor said:

Steve Graupner said:

Thanks for the really great info. It looks like this is all for original development though.  I wonder about the cost for RE development of e-learning.  With the everything else changing: user/org needs, technology (on both user and Org side), e-learning isn't static.  I understand there are variables, esp in re the availability of original materials, SMEs, etc.  If nothing is available, then a redevelopment can be priced as original work.  But there are a lot of parameters out there that can render previously working e-learning not suitable.  E.g.  an org wanting e-learning previously designed for a workstation to work on a mobile platform like a tablet or smart phone.  Or the constantly changing security parameters e-learning has to contend with to reach to end user.


In my experience sometimes rework in another program takes at least as long as the original development time.


Good point Steve; I agree with Phil here - while lengthy revision cycles are rare, they exist, and this may be one thing you want to stipulate in your contract (the amount of revision cycles you'll allow before the price goes up).

Adam Mastalerz

I wanted just to continue and add to this discussion, I been discussing this  issue for a while that comes with pricing 1 hour of e-Learning.

In some cases 1 hour e-Learning is counted by the amount of screens, but that is not sufficient enough because some screens can be more complicated vs others.

We developed a tool which looks at 3 components:

Multimedia Complexity (how complex is the interactive media/content in your e-Learning course)

Level of Interactivity (interactivity level, how much does the user interact with the content/media)

Multimedia and Interactivity Percentage (if you have an entire course how much of it is plain text and images and how much of it is interactive)

The second set of questions, is how well is the content structured and documented, is it in the SME's head only etc.

Another question we ask is how complex is the subject and if assessments are prepared. Lastly we have to look at things like is this course independent learning is it instructor led, does it need to be compatible with mobile phones, is it rapid, is it blended etc.

When it comes to revisions, I think any developer has to set the amount of revisions allowed or have a revision policy when starting development, anything outside of the revision policy set should cost extra:

Example outside of a revision policy might be: Developer, spends hours to develop and interactive media piece. Client decided to change the storyboard and go with a different concept in which nothing can be re-used from the previous interactive media piece. (should be specified in your revision policy that major changes like this may cost more)

I would invite you to try to the tool and let me know your thoughts, the tool has tool tips that explains lots of things in detail and it tries to give a close approximation for developing online courses.

Tool can be found at:

www.scholarixsolution.com/pricing

Rob Billiau

There are a lot of answers here from a lot of different viewpoints, and it's fun to see how this can be approached from so many different angles. 

The only thing I want to add, is that "It depends" is probably a good place to START with a client, until you can get a real initial meeting to be able to suss out needs and expectations. Pre-qualification of your client's needs and expectations will probably be the greatest determining factor to being able to answer the question of rates.  You have to find out not just what they need, but also what they are imagining in their head to get any kind of good idea of where pricing should be. this is why a qualifying  meetings should take longer but, will probably save you headache later on from expectations not being realistic. 

The only other point I would bring up, which I saw once on here but I felt needed reiteration is this: Pre-qualify their budget. Dont be afraid to ask what they are budgeting for a project. This line of questioning can be the best determining factor for you to be able to price according to their expectations. If you can find this information out early, then you can save yourself a lot of time even in the pre-qualification stage, and lead your client down the path that will get them to a realistic goal. 

Bruce Graham

Phil Mayor said:

Agree with Rob about asking the budget.  saves a lot of wasted time.


Yep - budget. If the budget is less than you want/need, do not be afraid to say so, and explain with well-constructed principles. Do not get caught up in a price-wars, no matter how much you want the business.

If the budget is more than you want, get creative - offer more. For example, I had a project last year with a large budget. One of the reasons I won the business was because I bid 75% of the budget HOWEVER I included the outstanding 25% as contingency for updates after initial roll-out and a few months usage. That has now come to fruition. Not even a revision cycle per se, but way of building cost into a sales cycle. What's more, the customer has provisioned the 25%, and they/we know that we can now make a great course superb, based on user feedback.

This is all about understanding your customer and sales/sales operations/billing cycles etc. , not about "learning", and the more principles you learn the easier it will be to answer questions like "What does it cost?"

Chuck DuSablon

This has been a helpful thread. I started freelancing as an instructional and graphic designer after 15 years in the corporate world... but I started as a copyeditor, so over the years it's been expected of me that I'll "do it all," from project management to instructional design to storyboarding to editing to programming to deployment to you-name-it... good in some ways, not so good in others. There are reasons why we have more than one head on any given project! So as I struggle to price my jobs as a freelancer, it's been challenging for me to separate one role to the next, and price for what I'm actually doing without shorting myself when I think, "Oh, I can find or create the images on top of ID, it's no big deal." Well it IS a big deal!

Part of me wishes this thread was open to the people who hire us...  they're often the people who need to know what this kind of work entails, why we charge what we do, and how we decide what should cost what.

Enough ranting. Thanks to all who've posted above with the pricing calculators and info... it sure helps validate the thought process I go through when pricing new projects.

Chuck DuSablon

Bruce Graham

@Chuck - there are plenty of Articulate customers who read these threads - it is open to anyone, and I am sure that they have read it.

Often they read posts here before they decide who to approach - that I can CERTAINLY confirm.

That's the point.....who in business, in their right minds....would expose their commercials to another company? It's just not clever, and that is NOT the way that price negotiation works.

I have invoiced a few $ hundred for an hour of content, and I have invoiced over $25k for around an hour of content.

What it costs is an amalgam of how much you want, how much you need, how much they have, how much your competitors have offered, and how much you can "sell" for.

We add value - so sell on YOUR value, not someone else's.

That takes some investment to learn business kills - not "learning" skills.

Sarah Mordan

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


Fantastic post. Thanks Owen. Really nice way of estimating what you want to quote at the right rate and for the appropriate level. With you CourseDevTimeEstimator, should this open an Excel? When I open the xml through Excel, it imports the strings. Can you advise? Thanks.