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Fixed price or hourly rate: which model is fair in a web project

Fixed price or hourly rate: which model is fair in a web project

Fixed price or hourly rate: which model is fair in a web project

Fixed price or hourly rate: which model is fair in a web project

Fixed price or hourly rate: which model is fair in a web project

Which billing model suits which project – and who bears the risk.

Which billing model suits which project – and who bears the risk.

Which billing model suits which project – and who bears the risk.

Published:

Published:

Updated:

Updated:

4 min.

4 min.

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Reading time

Key messages

Key messages

Key messages

Key messages

Key messages

A fixed price is suited for clearly described projects, while an hourly rate fits everything that gets clarified along the way.

A fixed price is suited for clearly described projects, while an hourly rate fits everything that gets clarified along the way.

A fixed price always includes a risk premium – even if you don't see it, you've still paid for it.

A fixed price always includes a risk premium – even if you don't see it, you've still paid for it.

The hybrid model of a fixed price for the basis and an hourly rate for extensions is usually the fairest.

The hybrid model of a fixed price for the basis and an hourly rate for extensions is usually the fairest.

The model is not what is decisive, but rather how precisely the scope is described.

The model is not what is decisive, but rather how precisely the scope is described.

What a fixed price really is

What a fixed price really is

What a fixed price really is

What a fixed price really is

What a fixed price really is

A fixed price is not a price quote, but an assumption of risk. The service provider undertakes to deliver a described result for a fixed sum – no matter how long it takes.

This necessarily results in a markup. Anyone who estimates that a project will take 80 hours cannot quote for 80 hours. They must plan for it to take 100. 15 to 30 percent is typical, depending on how clear the description is.

This is not a trick, but the condition for someone to take on the risk. Anyone who wants a fixed price is buying planning security – and that costs money.

The second effect is less obvious: a fixed price makes changes expensive. Any deviation from the described scope becomes a supplementary charge, because otherwise the calculation does not work out. What would take half an hour in an hourly model becomes an offer for 250 euros.

The Price of Security

The Price of Security

The Price of Security

The Price of Security

The Price of Security

A fixed price is not a price quote, but an assumption of risk. The service provider undertakes to deliver a described result for a fixed sum – no matter how long it takes.

This necessarily results in a markup. Anyone who estimates that a project will take 80 hours cannot quote for 80 hours. They must plan for it to take 100. 15 to 30 percent is typical, depending on how clear the description is.

This is not a trick, but the condition for someone to take on the risk. Anyone who wants a fixed price is buying planning security – and that costs money.

The second effect is less obvious: a fixed price makes changes expensive. Any deviation from the described scope becomes a supplementary charge, because otherwise the calculation does not work out. What would take half an hour in an hourly model becomes an offer for 250 euros.

When a fixed price is the right model

When a fixed price is the right model

When a fixed price is the right model

When a fixed price is the right model

When a fixed price is the right model

Three conditions must come together.

The scope is definable. Twelve pages, one contact form, one language, texts are provided by the client. This can be calculated.

The decisions have been made. Anyone who doesn't yet know whether a blog will be added or whether it will be in two languages is buying a fixed price for a project they don't yet know.

There is a fixed deadline or a fixed budget. This is exactly what the model is built for.

Typical projects that fit a fixed price: Relaunch with a clear page scope, landing page, corporate design, migration from one system to another.

It is then important that the scope of services is actually in the offer – not as a heading, but as a list. Website by agreement is not a fixed price, but a dispute with a date.

When the hourly rate is fairer

When the hourly rate is fairer

When the hourly rate is fairer

When the hourly rate is fairer

When the hourly rate is fairer

The hourly rate has a bad reputation because it leaves what stands at the end open. Nevertheless, for certain projects, it is the more honest model.

When the scope only becomes clear during the work. For consulting, ongoing optimization, for everything where the result of the first week determines what makes the second one useful.

When a lot of coordination is necessary. Multiple decision-makers, changing requirements, a project that is still shifting internally.

When you contribute parts yourselves. Then you only pay for what was actually done, instead of a flat rate for services that you take on.

With ongoing support. A fixed monthly amount without a quota means: in quiet months you pay too much, in busy ones you get too little.

To keep it fair, three things are needed: an estimate with a range, a cap from which discussions begin, and a comprehensible breakdown of the hours.

The hybrid form

The hybrid form

The hybrid form

The hybrid form

The hybrid form

In practice, the most sensible option is usually a combination.

Fixed price for the defined core. The twelve pages, the structure, the design, the technical implementation. Everything that can be described beforehand.

Hourly rate for everything beyond that. Additional pages, change requests after approval, special functions, consulting.

A contingent for the period thereafter. For example, ten hours, available during the first six months, for the little things that always crop up when a site is live.

This has advantages for both sides. You know what the basic version costs. The service provider does not have to factor in a surcharge for the unknown, because the unknown is billed according to actual effort.

Only one thing is important here: It must be determined beforehand what is part of the fixed price and what is not. Otherwise, this boundary shifts during the project – and then it is not a hybrid model, but a point of contention.

What should be in the contract for both models

What should be in the contract for both models

What should be in the contract for both models

What should be in the contract for both models

What should be in the contract for both models

Regardless of the model, five points determine whether things run fairly.

The scope of services as a list. Not just "website creation," but exactly what is included.

The number of revision rounds. Two to three per stage are common. Without specifying this, every additional round becomes a conflict.

Who delivers what and by when. Texts, images, access details, approvals. Delay on the client side is the most common reason for postponed deadlines.

What happens in the event of additional effort. Will it be discussed beforehand? From what threshold?

What is handed over at the end. Access details, source files, documentation, usage rights.

A proposal that includes these five points is reliable in both models. One without them is risky in both models – the fixed price only does a better job of hiding it.

The question that determines the model

The question that determines the model

The question that determines the model

The question that determines the model

The question that determines the model

Instead of choosing a model, one question helps: How reliably can you describe today what the final result should look like?

If you can write it down on a single page, and the same would still be written there in three months: Fixed price. You are buying certainty and paying a premium for it, which is worth it.

If you notice that every answer begins with 'it depends': Hourly rate with an estimate and a cap. A fixed price on an unclear basis is either too expensive or will be renegotiated during the project – usually both.

And if the answer lies somewhere in between, which is usually the case: Hybrid model.

One last tip: A service provider who immediately quotes a fixed price for an unclear project has either added a generous premium or will demand additional payments. Both can be recognized by the fact that no follow-up questions were asked.

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