Forum Discussion
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
- SarahMordanCommunity Member
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:- close to the basic course/average effort
- heavy on design
- light on storyboarding
- with graphics provided
- no video
- no audio
- Average authoring (thanks StoryLine!)
- Light QA Testing
- 0 Project management (I work alone)
- With a few reviews
- an average pilot
- 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. - RachelBarnumCommunity Member
I just wanted to add in another resource that I've used (or really, a collection of resources): https://christytucker.wordpress.com/2013/09/09/instructional-design-hourly-rates-and-salary/
I also wanted to point out that there hasn't been much mention of agency vs. individual which may be why the prices seem to be so high for some of the calculators. An agency is likely going to have a separate ID, dev, graphic designer, project manager, etc, plus have more overhead in general.
Very few individuals are an expert at all of those items, so you're paying for the expertise in each little piece of your elearning development when hiring an agency.
Some people don't need a full agency though, and that's where we come in as freelancers.
I think Owen's example is fantastic - there's a lot that goes into pricing.
I've also seen a couple people post the Slideshare on How Long Does it Take to Create Learning. Here it is broken down: http://www.chapmanalliance.com/howlong/ - I have used this formula once so far, and it has worked out (it actually seems to be giving me more time than it actually took, but it was a much more casual project than usual as well).
- OwenHoltSuper Hero
Thanks for the shout-out Rachel.
@Bruce Graham... 100% agree that you have to love what you do; which means more than just the "learning" side of doing business. You have to love doing business. Sometimes, like certain foods, this is an acquired taste that you gain only by facing your fears and taking some chances.
- SeanSpeakeCommunity Member
Thanks Jeanette, that's awesome.
sean
- RandyBorumCommunity Member
@Jeanette - Thanks- as always - for your timely help in providing a helpful resource.
@ Steve- Really interesting resources ... an actual "estimator"? Golly. Excellent practical business advice by the way. Appreciate your insights.
- RandyBorumCommunity Member
So - if I'm understanding Chapman's presentation - the average development cost is a little over $100 per hour. I appreciate that different people, contributing different elements to the team effort may have an hourly rate above or below that, so...
everyone - Is USD$100/hour fairly consistent with your experience of usual and customary billing rates?
Please say: "It depends." ....
Thinking about Sean's original query here - when asked: "How much should we be paying for an hour of elearning?" - would folks generally feel comfortable saying something like this?:
"Industry research suggests that a basic, but professionally produced, hour of eLearning requires about 185 hours of effort at an average cost of about USD $19,000. But the reality is that price varies a lot. Costs can be lower if the hour doesn't involve any interactive learning exercises or higher if it includes higher-end elements like simulations or games."
- MohammedAyubCommunity Member
How many institutions / corporates actually pay the price of $ 19,000 for developing 1 hour of interactive animated content is the Million Dollar Question...
Sometimes the wisdom of the crowd is close to insanity... coz they constantly recyle without actually thinking.
- SteveFlowersCommunity Member
Yes, I think that "it depends" statement captures fairly accurately. It comes down to expectations. Complex media requires complex design specialization and specialized development labor. That's expensive no matter which way you slice it.
I think the problem is in packaging expectations and the lack of granularity to most statements of work. In many cases you can spend a little on some highlights and get a lot of mileage out of those AND the rest of your design package. Too often projects are scoped in one hour increments. I always say "part task is powerful", focus on the elements that will give you the greatest gains first. If everything else falls away you still have the powerful stuff.
I work for government so I have that expectation framing. But I also work independently as a consultant. The price range difference is staggering, in my opinion. My rates are significantly lower and my work quality is generally higher than many of the contract providers I've worked with. But I also bite off smaller pieces. Usually much smaller and normally specialized outputs. My point is I don't think the value is often there for many of the deliveries that people pay for (this isn't always true, I've seen some really kick ass stuff do some really kick ass stuff).
I tend to view my independent work rates sort of like an auto mechanic would. I have an hourly rate that flexes a little based on the complexity of the output. I know how long it will take to do X. So I can quote a firm fixed bracket based on a set of assumptions. I like to keep the modules small and tuned around a measurable skill change. A 15-20 minute module could cost between 2k and 4.5k depending on the types, quality, and quantity of media. I'll usually build Level II IMI with some Level 3 highlights, content chains, or assessment chains. This is on the low side of my industry estimator. But I don't really have much overhead.
- SteveFlowersCommunity Member
To your other point, $100 is atypically high for an independent contractor. For a large vendor, the rates may balance near this level due to the overhead carried by a large firm.
Offshore work will be significantly lower for similar quantities (and is gaining quality every year). This should drive competition and quality edge.
- PoornimaRamachaCommunity Member
Very useful piece of info. Thanks guys!
- BenDCommunity Member
Steve,
Thanks for all the resources you post. These estimators are particularly helpful.
Ben
- HollyMacDonaldSuper Hero
Steve Flowers said:
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:
- 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.
- 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.
- 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).
- 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
Awesome resources Steve, it's always good to have confirmation that you are in the ballpark.And nice that when I go searching in the forum I find the answer I'm looking for.