When researching companies to build your mobile presence, it is important to know and understand basic pricing structures used in the industry. Determining which is best for your project in the beginning will make proposal comparison more straightforward. Some common options are time and materials, fixed price, and retainer.
A rigid model that offers a set cost for a set scope. Functionality is predetermined and not expected to change as the project moves forward. Any changes throughout the process are not included in the fixed price agreement.
Pros: It guarantees that you will get an application with x, y, and z functionality for a set price. It is easy for companies and start-ups to use in planning and projections because costs do not fluctuate week to week.
Cons: Because the time spent on a project cannot be estimated at 100% accuracy, companies take on the risk of Murphy’s Law- everything bad that can happen, will. To account for this, extra hours (costs) are typically added to the project as a risk buffer. It can be difficult to account for every little detail of functionality and adding items that were missed or changes in scope can add unprecedented costs.
Additionally, the fixed price, fixed scope nature does not provide an opportunity to collaborate and brainstorm throughout the development process. The flexible, iterative approach that typically works best with software development cannot be utilized due to the scope already being set.
Time and Materials
Customers are billed only for the time spent on their project.
Pros: Scope can be changed at any time, allowing the project to grow and adjust as needed.
Cons: Getting an accurate cost and time estimate for the project is almost impossible since everything is subject to change and more than likely will. Because of this, scope creep is a common issue. What was originally estimated to cost $50k can turn into $70k, $90k, or more.
A set cost for a set amount of time. The time can vary from weeks to months.
Pros: Scope can be changed as needed. Costs are constant which customers looking for funding and large companies appreciate. Particularly long projects may get a discount.
Cons: A set list of functionality is not guaranteed. The overall project cost is not set.
What We Recommend
Metova has used both Time and Materials and Fixed Price but feel that most projects do best as Retainers.
With time and materials, costs can vary from week to week depending on the feature. This can cause you to put your focus on the cost of individual tasks. Retainers allow you to focus on your application and the best way to reach your goals. Read more about T&M in our previous post Why We No Longer Use Time and Materials.
Additional charges to account for unknown risks are not necessary like they are in fixed price. Re-negotiating every time there is a change in scope can be tiresome and use precious energy that would be better expended on the actual project. Even though fixed price projects are scoped out before the project is started, scope increase still happens. Things always change through the process and project price never stays “fixed” for long.
Budget planning is easy with Retainers. You know exactly how much each week of work will cost you. You don’t have to worry about a change in cost even if your needs change from primarily strategy to development. You are purchasing our expertise and whatever resources we can offer are yours for the duration. We give you the guidance that you need to succeed. Since scope documentation is not a prerequisite with retainers, the team can jump right in. Are you ready?