Cost of developing 1 hour of elearning

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

Hi Sean, have you seen this resource already? Despite the title, it does contain info about both time and cost.

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.

Hi there Eric, and welcome! Since the site allows downloads, I downloaded the presentation and attached it to this post. Hope that helps.

Thank You Jeanette, this is a great presentation!  I really appreciate your extra effort to help me out.

Thanks again,

Eric

I've referenced Karl Kapp's article on estimation.

http://www.astd.org/LC/2009/0809_kapp.htm

In my experience "it depends" is a big x-factor. But you should be able to get a rough order of magnitude that you can line up against an expectation of quality on delivery.

I've attached a document to this post - will attach another to a follow-on post. The first document is a quick estimator based on this chart and my experience in the industry. This is based on GSA schedules (government) which may be significantly higher than what you might experience in your industry. These are also rough estimates for proportions of distribution between labor categories. Your mileage may vary. The second is a definition of some factors commonly associated with interactivity rubrics (one factor in the calculation of cost / value).

I've found the best things for maximizing value and minimizing risk are:

1. Complete a good pre-design analysis. If you go into a statement of work with a weak description of the delivery, or leave your expectations to interpretation... you are going to pay more for that risk.
2. Separate the expensive and special outputs into separate deliverables. Need a 3D model or a complex animation? Make that a separate delivery. The risk is that if you define one type of output, the vendor may tend to paint the entire deliverable with the same level of effort brush - handily masking more simple tasks under this level of complexity. They are, of course, a business. Maximizing profits is the name of the game. Particularly if you can do this while wowing the customer.
3. Be aware of labor categories. Instructional media design and development takes all kinds of team talents. If your contract is not firm fixed price, you'll end up racking up expensive hours if you don't have stratification of those hours specifically spelled out in the contract (an ISD is more expensive than a graphic artist, and typically less efficient at those tasks).
4. Stick with known quantities. A trusted partner is worth it. The best way to remove risk is to know who and what you're dealing with (this point and number 1 can lift huge weights of worry off your very own shoulders).

~Steve

Here's the second document - interactivity factors. For the record... I don't like the LOI models like this one. They tend reduce interaction to a generalization when interaction is intentional and by design. A tool is just a tool unless it's used by a *tool*.

$30/hr to $50/hr is the range (level 1-3).

$40/hr is the mean.

The mean range is $35 -$45/hr.

Again, $40/hr is the mean.

You should charge a least $38 to $45/hr to do anything in

eLearning. The low end is if you can get a 12 month+ contract. 

Shorter contract = higher hourly rate ($45+/hr).

To do higher level 3 work (lots of simulations, etc...),

the fair rate is $45 -$60/hr.

This is for doing eLearning production (development) work.

If you have to do everything (clean-up storyboards, develop 

simulations, track QA, tight deadline, etc...) the range is $50 -$70/hr.

These are for freelancer eLearning developers.  

But, it's capitalism, so YMMV. Any thoughts? Comments, etc...?

http://goo.gl/Dlu5R

I'd like to see the link you referred to but it is blocked on my companies network.  Any other way to view it?  Thanks You,

Eric

We also posted an interesting article that is helpful in defining one hour of e-learning.

Please take a look here.

http://www.scholarixsolution.com/wp/cost-of-developing-1-hour-of-e-learning-a-better-definition/