Last week, I talked about how charging an hourly rate is a great way to start out in your freelance e-Learning career, particularly as you get to know your own work pace and abilities. When you’re first building your business, charging an hourly rate helps you make sure you get paid for all of the work you do, and helps your new clients minimize the risks associated with working with a new vendor (because if things don’t work out and they decide to move on, they’re only on the hook for the time you’ve already spent with them and not the entire project cost).
Eventually, however, charging an hourly rate can present new challenges, and sticking with an hourly rate model can hold you back from growing your business and making more money. As you progress with an hourly rate, you’re likely to run into tough questions like:
- When can I raise my rates?
- How do I justify a rate change to my existing clients?
- How do I avoid getting into bidding wars with other freelancers?
- How do I avoid having to track the different rates I’m charging different clients?
These are definitely solvable problems, but before you spend too much time on them, consider that there’s a better solution: charging by the project.
How to Evolve to a Project-Based Mindset
Evolving your business model from hourly to project-based can be difficult at first, because it requires a shift in how you view your own value, and how your clients see it as well. Before you make the leap, consider these three ideas:
1. You aren’t just bringing your Instructional Design skills to your clients—you’re also bringing your relationship and business skills to them.
People skills matter! No matter how much of a ninja you are with Storyline, or how cutting-edge your e-Learning materials are, the most valuable thing you bring to your clients is the relationship you foster with them. If you’ve created a relationship with them where they know they can trust you to understand their needs, they will value you more as a vendor both socially and financially. Think of it this way: most businesses have people in account management roles, and account managers are there to understand their clients’ businesses and maintain those relationships. The more effective an account manager is, the more likely they are to keep their clients’ business and grow it over time. As a freelancer, you need to perform the account management functions, and when you do that well, you’re using skills with value that extends beyond your e-Learning expertise.
2. As you get better at creating learning materials, your quality will increase, and the time you need to finish projects will decrease.
This is the great contradiction of hourly work! As your skills develop, tasks that used to take you several hours may only take minutes. If you charge your clients by the hour, they’ll be paying less and less for your work as it progresses, and before you know it, you’re making beginner-level money for advanced-level work. That’s not how you want things to go!
If you start to work around this by charging for hours you didn’t actually work (e.g., if a small course only takes you an hour, but you charge your client for two hours, because that’s how long it took you at first), you have to keep track of both the hours you work and the hours you charge for, which can be a bit of a logistical nightmare.
When you move to charging by the project, you stop having to worry about tracking hours and monitoring your own productivity, and you can focus on higher priorities like creating e-Learning materials and developing your client relationships.
3. Your success charging by the project will be largely influenced by your ability to estimate and plan your projects effectively.
This point is critical—the secret to successfully becoming a project-based freelancer is creating accurate estimates and writing project proposals that are specific about what work will be done and set reasonable expectations. I covered how to write a project proposal in a previous post, and as you’re getting ready to make the switch from hourly to project-based, I encourage you to revisit this topic to ensure your proposals are as effective as possible.
Getting Clients to See Your Full Value
Once you’ve made the mental commitment to migrate to charging by the project instead of by the hour, it’s time to get buy-in from your clients. To do this, I recommend focusing on finding ways to show your business and personal skills.
Showing Clients Your Soft Skills
A few years ago, a new client approached me and asked me to build five e-Learning courses for them. They were pretty eager—in fact, ten minutes into our first phone call, they asked “So how much do you think all this will cost?”
I bit my tongue and resisted the urge to throw out a number, and instead put my business and personal skills to work. Instead of asking about what would go in the courses, I started by trying to identify their business drivers. What problems were they looking to solve? How had they arrived on e-Learning as a solution? What were the specific pain points of their current situation?
By conducting this mini-analysis with the client then and there, I was able to accomplish three things: (1) I helped him see that an accurate estimate would require a lot of information, and that an on-the-spot estimate wasn’t likely to be useful; (2) I demonstrated to him that I had business skills—that is, my ability to analyze his needs and develop a tailored solution was additional value I brought to the table; and (3) I established a foundation of trust by showing that I was an effective listener dedicated to providing an accurate estimate, rather than an immediate one.
In the end, I won his business, and he later shared with me that although my estimate was not the cheapest he got, I had inspired so much confidence that he chose me based on trust. Since that first project, I’ve worked with that same client several times, and I often reflect on the thought that our long-term relationship would never have been possible had I stuck with charging by the hour.
How to Charge by the Project
Of course, the next big question is “How do I know how much I should charge per project?”
In his recent article Pricing 101, Jake Jorgovan highlights the two biggest mistakes a freelancer can make at this stage: (1) Creating a project estimate based on the number of work hours you think a project will take; and (2) setting an amount based on what the rest of the market is charging. These are flawed approaches, he argues, because if you’re doing the work of estimating the project in hours, you might as well charge by the hour, and if you base your prices on market value, you’ll have trouble getting paid what you’re worth.
So how do you come up with an estimated amount that will be lucrative for you and still represent a good value to the client?
Jorgovan argues that there is no single approach or formula that can used consistently, so instead, he recommends basing your estimated project cost on three factors: (1) your relationship with the client, and specifically how much you like them; (2) the amount you believe your client is willing and able to pay; and (3) how much value you’re providing to your client. I encourage you to read the article in full, because it makes compelling cases for these ideas.
As an e-Learning freelancer, I urge you to consider Jorgovan’s third factor the most heavily, and base your project estimate on how much value you’re bringing to your client. Your client is looking for your e-Learning work to solve a business problem they have—and from that perspective, you’re not selling courseware, you’re selling solutions. The solutions you provide are very likely going to have a positive impact on your client’s business, whether that’s by helping them generate more revenue, or perhaps even growing their business overall.
It might help to consider your migration to project-based work as a three step process. First, spend time shifting your own mentality from hourly work to project-based work, and commit to writing effective project proposals. Second, give yourself opportunities to demonstrate your business analysis and social skills to your client—and make sure you’re showing them these skills and not just describing them. Third, develop project pricing estimates that reflect the value of the solutions you’re creating rather than estimates that simply reflect the number of hours the work will take you.
Never forget: you are more than the hours you work. You have years of experience, talent, knowledge, and skills you bring to the table. Understanding and communicating your value is what will make the biggest difference in your e-Learning career. The sooner you start seeing yourself as a dynamic professional who partners with clients to solve business problems, the sooner you’ll be able to grow your own business through lucrative and rewarding projects and relationships.
How have you tackled pricing in your own freelance e-Learning career? Do you prefer to charge hourly, or on a per-project basis? What challenges have you run into when making the transition? As always, I encourage you to join our private Facebook group to share your experiences and learn from others, or chime in on the conversation on Twitter using hashtag #eLearningBiz!
Editor’s note: This post is part of my ongoing 2017 series, “Succeeding as an e-Learning Freelancer,” a comprehensive look at the ins-and-outs of working independently in the Learning and Development industry. All of the previous posts in the series can be found here.