Fixed price or hourly? How to buy software without surprises

When you hire someone to build a website or software, there are two common ways to pay: a fixed price for an agreed scope, or time and materials, paying for the hours actually worked.

Neither is right for everything. But understanding the difference protects your budget.

Fixed price

You agree on what will be built, by when, for one price.

Good for you because:

• you know the cost before you commit,
• the developer carries the risk if the work takes longer than they expected,
• it forces both sides to think clearly about the scope up front.

Watch out for:

• Vague scope. "A modern e-commerce website" can mean anything. The fixed price only protects you if the scope is written down clearly.
• Changes. Anything not in the scope will cost extra. That is fair, but you should know the price of a change before it is done.
• Padding. Because the developer carries the risk, a fixed price may include a margin for uncertainty.

Hourly (time and materials)

You pay for the time spent, usually with regular reports.

Good for you because:

• it is flexible, and you can change direction at any time,
• it suits ongoing work, maintenance and research where the end point is unclear,
• there is no padding for uncertainty.

Watch out for:

• No ceiling. Without limits, the final cost is unknown.
• Less incentive to be efficient. Most developers are honest, but the structure does not reward speed.
• More of your time reviewing hours and reports.

Making either one work

For fixed price, insist on:

• a written scope listing pages, features and what is not included,
• the number of rounds of changes included,
• a clear process and price for changes,
• payments tied to milestones you can see and test.

For hourly, insist on:

• an estimate, and a cap or a warning when it will be exceeded,
• regular, itemised reports,
• the right to stop at any milestone and keep what has been built.

A sensible combination

Many projects work well as a mix:

1. A fixed price for the defined build: the website or the first version of the app.
2. Hourly or a monthly plan for what comes after: new features, improvements and support, where the needs only become clear once real people use the product (after launch).

How we price

We quote a fixed price for a written scope. The proposal says what is included, what is not, how many rounds of changes are covered and what the dates depend on. Payments follow milestones, and at each one you see working software rather than a progress report (why we demo every sprint). If you want something new mid-project, we quote it first, and you decide whether to add it now, swap it for something else or leave it for later.

That way the price you agreed is the price you pay, unless you choose otherwise.