The document outlines the importance of transparent pricing in custom software development for startups, emphasizing that uncertainty in pricing is a key reason for startup failure. It details various pricing models, including fixed price, time and materials, fixed time/fixed budget/flexible scope, milestone-based, and dedicated team models, each with their respective pros and cons. Additionally, it highlights the necessity of thorough project planning, contractual agreements specifying deliverables, and the selection of a reliable development team to achieve successful outcomes.

1. How To Get Transparent
Custom Software
Development Pricing
Halyna Korolevska
Content Manager

2. The startup founders and managers want to get a
quality product but they worry about overpaying for the
services of an IT company.
According to cbinsights.com, pricing and cost issues are
among the top 5 main reasons of startup fail.

4. The formation of a transparent custom
software development pricing includes the
following steps:
I. Quality project planning
II. Choosing the right pricing model
III. Contract with indicated planning
results
IV. Experience and reliability of the
development team

5. І. Quality project
planning
To make your tech startup successful, you
need to carry out the strategic and tactical
planning. This planning with the help of IT
consulting helps you to plan all aspects of
the project in a way that prevents the risk of
overpaying for the custom software solution
development.
During tactical planning, you carry out:
● architectural planning
● operational assessment
● implementation planning

6. So you need to:
● create a logical architecture for product
development, define milestones and
specific tasks,
● discuss all organizational issues,
estimate the work load, assign different
tasks, ensure that you have the
appropriate quality and quantity of
performers, and the necessary finances,
● choose a methodology for
development (scrum, waterfall or
another),
● select the appropriate pricing model.
І. Quality project
planning

7. II. Choosing the right
pricing model
Pricing model is a way in which the cost of
software development services and the
method how the customer pays for these
services are formed.
Types of pricing models:
Fixed price - Fixed Price
Time and Materials
FFF - Fixed time, Fix budget, Flex-scope
Dedicated Team
Milestone based model

8. 1) Pricing Model - Fixed Price
Due to this model, the exact cost and terms of startup
development are determined and do not change for the client.
But if the client wants to add a new function that is not in the
documentation, after the agreement of the parties, it's drawn
up by an additional agreement to the contract.
Pros
- Works for medium, small projects, and MVP
- the cost of startup development doesn’t change for a client
- Strict adherence to the development deadline and result
predictability
- The price remains fixed until the customer has changed the
requirements
- Does not require client control
Cons
- Preparation takes a lot of time
- Detailed documentation is required before the development
- Not suitable for working on large and complex projects
- Partners agree on the necessary changes and indicate them
in an additional agreement to the contract
- The execution of additional agreements to the contract may
slow down the development
II. Choosing the right
pricing model

9. II. Choosing the right
pricing model
2) Pricing Model - Time and Materials
This model is characterized by more flexible terms and
costs. The customer pays for the actual working hours of
the developers at the rates previously agreed with the IT
company. Client pays gradually as sprints or tasks are
performed.
Pros
- Works for long term tech projects
- Gradual payment for the finished result
- Quick start - no need for lengthy planning and
documentation
- Process transparency and contact with the customer
throughout the project
- Ability to make changes in the development process
Cons
- Not fixed startup deadlines
- Unable to accurately plan your budget
- Time required to work with the project development
team

10. 3) Pricing Model - FFF — Fixed time, Fix budget, Flex-scope
With the FFF pricing model the deadlines and budget of the
tech startups software development cannot be changed under
any conditions, which includes work scope adjustments. So
customer plans a budget before beginning a startup, knows its
final cost, and date of release.
Pros
- The ability to get a quality product with a limited budget
- Strict deadlines
- Changes in the scope of work do not affect the development
cost
- The contractor and the customer collaborate in the
development process
Cons
- Constant customer cooperation with software solution
vendor
- The executing company should be flexible in its work, make
sure that it does not exceed the budget and plan its work well
II. Choosing the right
pricing model

11. II. Choosing the right
pricing model
4) Milestone based pricing model
At this pricing model the work development scope is
pre-divided into separate parts, or milestones. In turn,
depending on the importance, IT company completes
one milestone & proceeds to the next. Thus, customer
pays the planned costs for each successfully completed
milestone.
Pros
- Customer pays for individual workloads
- The client doesn't pay one large sum for the entire
project development
- The team performs tasks efficiently
- The client pays for the actual provided functionality
- Low risks, transparent work, and predicted results as
client controls the project
Cons
- There is no fixed price because milestones have
different costs
- There is no way to determine the exact release date
- Approximate project budget

12. 5) Pricing Model - Dedicated Team
Before project development, the software customer and the IT
company discuss the requirements, workload, and calculate
the time needed to complete the project. The software
development company provides the customer with a
dedicated team of necessary IT professionals. Each month, the
software customer pays for the work of this team.
Pros:
- Works for complex long-term projects
- Client significantly saves on infrastructure
- The client fully manages the development team
- Dedicated team devotes 100% of its working time to your
project and deeply understands your product
- The team works on a long-term basis and is interested in
quality
Cons:
- Dedicated Team pricing model is the most expensive cost
wise
- Big expenses and time for managing a development team
II. Choosing the right
pricing model

13. ІІІ. Contract with indicated planning results
One of the most important components of the qualitative
formation of a transparent software development pricing is the
preparation of a contract between the customer and the vendor.
It gives certain guarantees to both parties and eliminates many
risks.

14. ІІІ. Contract with
indicated planning
results
In contract the partners write the results of IT
consulting, namely:
- all estimated tasks (or sprints, milestones),
- the number of required people in the project team
and their specialization,
- technical issues
- organizational issues
- the selected pricing model that we talked about in
the previous section,
- financial expenses and the cost of the project (if
possible according to the project type).
- code warranty. It means that the final price of the
development will not change due to the fault of the
vendor. If something happens, service supplier will
do troubleshooting for free.

15. To implement a successful project, you need
a reliable team, a software vendor, which:
- has lengthy experience in software
development,
- finishes projects on time,
- gives certain guarantees,
- offers reliable protection of your data,
- provides complete confidentiality of the
entire development,
- concludes a contract.
IV. Experience and
reliability of the
development team

16. To provide transparent custom software development
pricing for your business you need:
- to carry out the quality project planning
- choose the right pricing model
- enter into a contract
- work with a reliable team.
Learn more detailed information about the transparent
pricing in custom software development in the article on
the blog of MassMedia Group's website.