Why We Bill by the Hour

In the last month or so, I have had a ton of calls with prospective clients. All the calls inevitably wind their way to “price”. Most want a bid for a project and that’s where the fun begins.

We don’t do fixed bid

We bill our clients hourly for our expertise. Most potential clients have been conditioned to consider only a fixed bid. The biggest reason is because they have a set budget. You can bill hourly and still work within the confines of a budget (and I believe you can do it better with an agile methodology).

Why bill hourly?

It’s been my experience previously working at Compaq and later starting up our own business six years ago that in a fixed bid situation, either the client gets taken to the cleaners or the developers do. With fixed bid, the requirements of a project have to be so locked down and fine grained that there is no flexibility. If requirements change, costs for the developer can spin out of control. For a developer to make profit, they have to bid the project up really high to cover any unforeseen scope creep. Business as usual (fixed bid) just didn’t make sense to us.

Our perspective

We do software development at an hourly rate, delivering quality code and constantly interact with our clients as we iterate for them. Because of our agile process, two week sprints, and constant communication with our clients, we actually save them money. When a client sees their ideas take shape and can bang on it in a couple of weeks, they quickly see what works and what doesn’t. This saves money!

Take a fixed bid, waterfall method, for example, and they would see that piece of functionality when it was at completion and there is nothing they can do about it, and they had to pay for it. With an hourly bill rate, the customer always has his foot on the gas pedal. Say we just finish up the third sprint and the customer decides he’s ready to go live even before his feature list is complete. With fixed bid, the client would have been locked in and would have given us half up front. In the agile approach, not only does he save money, he’s making money ahead of schedule, too!

Bottom line: Squeejee believes that billing hourly offers more flexibility and cost savings for our client and is fair to us. Now that’s a win-win.