Fixed price vs hourly price project: Which one to choose for your project?
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Fixed Price Vs Hourly Price Project: Which One To Choose For Your Project?

Ashish Chauhan By Ashish Chauhan | February 11, 2021

Outsourcing your app and web development projects demand a lot of brainstorming, research, and decision making. The process of web and application development is infused with risk potential and cost-related considerations. If you are a businessman planning to develop any mobile or web application, you need to consider different factors. Getting an app or web idea with clearly defined features is the first feature to arrive at the scene.

However, many clients are curious to know how much it would cost to develop a website or application. They want to pre-define their budget estimate. To get the maximum value from the vendor-client relationship, selecting a suitable pricing model is essential.

But the fact is that providing you with an exact figure of app and web development cost is a very difficult task for any mobile app development company or developers. So, what is fixed price vs hourly price projects and which is the best one?

What Is The Suitable Pricing Model: Fixed Price Vs Hourly Price Projects

You must know that the price depends on different elements such as the choice between freelancer or In-house agency, platform selection (Android, iOS, hybrid or native), the development team and its particular location, technical features, UI-UX design, testing, quality assurance and the cost of app publishing, etc. Furthermore, if you want to develop your app or want some additional features, you will have to pay more. 

Have you ever heard about the different pricing models for determining the cost of web development? Many clients are actually aware of it as they undertake great research before getting in touch with a reputed web and app development company.

If you want a scenario of the development industry, many companies basically follow a dual pricing model.

  • Fixed Pricing Model
  • Hourly rate model

Being versed in developing innovative apps and webs, Appventurez approaches every project with a unique perspective. In this blog, we are going to help you make an informed decision by discussing what every engagement model means to your business. On top of that, you will know what is better for your project: fixed price vs hourly price project. 

What Is The Fixed Pricing Model?

fixed price model

As the name implies, the fixed cost model has predefined elements of budget, requirements, scheduled tasks, and choice of the specific platform. The development team and client undergo a mutual understanding with clear ideas and the results. The client is pretty sure about app success and so he is prepared to take the risk.

A fixed price model is suitable for a short-term project with limited requirements and transparent goals and expectations and a logical working process. If you are planning to start business with a new partner who still needs to prove their skills, this model is the best option. However, the disadvantages of this model are that you are giving more preference to your budget than a quality project. If the app idea doesn’t click as per your expectations, you have to prepare to take the risk and face failure.

— Why Choose A Fixed Pricing Model?

Here are some reasons why you should charge a fixed price for your web development and app development projects.

#1 Low Financial Risk

Fixed price gives you an exact figure you can use for your budget planning. There is no danger of going over budget and having to determine additional finances. If the project goes overboard, the supplier tolerates the cost.

#2 Clear Deadlines

All terms and steps of the development process are decided by all the stakeholders. So, deadlines are clear and can be expected to be met.

#3 High Efficiency

In fixed price, the project’s cost is predetermined, so developers put their efforts to deliver the project within time with great efficiency.

#4 Ease Of Management

Payments are fixed both cost-wise and due date-wise. Little involvement on your part is essential for day-to-day projects. After completing your work part – providing the requirements – you can deliver the project to the supplier and don’t worry about its completion date.

— Drawbacks Of Fixed Pricing Model

#1 Lack Of Flexibility

After approving the requirements, this price is considered mostly set-in stone. If models need to change due to a shift in the market environment, the business needs or new and better ideas that have to be done through the procedure for change request which might be frustrating.

#2 High Cost

Regardless of how long it will take for the project to be completed, you will pay the agreed price. That might be good in some cases, but many times, you will have to pay more than necessary because of overestimations or time spent on features. It includes a risk premium which is meant to reimburse the supplier in the situation that the schedule turns out to be an underestimation.

#3 Longer Time-To-Market

In the long pre-development stage, you need to get the requirements to clarity. But the fact is that you only get a functioning product at the end of the project term. It leads to delayed revenue and the risk that the product will become outdated.

—Features Of Fixed Price Model

  • You cannot ask for any changes in any circumstances within the timeline
  • The project’s budget is pre-determined with the mutual understanding of the developer and the client
  • This model completes the project within the specified timeline due to the deadline

—-Conditions When Fixed Pricing Model Is Successful

There are many advantages and disadvantages of fixed pricing models. So, which conditions fixed model will suit your needs? If,

  • You need a simple app with simple tasks
  • You don’t have enough budget and you are left with no other alternative
  • You are planning to develop an MVP to test the validity of the app’s idea
  • You have a crystal-clear idea of an app with features and required platform

—-What Is The Hourly Rate?

hourly rate model

Hourly rate is also known as the time and material model. The project cost is resolute on a per hour basis which depends from area to area and from one company to another. The total number of hours worked by skilled professionals to finish projects represents the cost of app and web development projects. It is more preferable for clients who really seem to take a great interest in what is going behind the scenes. Due to nature flexibility, your changes and suggestions are most met by the dedicated development team to improve project quality.

—Why Choose The Hourly Rate Model?

Here are some reasons why you should charge an hourly rate for your web development and app development projects.

#1 Great Flexibility

The fixed price model comes with easy decision making since the clarity needed on specifications is there in the beginning phase. However, the changes with fixed prices are impractical and expensive. In the hourly rate model, team members can freely tweak and alter the course of the project when required.

#2 Better Risk Management

The fixed price model does not comfort you much when it comes to maintaining the risk potential of the project. It wants the firm assurance that occurred from accurate estimations. In addition, if you are planning for a big project, the commitment to the technology partner within a fixed price contract may not work well. Also, tracking progress appears feasible only when you are to get deliverables to post a clarified milestone which increases the risk potential on your part. But, with an hourly rate, you don’t need to worry about this situation.

#3 Economy

Since the fixed price model involves the calculation of forecast risks and overhead, you don’t always end up getting the economical charges for prolonged projects. In the absence of fixed cost processes, you save a lot of money and extract the best from their experience. Hourly rate models do not urge on your unnecessary cost of non-required features, drawbacks, and abstract failures.

#4 Contractual Simplicity And Agility

The hourly rate model offers you great simplicity in legal contracts and straightforward and brief contracts. This model allows you to change with the conditions proposed by the client. And even you can start more important new things as agreed by both parties without a burden of renegotiation.

—-Disadvantages Of The Hourly Rate Model

#1 Impossible To Accurately Estimate The Final Cost

One of the most common cons of hourly rate is that it is impossible to find out how much it will cost. As the project can be edited in the development process, it is not suitable for those who have a limited budget.

#2 Money Down The Drain

Developers who don’t have many years of experience in this field may overestimate the time essential for completing the task. This type of overestimation often leads to unreasonable additional costs.

#3 Variable Deadlines

Last but not least, variable deadlines are a common disadvantage of charging hourly rate. The project can be changed any time in this model. As the project changes, the final release dates delays.

—-Cases Where The Hourly Rate Model Is Successful

There are various conditions when hourly rate model will definitely suit you:

  • If you don’t have any idea about a clear app and you are not sure about validating it.
  • The developers are working on a complicated project, which requires subsequent testing and client approval.
  • When you directly want to get involved with the project and desire to know how the developers are proceeding with the given task.

—–Features Of The Hourly Rate Model

  • Hourly rate depends upon the hours that coding developers give to the project.
  • Project’s cost and timeline both are flexible
  • In the whole project, the client is also involved and gives valuable suggestions time-to-time.

Which One Should I Choose?

As you can see both pricing models have their own pros and cons, it is very challenging to select one between a fixed and hourly rate pricing strategy. No matter how many hours you spent on your Google degree in attempting to answer this question, you just need to test each model to ensure what’s right for you and your business.

You may find that the best strategy is to mix it up. It will be better to choose an hourly rate model for possible projects with unknown variables but fixed prices on projects are more expected. Trust yourself and utilize your experience and expertise in your field, as well as a decent time-tracking tool, to make the best choice

The Final Call!

As we discussed in detail about fixed price vs hourly price projects. Both pricing models are followed by almost all the development companies today when catering to any projects. And even you can see that both price models have their own advantages and disadvantages. So, what you should choose depends on your specific requirements and budget estimation. 

If you are choosing a fixed cost model, you are compromising with the quality of the app and not getting any scope for changes. Alternatively, if going for the hourly rate, your cost would definitely be on the higher side but you can get the product as desired.

Ashish Chauhan
Ashish Chauhan

Co-Founder and VP Mobile Architect at Appventurez. An expert programmer who is passionate and loves to explore emerging mobile technologies. As a leader, he is a perfect match as he is always there for the team to help and guide them to learn and implement smartly and effectively.

⚡️ by Appventurez

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