Fixed Price or Hourly Rate: Which Pricing Model Should You Use for Web Development Projects

Fixed Price or Hourly Rate: Which Pricing Model Should You Use for Web Development Projects

Should you pay a fixed price or an hourly rate for a web development project? In the world of website development, the pricing model of cooperation plays an important role. The agencies decide themself how they will receive payment for the services they provide.

Today we offer you a short guide to the world of the fix, hourly rate, and other pricing models. The Wishdesk web development company answers the question: What is the best way to pay for the web development project: fixed-price or hourly rate?

In the future, you will not get confused between the fixed price, hourly rate, and other pricing models.

By the way, if we are talking about pricing models, then you may be interested to know that Wishdesk switched to a new model of cooperation. Now we carry out your tasks twice as fast, which allows you to save your money.

What is a Fixed Price Model?

Fixed Price = a clear scope of work + fixed budget for the assignment

Fixed Price is a model of cooperation to which, before performing a task, the company clearly estimates the amount of necessary work and indicates a fixed price. This price does not change.

It allows the customer to clearly plan their budget and gain confidence that everything will be done at no extra cost. However, Fixed Price is possible subject to strictly defined requirements and assumes the amount of work will not change in the process. 

All the nuances and requirements of the web development project should be spelled out during the project estimation process to avoid future misunderstandings. 

Any additional charges must be paid for extra. Therefore, pay particular attention to the pre-discuss parts.

Benefits of Fixed Price Contracts

1. Exactly following the requirements. 

The tasks agreed upon in the contract are carried out.

2. Approved project budget. 

There can be no change in the budget after signing the contract.

3. Performing tasks in a clear time frame. 

After the development company has made an assessment, they accurately indicate the deadline.

4. There is no need for control. 

After everything is agreed, there is no need for you to control the project, as the PM will do this.

Disadvantages of Fixed Price Contracts

1. The project is not flexible. 

Once all the conditions have been discussed, you can no longer make edits.

2. The long planning process.

Planning all the details of the project and its evaluation takes time that you could spend on its implementation.

3. The risk to lose something. 

It is almost impossible to take into account all the details of the project; there is always room for error.

Paying Per Hour for web development

Paying per hour = pay for time worked on your project + floating number of tasks

Perhaps the most popular pricing model is the hourly rate for web development. Paying per hour is the most common price model by which you pay for the tactic hours spent on fulfilling your task. 

As a rule, all web development companies use this model of payment. 

According to this one, customers have more responsibility, since they put forward the requirements for the project and give adjustments. They can make changes in the process of implementing their idea.

Advantages of the Hourly Price Contract

1. The fee for the actual time spent on the task. 

The fee is paid only for the hours that the website development team spent on completing your project.

2. The project can be changed as necessary.

You can add something, i.e new features to the project when you want to do it. The project is flexible and open to change.

3. The completed task is perfectly done.

Due to the fact that the project can be changed, then in the process of completing the assignment, it can be improved many times. Ultimately, this allows you to update the final product as much as possible.

Disadvantages to Hourly Rate Contracts

1. It is not possible to accurately estimate the final cost. 

Since the project can be edited in the development process, it is impossible to find out how much it will cost. It is not suitable for those who have a limited budget.

2. Money down the drain. 

Some unreliable developers may overestimate the time required to complete tasks, which can lead to unreasonable additional costs.

3. Floating deadlines.

Since the project may change, the final release dates may be delayed.

Fixed Price or Hourly Rate for the project: What should you choose?

After you have seen the pros and cons of each pricing model, the logical question is: 

What should I choose a fixed or time-based payment for my project development?

There is an answer — it all depends on the size, complexity, and timing of the project. 

Below we give examples of projects that are better to pay for a fixed and hourly price model.

When to use a fixed price for the project

  • if you can evaluate a deadline for the project in time
  • small projects
  • with a clear budget
  • with a specific list of requirements

When to use hourly rates for project

  • if the scope of the project cannot be determined in time
  • for extensive projects
  • that will change during the development
  • that do not have budget constraints

Of course, this is not a clear or definitive list of "when to use..." Use it only as a guideline to help you on your way. 

6 pricing models of the Wishdesk web development agency

Collaboration with us consists of 6 factors that affect lead times and cost. 

1. Fixed price is the ideal pricing mechanism for projects with a clear volume and stable set of requirements. This model requires a well-defined scope and all the specifics of web development, a predefined project submission deadline, and a fixed budget. 

If the client has a limited budget and a clear, detailed technical requirement, then this model is the most appropriate.

2. Hourly rate is another of the most popular payment models for project development. This model is suitable for customers who do not yet know the exact deadlines and requirements.

Payment will be carried out only for the actual time that was spent on the implementation of your project.

3. Time and materials is a payment that is more suitable for long-term projects with dynamically changing requirements, an uncertain workload, and different workloads for the development team. It can be useful if the project is still in its infancy and it still lacks data to properly estimate the final cost. 

If the client wants more direct control over the process, then this model is best suited.

4. The dedicated team. In this model, the outsourcing company provides competent IT experts, equipment, and other resources based on project requirements. The customer is satisfied and pays a single price in return. 

The client has complete control over the project and team, can manage resources and plan the workflow at their own discretion, with the maximum benefit for themselves.

5. Cost-plus model. This allows you to work directly with our developers, while we take care of all organizational issues. This includes finding the right developers, checking their skills, organizing their workplace, paying taxes, creating invoices, controlling the developer`s task logging in the task tracker, and more. 

We negotiate with you for a fixed monthly fee for such a developer.

6. When collaborating on other models, the terms are discussed at the conclusion of the contract.

WishDesk are here to help you choose the best way to pay

You should analyze whether you should pay a fixed price or hourly rate for your web development project development. 

Take our advice into account and choose an effective pricing model for yourself. If you need help, just contact the Wishdesk website development agency.

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