Many firms quote projects on a fixed-price basis, and even use this as a selling point. Fixed price projects sound great — the client gets to know how much something’s going to cost upfront, and can work that into their projects — but we don’t believe they’re good in the long run, for the project, for the firm or for the client, and so we avoid working on a fixed-price basis.
Instead, you should provide conservative project estimates, and work very closely with the client throughout the duration of the project. At Loud Dog, our minimum project estimate is a half-day (four hours), and the minimum time increment is one hour, but we typically estimate in half-days.
So why shouldn’t projects be done on a fixed-price basis?
If a client calls and asks for something, we like to do it. We don’t like to say, “no,” and we don’t like to haggle about how much more it’s going to cost or do a lot of paperwork for something simple. As long as it’s within reason, we just want to get it done, and get it done right.
Moreover, we want to do things right. Sometimes that requires a lot of time, many iterations or more research. A fixed-price basis doesn’t permit this sort of back-and-forth; instead the number of iterations is fixed in the contract.
When we work on a fixed-price basis, we need to spend additional time upfront examining the requirements to ensure that we aren’t missing something. This takes additional time, which is factored into the price of the project.
Many websites are developed in fast-changing environments. It is difficult to adjust a fixed-price project, which has been carefully defined months in advance, to changing market conditions without engaging in complex, time consuming and expensive re-adjustments.
Perhaps most powerfully, by their nature, fixed-price projects require that one party loses. Either the firm estimates too low and eats cost (or, like some firms, leave the project unfinished), or the firm estimates too high and the client pays too much.
Everything copyright © 2010 Josh Orum