Fixed price or hourly. Which is best for your project?

When you are selecting a development company to complete your projects or maintenance work, you may notice that pricing plans are one prominent difference among companies. The disparity can be confusing. If you have a hard time distinguishing whether fixed price or hourly projects will be best for your business in the long run, you’re not alone. This post will examine the pros and cons of both approaches to help you decide which pricing plan you should opt for. Neither is the right answer for every project, so be sure to carefully consider the needs of your business and website as you search for and consult with developers.

Fixed Price Projects: Summary

This type of project is exactly what it sounds like. When you present a developer with an idea under this pricing plan, they will produce a quote that has a finite dollar amount attached to it. While the development company will have taken time into account when producing the estimate, you will receive a sticker price that depends on deliverables rather than hours spent on the project. This pricing system is usually best for short-term projects that have an explicitly clear scope.

Fixed Price Projects: Advantages

  • Lower possibility of scope creep. Fixed price projects have specific, measurable milestones that don’t allow for expansion beyond the original boundaries of the project.
  • Potential for a trial run. If you are interacting with a new development company, a small, fixed price project can be the best way to test their efficiency and the quality of their work.
  • Staying within budget. Since the dollar amount is confirmed up front, it will be easier to predict the cost and avoid paying more than you bargained for.

Fixed Price Projects: Disadvantages

  • Lack of flexibility. With a budget and scope firmly set up-front, it can be more difficult to work around additional requirements or unexpected bugs. It will be harder for you or the development company to make needed changes to designs or functionality once the project has been agreed on.
  • Potential for flawed work. If your development team runs into unexpected barriers or bugs, they may turn over shoddy work in an effort to make a profit. This is dishonest and unethical, and it’s something you should watch out for if you have agreed to project-based pricing.

 

Hourly Projects: Summary

With hourly projects, you are paying for time and experience. Many developers charge this way, alongside attorneys and financial professionals. Development companies may offer a universal hourly rate, or they may adjust the rate per hour based on the type of work, client relationship, or other factors. This kind of pricing is often best for longer-term projects that may have a fuzzy scope or underlying issues that could be difficult to accurately quote up-front.

Hourly Projects: Advantages

  • Adaptability. For projects with an unclear initial scope, a timeline that is subject to change, or one where outside factors like retrofits or new technologies may influence the work in unpredictable ways, hourly billing can be a perfect way to compensate for unpredictability.
  • Straightforward and transparent. With hourly billing, you will never have to wonder what you are being invoiced for. Each minute will be accounted for.
  • Easy comparison. Hourly rates make it effortless for you to do a straight-across cost comparison between companies.
  • Getting what you pay for. If you choose a fixed-rate project, you might be paying a very high rate per hour without knowing if the task is accomplished quickly. Conversely, if the project is unexpectedly difficult and costs the developer more than you’re paying for, they may be frustrated and less willing to work with you again. With hourly billing, you get what you pay for and nothing less.

Hourly Projects: Disadvantages

  • Sticker shock. When comparing hourly prices across companies, you may be tempted to simply go with the lower rate. However, this method does not account for quality. If a company charging $60 does work at half the speed and quality of a company charging $100, you could end up getting a bad deal in the end.
  • Prices may exceed estimates. If your project expands in scope or takes longer to complete than expected, you may be billed for more than the dollar amount estimated in the original proposal.

If you have questions about which billing system might be best for you, feel free to reach out! WebArc uses both fixed price and hourly billing depending on project and client needs, and we can’t wait to work with you and help you find the right fit!

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Chantelle Gossner

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