We communicate clearly that we only do Agile projects based on an hourly fee, but we still receive a few requests each month for fixed-price quotes. It’s important that we list a few reasons why fixed-price projects are not a good idea for the early stages of a business. Five reasons you shouldn’t hire a web agency to work on a fixed-price startup project. Instead, use an hourly rate model or something similar. 

1. It results in a better project

Always. Fixed-price models allow you to specify the price upfront. This means that you can make serious decisions without having much information. When you learn, there is no way to make changes (or it becomes difficult/expensive) Trust your team and allow them to pivot and change the direction as needed.

2. This reduces your risk

This sounds like it should lower your risk. It is not. Two reasons are why.

  • accurate, long-term estimations are virtually impossible to make – there is a great summary of the reasons for this here
  • Once you sign a contract you commit to the relationship for the minimum of the first milestone. It is harder to track progress and you can only assess milestone deliverables.

This is a greater risk for you than for the agency. They are usually more familiar with managing project risks and ensuring that the contract protects their rights.

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3. It puts your priorities in order

The traditional fixed-price model is where your priorities are opposite those of the contractor. They want to do as little as possible and make the most of their profits. You want them to spend as much time on your project as possible. If you are looking to achieve something together, it is important to align your priorities. This goal is easier to achieve if you can work at an hourly rate.

4. It allows you to start earlier and move quickly

Because the deal is straightforward and easy to understand, there is less legal back-and-forth. Templates can be very cost-effective and offer little risk. You don’t have the obligation to establish priorities before you start a project. Priorities can change at any time. Did you ever have an investor or client suggest that you change the direction of a project? That’s no problem. No problem. Let’s just stop doing what we are doing and get on with the important things there is no need to renegotiate, no meetings, no overheads.

5. It’s less expensive

Yes. Agency personnel must calculate the potential failures into a fixed cost. In reality, the best price is not the lowest, but the most secure for the company. These overhead costs are paid by you. You can save money by working with a company without these processes. Instead of paying for overhead, you will only pay for the actual work and experiences. It will come to an end that the requested feature is not within scope. Don’t waste your time or that of your team by pretending that you can plan every feature before you start work.

Are you a positive experience with fixed-price programs? Perhaps you have horror stories about how they failed you.