This document discusses different methods for pricing custom software development projects: hourly billing, fixed price billing, and weekly billing. Hourly billing is the most profitable for developers but can lead to unexpectedly high costs for clients. Fixed price billing provides an upfront cost but offers limited flexibility. Weekly billing provides regular payment without large upfront deposits, allows for flexibility, and gives developers and clients the same goals of on-time, on-budget delivery.

1. How Is Custom Software Priced?

2. Developers Perspective
• Developer will keep track of the hours
spent working on your project.
• Developers will bill you for those
hours based on the agreed upon rate
and bill you for as many hours as
possible.
• Developers has no motivation to
work quickly or efficiently.
Hourly Billing

3. Client’s Perspective
Client’s want to keep the billed hours limited to
save money on the overall cost of the project.
Flaws
• It puts you and the developer at odds with
each other.
• Developers may end up earning less from the
project.
• Many potential clients just look at the hourly
rate when determining the developer they
are going to use.
Hourly Billing

4. Benefits of Hourly Billing
• Easy to understand
• A common billing method most businesses are familiar with.

5. • Projects often take longer than expected which can lead to
unexpectedly high costs with hourly billing.
• Relies on the developer to accurately record their hours.
• No incentive for the developer to work quickly or efficiently.
Drawbacks of Hourly Billing

6. • Most profitable for the developer and least beneficial to the client.
• It will generally be charged for non-coding related items such as phone
calls, status updates, responding to e-mails, etc; at the coding hourly
price point.
• It requires a large deposit upfront based on the estimated overall
project cost.
Drawbacks of Hourly Billing

7. • Your developer will quote a price for the total project based on the
requirements you provide them.
• Any additional changes outside of what was originally agreed to is
considered "out of scope".
• It won’t be able to include any changes without renegotiating the
cost of the project.
• Often not appropriate for complex, hard-to-estimate projects or
software development that will continue for extended periods of
time.
Fixed Price Billing

8. • No unexpected costs or fees.
• More akin to buying a product, where you know the exact cost
beforehand.
Benefits of Fixed Price Billing

9. • Limited flexibility – changes might
require a renegotiation midway
through the project.
• Developers may be unwilling to add
additional features.
• Can lead to poor quality work as last-
minute features are rushed.
Drawbacks of Fixed Price Billing

10. • As a client or a developer, one of
the best options is weekly billing.
• You and the developer both have
the same goal; to create a great
custom application quickly and
efficiently.
• Most developers won’t charge you
extra if a certain feature runs over
into the following week
Weekly Billing

11. • It does not have the same
tendency to result in unexpected
costs.
• You know exactly how much your
development project will cost
each week and you have a good
estimate of how many weeks your
project will take.
• Allows you to start your project
without having to come up with a
huge deposit.
Weekly Billing

12. • It does not have the same tendency to result in unexpected costs.
• Greater flexibility
• Ability to add additional features along the way
• Less chance of unexpected costs so you can budget accordingly
• No large upfront deposits
• Developers don’t have to waste time recording hours
• Non-coding related tasks are included in the weekly rate
Benefits of Weekly Billing

13. 1. Managing one or more business processes using Microsoft Excel or
Microsoft Access and have outgrown this setup.
2. Using a variety of software tools that don’t “talk” to each other.
3. Staff is unable to do higher level work because they’re stuck doing
tasks manually which could be automated, especially tasks that
involve entering the same information in multiple places or using
multiple software tools.
4. One or more of their current business processes take too long, are
too tedious or are otherwise “painful” to deal with, yet have to be
done frequently.
Our Best Custom Software Clients are Business
Owners Experiencing at Least 3 of the Following
Problems:

14. 5. Unable to find off-the-shelf software that fits how they do business.
6. Looking for ways to streamline their business to give them a
competitive advantage and/or to make their business more valuable
for an eventual sale.
7. Frustrated with their current software because its too hard to use or
lacks critical features.
8. Want to systemize and streamline how they do business, making
delivering services to their customers more predictable and consistent.
9. Looking to launch a startup web application and need technical help to
take their concept from idea to working code
Our Best Custom Software Clients are Business
Owners Experiencing at Least 3 of the Following
Problems:

15. ✓ Sells complex products or services.
✓ Has numerous or complex processes necessary for delivering
products or services to your customers.
✓ Has at least $1M/year in revenue or the potential to reach this
level in the near-term.
✓ Is looking for a way to differentiate themselves from competitors.
✓ Has a budget to invest in a custom software solution.
✓ Believes a custom software solution could solve key problems in
their business...or at least wants to consider this as an option.
We Can Help If Your Company...