Working in Thirds
Based on management consulting, law firms, and other professional trainers we have a nice model to shoot for. They tend to work in thirds.
- 33% billable hours
- 33% developing the product
- 33% developing the company
In nearly all cases, this means class time. The goal here is to charge a high enough rate that it covers the other two thirds of your time. There are two considerations then when setting pricing targets. First, we need to determine how much we want to earn and fit it with what the market will handle. Second we need to look at it from the client's perspective in regards to how many total training hours they will receive.
For example, let's assume we want to earn €36,000 per year net. This means we will need to send out about €60,000 in invoices (not including sales tax) to cover income taxes, health insurance, retirement, etc. Assuming there are 1760 working hours in a year (44 weeks x 40 hours), we will have to set our prices at €102/hour to reach this goal. This is because we are assuming that only 1/3 of our time will be billable.
But it also depends on the training. If we have 6 participants in a course for 1 hour, that is 6 training hours. This translates to roughly €17 for each participant. Yes, these numbers seem a bit high for some markets, but we'll look at how we can make up for that.
Developing the Product
This third includes several tasks.
- Training prep
- Materials writing
- Identifying and adapting materials
- Post-lesson correspondance, feedback, and notes
- Professional research with direct training impact (e.g. reading a CUP teacher's handbook or english onestop)
If a client is receiving fully customized training, the time spent to develop and produce that training is billable. After all, a consulting firm doesn't only charge for the time they are in meetings, rather also for the research and preparation. If you walk into a company and say, "I add 30 min of billable time for each hour of your training so that I can provide you with a fully customized package," most will easily accept the proposal.
There are other ways to make this time add to the bottom line. If you are running a course website or online portal, this is also billable and is training. If you are offering assistance per email or telephone for participants, this is billable. If you are sending the participants follow up exercizes and links to websites post-lesson or part of your flipped classroom concept, this time is billable. If the client does not want to pay for it... don't do it. This will then leave you room for upselling in the future.
My recommendation is that the basic classroom training is the door opener. Then once trust is built and they are satisfied with the training, additional outside the conference room support can be added to the project.
Developing the Company
This is perhaps the most important but also most neglected areas for longer term business success. These activities include:
- Billing and admin tasks, including handling taxes and expenses
- Marketing and branding
- Industry profile (social networking in ELT, blogging, article writing, professional organizations, conferences, etc.)
- External profile (social networking with target market, website & advertising, identifying and acquiring new/prospective clients, retaining and upselling current clients)
- Professional development not related to a specific client (conferences, training courses, online/print research, etc.)
The Work Week
So, by allocating and dividing our time in thirds (and supporting it financially) freelancers can achieve business growth, stability, and obtain a more suitable work life balance without burning the midnight oil.
To close, let's make this a little more tangible by showing how this would look for a normal 40 hour work week.
14 hours in class
13 hours developing the product
- 5 hours preparation - some billable
- 2 hours out-of-class contact (email feedback, course website, etc.) - all billable
- 2 hours travel
- 2 hours professional research for specific clients
- 2 hours writing materials
- 4 hours industry profile
- 4 hours external profile
- 3 hours professional development
- 2 admin work (the key here is to make this as efficient as possible)