Fixed-Price vs Hourly Software Development: How to Choose
Develop It Today, , 2 min read
Fixed-price and hourly development suit different projects. Here is when each works, where each goes wrong, and questions to ask before you sign.
Most overruns are not caused by bad developers. They are caused by a pricing model that did not fit the project. Here is how to tell which one you need.
How each model works
Hourly (time and materials) means you pay for the hours worked. The scope can change as you learn, and you carry the risk if it takes longer than expected.
Fixed-price means you agree scope, price and date up front. The developer carries the risk of it taking longer, and you carry the risk of having scoped the wrong thing.
When fixed-price works well
- The result can be described in writing: pages, screens, integrations.
- You need to know the total cost before you commit.
- The type of project has been built many times before, such as websites, funnels, stores, dashboards and standard integrations.
When hourly works better
- You are exploring, and you expect the scope to change every week.
- You want a developer embedded in your team over months.
- The problem is research-heavy and nobody can say what done looks like.
Where each one goes wrong
Hourly
The incentives point the wrong way: slower work earns more. Without a cap and regular check-ins, a budget can disappear without a working product to show for it.
Fixed-price
If the scope is vague, one of two things happens. The developer pads the price to cover the unknowns, or the project turns into a dispute over what was included. A fixed price is only as good as the written scope behind it.
Making fixed-price actually fixed
- Written scope. Every screen, state and integration listed and approved before work starts.
- Change orders. Anything outside the list gets its own price, agreed before it is built.
- A ship date. With a stated consequence if it is missed.
- Visible progress. A live preview link and milestone walkthroughs, so there is no big reveal at the end.
- You own the result. The repository and accounts transfer to you at the end.
This is how we work. Our tiers run from $997 for an automation pack to $7,997 for a full MVP, and each has a fixed price and a ship date between 7 and 28 days. The process page shows the four phases in detail.
A simple rule
If you can write down what you want on a page, buy it at a fixed price. If you cannot yet, spend a small fixed amount on finding out. A validation landing page is one way to do that. Move to hourly only when you have something running and the work is genuinely open-ended.
Not sure which side your project falls on? Send a short brief and we will tell you honestly, including when the answer is that you do not need us yet.