In this post:

The training budget is too often taken for granted, yet plays the most critical role in the entire training operation. After all, without a budget to support learning operations, no amount of training is going to get done.

Every training team in the world has its unique challenges, but there is one that they all share: substantial employee training costs, as well as costs for external trainees such as customers, partners, or distributors.  These expenses substantially impact the training budget, especially when small mistakes start adding up across hundreds or thousands of learners.

With this in mind, how can you avoid training budget mistakes, and get smarter about how you spend your budget to get the most bang for your buck? Below, we’ll look at some of the most common training budget pitfalls and how you can get them right – to maximize your training ROI.

The Training Budget: The Most Important and Most Overlooked L&D Item

What goes into a training budget?

While the specifics will vary depending on the organization, some of the things that go into a standard training budget include:

  • Learning technology stack: These can include LMS, LXP, and TMS platforms.
  • Trainers and subject matter experts assigned to Instructor-Led Training (ILT) or virtual Instructor-Led Training (vILT) sessions
  • Equipment and resources, such as demo models or printed sheets
  • Travel, catering, and accommodation costs for ILT sessions
  • Authoring tool subscriptions for building and designing content
  • Subscriptions to off-the-shelf content catalogs (such as LinkedIn Learning)
  • Marketing costs (for extended enterprise training)

L&D or HR leaders are usually responsible for the training budget, though the rest of the learning team will likely contribute their ideas and suggestions.

However, in the grand scheme of a business, the training budget is often overlooked in favor of other areas of the budget. Most organizations don’t think about how much training can cost in the short and long term. As a result, training budgets often end up smaller than they would be if the true impact of training were fully understood.

Training is Expensive: Training Program Costs and Employee Training Costs

Many modern training budgets in organizations overlook various costs associated with training. According to a Training Magazine article, large companies with 10,000 or more employees were able to reduce the cost per employee for training by 53% by implementing strategic budgeting tactics. The issue with most modern training budgets within organizations is that they don’t account for every single cost that goes into training. What caused the industry-wide decrease? Training managers and L&D directors realized that even small expenses, when multiplied by volume, would accumulate quite fast. The true cost of training can add up.

Training costs are usually broken down into the following categories:

  • Number of total learners
  • Number of training sessions
  • Training program requirements
  • Training resources needed

When all factors are considered, training can end up costing much more than what was previously estimated by training managers or HR teams, leaving training teams with far less money to play with than they initially expected.

Cost of Running a Training Operation: The Business of L&D

What’s the total cost of a training budget? While there are multiple formulas out there, a general rule for calculating a comprehensive budget:

Total annual salary (per learner) x 1-3% = Total Training Budget

As with any other department, there will never be perfect alignment between the originally agreed budget and what transpires over the year. That’s why it’s so important to do whatever you can to take control of your training costs.

Running a training operation or L&D department involves managing several overhead costs to ensure effective functioning. These costs can be categorized into two main areas: the overhead costs of the L&D function itself (i.e. staffing costs), and the costs associated with running the actual training programs for the organization or its clients.

Training operational costs

  • Administrative staff. Members of the training delivery team including coordinators, learning specialists, and adjacent HR specialists.
  • Software and Systems. From the learning tech stack essentials to the CRM and accounting tools to manage everything in between
  • Marketing budget. While most might consider this an entirely different cost, ensuring promotional materials and campaigns are running is paramount.
  • Facility maintenance. Fees to ensure that learning venues are kept clean, up-to-date, and always ready for use.
  • Partnership fees. Usually used when running training for certification and licensing programs.

Training program costs

Training program costs are both applicable for running in-person training as well as online ILT sessions. A blended learning program is expected to incur a mix of both of these costs:

  • Instructor fees. Each trainer and SME will have their set hourly rate including additional costs.
  • Classroom costs. Including the cost of booking and managing a venue for holding in-person or on-the-job training.
  • Accommodation and catering costs. Travel costs for the instructors showing up on site as well as costs for feeding both learners and the training team (if applicable).
  • Equipment and additional resources costs. Anything used to make learning easier and better for learners. From tablets to enhanced eLearning to tools used while on the job.

Instructor fees are likely the biggest part of the training program portion of the budget, especially if instructors are external to the organization or subject matter experts. This will include paying hourly rates and potentially paying for their travel, accommodation, and per diem if they are traveling to deliver ILT sessions.

Of course, none of these are one-off costs and may not stay consistent throughout a budget period. For example, your preferred venue may increase its prices midway through the year, or you may discover you need to update your tablets to a newer model. These costs add up quickly and can significantly impact your budget if they haven’t been factored in. That’s why it’s crucial to incorporate some contingency into your training budget.

tools to manage training operations

Do You Have the Right Tools to Manage Your Training Delivery?

From scheduling to resource management, cost tracking and budget, find out the top features you need to optimization training scheduling and delivery.

Download Checklist

5 Common Training Budget Mistakes

Even with the best intentions, no training team can get the budgeting process 100% right every time. We’ve worked with many organizations over the years who have struggled with their training program costs, so we’ve identified five common training budget mistakes so you can take the necessary steps to avoid them:

1. Skipping a training needs analysis (TNA) with training data

Providing a training needs analysis (TNA) is essential in that it helps keep a training program within scope in all areas. The TNA helps identify the needs of the learner and organization, as opposed to the wants. By identifying pertinent skills gaps with employees, training managers can begin to identify what courses they need to establish. How they provide those can be thought of later. But first, it’s important to begin using a TNA.

Your L&D team should provide upper management with historical data that warrants the need for training. Areas that training team members can gather can include:

  • Performance results. Where are employees and personnel lagging the most given the data? Compared to what is the expected standard?
  • Individual use cases. Did one person fail to understand a concept or was it a multitude? keeps learning needs in scope.
  • Customer or Stakeholder feedback. Where have clients, partners, or stakeholders had concerns about a particular area? For example, if closing prospects became an ongoing issue, perhaps a sales enablement training program might be needed.

2. Lack of transparency with individual costs

Training managers must analyze the effect of how individual costs can affect the wider training budget. For instance, what if your main instructor increases their rates? Or, what if you suddenly need to buy a whole new set of training equipment? This means sourcing the value of each cost by scoping multiple vendors and trainers that meet your program’s needs within your ideal price point.

3. Poor management of hourly costs

When the training scope isn’t properly defined, it can result in over-training above and beyond the defined sessions. Not only does this cause training burnout, but it can also lead to unexpected expenses. Get a handle on hourly costs by defining exactly what will be trained in each session, agree on an hourly rate, and ensure you’re accurately tracking training time when your instructors log in to start their sessions.

4. Not looking for reasonable alternatives to provide training

If you’re not sure that your current training program is as cost-effective as it can be, it’s worth considering whether or not there are savings to be made. That doesn’t mean sacrificing the quality of your training, but if there are opportunities to maintain quality while cutting costs, this could help you stretch your training budget further. For instance, instead of in-person, ILT training, could the same sessions be run online to save on venue and travel costs?

5. Not planning for future training sessions

Lack of planning can cost both the client and the training team more. Proper planning can save you money with bundle discounts and by securing better rates with more notice. This can also include the continued maintenance of training sessions and the overall training program. After all, you don’t want to be paying short-notice rates for your preferred instructors if you haven’t planned!

future proofing your training budget

Web Series: How Can Organizations Future-Proof Their Training Budgets?

Fosway Group founder & CEO, David Wilson, sits with Training Orchestra to discuss how learning teams can organize training expenses and plan for a more efficient training budget.

Watch the Video

Addressing Training Budget & Cost Tracking Problems

Let’s be completely honest here: it’s almost impossible to build a training budget with 100% certainty. But the same holds true for any department within your organization. Your marketing, IT, and operations departments all face the same challenges around getting their budgets exactly right.

Many issues stem from using manual processes to track costs. If you’re using a spreadsheet to track your training budget, it’s easy to see how small errors can have a big knock-on impact on your projected costs and profit!

Unfortunately, the amount of scrutiny your training team must apply to ensure accurate cost and budget tracking means you can virtually never get it right to the cent. On top of this, manually tracking costs takes training coordinators and specialists away from other tasks, meaning less time spent on making improvements to the training program.

Training Budget & Cost Management with a TMS

When running enterprise-level training operations that rely on instructor-led training, both in-person training and virtually online, many resources are accounted for and must be tracked down to a tee.

Implementing a training management system (TMS) into your training operations helps simplify the accounting portion of training logistics. Unlike a separate accounting software to manage debits and credits for multiple training programs, a TMS like Training Orchestra is fully integrated, keeping track of all associated costs for resources and trainers throughout your learning operation.

The integrated training budget tool is capable of:

  • Managing total training budget debits and credits
  • Tracking individual costs for instructor and trainer utilization
  • Custom notifications to inform your team if costs are exceeding limits
  • Gather payment information and pricing for resources used during training

Understandably, budget and cost control are integral parts of training management for large-scale training programs. Without keeping an accurate record of your spending, you can quickly find yourself running the training budget dry. When your L&D team finds their budget in the red, it can lead to a whole new set of issues.

To future-proof your training budget, it’s crucial to get the right system in place that goes beyond basic accounting and cost management within the scope of managing training operations.

Even though most learning software has some rudimentary cost-tracking functionality, most fall short as they fail to provide a comprehensive picture of where funds are being spent. Most learning software such as LMS platforms provide basic ins and outs of training program expenses. While beneficial they are almost pointless when managing enterprise-level learning operations.

Watch a quick 3-minute demo

View Training Orchestra in Action

Watch a quick 3-minute demo video.

View our TMS in action

Training Orchestra: Budget and Cost Tracking for L&D

For over 20 years, Training Orchestra has helped over 600 training companies, corporate L&D departments, and associations worldwide to address instructor-led training operations management challenges for their employee, customer, partner, or member training programs. We’ve crafted the perfect training management system to address the most critical needs of corporate L&D and training businesses.

Schedule a Personalized Demo Today