TSS #006: Ditching Hourly: How to Price L&D Expertise

Read time: 5 minutes

Pricing services is a huge pain point for L&D freelancers and consultants.

You know your skills are top-notch.

You help clients transform their businesses through your expertise.

But putting an exact price on your worth? Agonizing!

How do you calculate rates without undervaluing yourself or scaring away clients?

You do mental somersaults trying to figure it out.

Imposter syndrome creeps in.

The default is to just mirror what others do — letting outdated hourly billing limit you.

But that comes with huge pitfalls…

There’s a better way that values your expertise and transforms how clients see you.

This will change everything about how you price and profit long-term.

Let's jump in…

Why hourly billing is a dead end

We get it - when people go solo, their automatic reflex is:

"How much should I charge per hour?"

We're conditioned to think 9-5.

The old-fashioned approach is to charge hourly rates, with your fee based purely on hours worked.

Many still think today that hourly billing is the "right" model.

But here's the thing...

For skilled professionals who know their stuff, hourly billing can actually destroy profitability.

There are only so many hours in a day.

Trade time for money, and your earnings get capped.

As you get better and faster, projects take less time. But your hourly rate stays the same.

To earn more, you'd have to charge ridiculous hourly rates - like $7-8k per hour to justify solving a $50,000 problem in a matter of a few hours.

And even then you'll hit a ceiling.

It's like that parable of the mechanic who charges $10,000 to replace a screw.

Let us recount it for clarity:

A ship's engine once failed, and despite numerous attempts, the crew couldn't identify the problem. They decided to call in a specialist. After briefly examining the engine, the specialist promptly replaced a single screw. The ship was fixed. Astounded, the ship's management received a bill for $10,000. Baffled, they asked for a detailed invoice. The specialist's response was simple:

• Cost of the screw: $1
• Knowing which screw to replace: $9,999.

The point is, charging by time spent just isn't scalable.

The better you get, the less time projects need.

Hourly billing rewards the wrong behaviors

Charging hourly motivates consultants to drag out work rather than solve problems quickly.

Why rush when you get paid more for extra hours, right?

Also, it encourages endless meetings and revisions, not efficient solutions.

With hourly billing, clients start questioning everything you do.

"You spent more time than expected on this task?"

Suddenly your hours get nitpicked, since that's what they're paying for.

Value and efficiency take a backseat to hours logged.

The bottom line - both consultants and clients behave poorly with hourly pricing.

It encourages inefficiency and mistrust on both sides.

There's a misalignment of motivations.

Flip the script with value-based pricing

Imagine you're shopping for a nice winter coat.

You spot a really stylish looking jacket for $500.

Do you ask the salesperson how many hours it took to make that jacket before deciding to buy it?

Probably not.

More likely, you've already assessed the problem that coat would solve for you - keeping you warm and looking good in cold weather.

You've determined in your mind whether that expensive jacket is worth it to fix those problems.

The time it took to produce doesn't really factor into your purchasing decision.

You can play that game with any major purchase.

Production time doesn't factor in.

You can apply similar thinking when pricing your services.

Focus on the outcome you deliver clients, not the hours logged.

Ask yourself - what is it worth to completely solve this client's problem?

Your pricing should align with the results they want. Not arbitrary hourly rates.

When you take this value-focused approach, you attract clients who care about real transformation. Not nickel-and-diming your time.

To illustrate this point, let us share a firsthand experience we had with one of our clients, a humanitarian organization…

They were spending over $500,000 a year on sporadic face-to-face onboarding training.

Onboarding trainers, from headquarters, would fly to different countries around the world, and put on a 2-week training.

That meant securing venues, coordinating up to 15 local subject matter experts, and paying for everyone's flights and hotels.

It was inefficient and expensive.

New hires couldn't get trained right away. And they couldn't update materials frequently.

So what was the transformation worth?

Making onboarding available on-demand, in different languages, with always up-to-date content.

We shifted the program online and made it self-paced. Total cost was less than $100,000.

The value delivered was worth 10x the price.

They broke even rapidly.

See the difference?

You want to price on the value of the transformation, not the hard costs or time involved with you delivering it.

Take action

Here's a high-level summary of the key steps to move towards flat rate, value-based pricing as an L&D consultant/freelancer:

Step #1 - Niche down

Traditionally, niches were defined too simplistically - just by industry or demographics.

Today, we need a multidimensional approach.

• What is the industry?
• What is the ideal client profile?
• What painful problem do they need to solve?
• What transformation do they want?

A niche zeroes in on solving a specific pain point for a defined audience, not just offering a general service.

For example, L&D consultants who help child protection social workers safely de-escalate tense situations through digital training.

The key is zeroing in on a defined audience and the specific transformation they want to make.

Step #2 - Create an ROI offer

As a consultant, you bridge the gap between a client's status quo and ideal future state. When crafting an offer, ask:

• What is my niche's desired end goal?
• How can I get them there with a turnkey service?
• What is it costing them to stay stuck?
• What is the value I can deliver?

Your offer should be the absolute minimum to enable their transformation.

Step #3 - Price on value, not time

Start with a baseline rate covering your overhead and personal financial needs per month.

But don't let that number limit you. It should be your floor, not your ceiling.

Customize your price for each client upwards based on the unique value you deliver them.

Factor in the monetary upside, time savings, emotional relief, status gains that your expertise unlocks for that client.

For example:

• Baseline rate: $10,000/per project
• Client A values: $50k/month new revenue
• Client B values: $30k/month cost savings
• Client A price: $50,000
• Client B price: $30,000

See how the value pricing differs from baseline? Focus on the transformation's worth to each client.

Step #4- Use hybrid pricing to handle scope creep

A hybrid pricing model combines flat rate, value-based pricing and hourly billing. This gives you the advantages of both approaches:

• Charge a sizeable upfront flat rate to secure the project, cover base work, and incentivize efficiency
• Switch to hourly billing if the project scope creeps and exceeds what was originally agreed upon

Quote a flat rate that includes 1-2 revision rounds, then switch to hourly for anything additional.

For example, you could charge a flat rate of $10,000 to implement a basic e-learning redesign with 2 rounds of revisions. But if the client later requests additional content or interactivity beyond the initial agreement, you bill those additions hourly.

The flat rate incentivizes you to work efficiently. The hourly billing protects you from endless unpaid revisions. Clients get cost predictability for the base project, but pay extra if they expand the work.

Summary

Pricing is tough.

But with the right niche, offer, and value-focused mindset, you can set profitable rates that make both you and clients happy.

Gain the confidence to charge based on the immense value you deliver - not limited hourly bills.

Shift your thinking to the outcomes achieved.

Price based on enabling powerful transformations that propel your clients forward.

When you know your true worth and price accordingly, abundant and rewarding projects will flow your way.

You've got this!