Why is flat-rate pricing expensive for customers?

Why is flat-rate pricing expensive for customers?

Planning your project budget, you get a logical desire to know exactly what you are paying for, how much, and when you will get the job done. It makes sense, especially talking about pre-packaged services or cases with clearly defined deliverables. A competent contractor can easily estimate the amount of time and effort needed to complete your website development assignment, including possible risks and complications. The figure feels right, and you go on, signing on the dotted line. But will you pay only for what you asked?

Why flat-rate pricing in website development can be expensive?

The modern IT sphere is flexible enough due to clients’ requirements. What was meant to be as easy as ABC can end up being a complex system with dozens of enhancements suggested by a new team member or copied from a competitor? Luckily, the latest project management principles allow a more manageable change of course and easy integration of new features. In any project, there is always a chance that the initial plan will not work as supposed to, so a need will appear to redo something. Will you add the extras to the budget? 

Yes, you already did when you agreed to the fixed price. And even if the plan works well – the extras are still here. Experienced contractors are aware of all typical pitfalls they may face and try to avoid wasting time and resources. Therefore, pricing always includes risks. And yes, you overpay.

Important information about flat-rate pricing

What you may want to keep in mind about flat rate website development is that:

  • They always charge for force majors that may not happen;
  • The estimation may be wrong and will affect the quality and delivery;
  • There will be no or little flexibility in project specification;
  • They are more expensive than hourly-based projects;
  • The real-time and budget may differ from the planned one, and be sure that your contractors will compensate for it one way or another;

Alternatives you may use

Hourly-based payment is an excellent alternative for you to pay precisely for the work done. Do you think the time estimation may be unreasonably high? Maybe, just like the flat rates calculated based on expected hours to be spent. The quote depends on your contractor’s ethics, and the two parties must build a respectful relationship. If you force your development team to fit into your budget, by all means, they might end up struggling to keep the balance between work and reward.

What’s worth remembering about hourly projects:

  • You strictly know what you pay for and how much time was spent;
  • Hourly-based work presupposes more reports and better work tracking;
  • You can monitor the progress and understand how close the finish is;
  • You offer a comfortable working environment for your contractor;
  • There is no risk that quality will suffer because of the fixed-price limitation;

The middle ground is hourly payment: you do not overpay, and your contractors know they do not risk. If you want to stop the work, you can do it any time. There is no stress and no loss of your fixed budget. Take this into consideration when planning your next project.