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Fixed Price vs Hourly: A Software Development Agency's Honest Guide

Fixed price feels safe. Hourly feels risky. A software factory shares when each model actually saves you money—and when it backfires.

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Double Commit
January 2, 2026
6 min read

We get asked this constantly: “Should we do a fixed bid or time & materials?”

The honest answer? It depends on how much you don’t know.

The Fixed Price Illusion

Clients love fixed price. It feels safe. “I pay $10k, I get an app.”

But here’s what happens in reality:

  1. We estimate based on a spec.
  2. We add a 20-30% buffer for “unknowns.”
  3. You realize halfway through that you forgot a feature.
  4. We have to issue a “Change Order.”
  5. Everyone gets annoyed.

Fixed price works ONLY if:

  • The scope is tiny and crystal clear.
  • You have zero intention of changing your mind.
  • It’s a solved problem (e.g., “Migration from X to Y”).

Time & Materials (Hourly/Weekly)

This scares people because it feels open-ended. “What if you just work slowly?”

But for a startup or a new product, it’s actually cheaper. Why?

  1. We don’t add that 30% “risk buffer.” You pay for actual work.
  2. You can pivot instantly. “Hey, let’s drop Feature A and do Feature B instead.” Done. No contract renegotiation.

T&M works best if:

  • You are building an MVP.
  • You want to iterate based on user feedback.
  • You trust your developers (this is key).

The Hybrid Approach

For many clients, we suggest a middle ground: The Retainer.

You buy a block of hours per month. It guarantees our availability (we don’t book other work over it), but gives you the flexibility to change priorities week to week.

Our Advice

If you’re building a landing page (like this one—here’s why we chose Astro), do Fixed Price. It’s a known quantity.

If you’re building the “Uber for Dog Walking” or an AI-powered product, do Time & Materials. You will discover 50 things you didn’t think of in the first month. Don’t lock yourself into a contract that penalizes learning.

The Bottom Line

There’s no universally “right” answer. The best pricing model depends on your project’s maturity and your appetite for flexibility.

Quick Decision Framework:

  • Fixed Price → You have a detailed spec and zero expected changes
  • Time & Materials → You’re exploring, iterating, or building an MVP
  • Retainer → You need ongoing development with shifting priorities

Not sure which fits your project? Talk to us—we’ll help you figure out the model that protects your budget and your sanity.