These 7 things can make you lose money when you’re working with your software development agency

June 8, 2018 by Team Vivirhub

When it comes to software development choosing a good process to handle your project can be a headache. Initially the fixed price might seem like the best possible because from the beginning you always know how much you will need to pay for the development; On the other hand, you may feel the by working hourly rate would be better and reasonable option.

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So which one is to choose?

 

The software development landscape has changed so much recently that there is a high probability you will fail your project with hourly and fixed fee approach. Why? I will tell you 7 reasons why billing hourly and fixed fee-based approach sucks and you’re doomed to fail your IT project:-

 

PROBLEM #1: EXPENSIVE

 

At hundreds of dollars an hour, your bill racks up fast. Your developer (or agency) has probably asked for additional dollars for the some new features and changes (Not big changes which will ruin the done work or kill all the efforts made so far by the developer, If the changes are likely to change the direction of the work and add big efforts and time). Your whole budget gets becomes almost double and brings you to the position where you can’t step back and also destroy you financially.

 

PROBLEM #2: LACK OF TRANSPARENCY

 

If you’re lucky, you know you can trust that your developer isn’t inflating hours. Paying that bill still sucks though. At some point, you have asked if completing particular task really took 50 hours…when you’re not in the room watching your developer’s work, you have no way to check that the hour count is accurate.

 

 

PROBLEM #3: INEFFICIENT

 

You want issues solved and add few new features quickly. What does your developer want? If you’re paying him by the hour, he wants it to take as long as possible. There’s always that extra thing they “strongly encourage” too. Shouldn’t your developer have the same goals as you?

 

PROBLEM #4: INFLEXIBLE

 

Some tasks are easier than others. That’s true for the things you ask your developer to do, too. When you pay by the hour, you can be pretty sure that you’re paying your developer top dollar whether a matter is adding small new features or improvements in the existing task. Should your developer get to charge you the same for resolving bugs and left undone tasks?

 

PROBLEM #5: DISCOURAGES EFFICIENCY AND INNOVATION

 

Let’s say that you have received the quote from 5 developers (or designers) for your project (There are very popular freelancing portals like Upwork Fiverr which can help you to find freelancers around the work at lowest rates).

 

Each of these 5 developers has different hourly (or fixed) rates to complete your project. These rates are based on their experiences and their own decision to be fair for their expertise. “Nikki” charges $45/ hour and others charge $50/hour, $75/ hour and so on. There’s also someone else (Let’s name him Robby) who charges $150/hour. Robby, with his experience in finding better ways to complete projects, can code the given tasks or project in 3 hours = total fee of $450. Nikki, with her lack of experience, knowledge, and efficiency, can complete that same task or project in 16 hours = total fee of $720.

“Hourly billing encourages you to not work smart and to drag the hours so you get paid more”

 

The truth is that some websites can be created in less than a day (or even within few hours) if you have all the info ready and you know exactly what needs to be done. If your developer is charging you by the hour, why would he rush to get this website done as soon as possible when he could delay it by a few days and get paid more for it?

 

To avoid this situation and to keep track of the activities of the developers you may use some popular screen and time to track tools such as Upwork time tracker and Time Doctor . These tools will help you to see the daily logged in time activities of your developer’s system.

 

Surely this kind of tracking tools will help you to stop being fooled but instead of focusing of sales, marketing, and build customer relationships, do you really have this much of time to get involved in these activities?

 

PROBLEM #6: WASTAGE OF TIME

 

As a customer, you may face this situation very often. There are times when you argue with your developer over invoices and timesheets which is waste of time for both parties, Sometimes you find fake billing or overcharge you by developers just to make some extra bucks and then it leads to disputes.

 

PROBLEM #7: HARMFUL TO YOUR RELATIONSHIP WITH EACH OTHER

 

To explain this point, let’s say you wanted to build a new mobile application for your business. You’ve shared all your requirements with him and the developer tells you it will cost $20k based on his best estimates to create that mobile app and you go ahead with the agreement. After completing 85% of the project, the developer says it’s going to cost another $5k to complete the remainder of it. How would you feel in this scenario? Would you work with them again? Would you refer them to friends? Probably not.

“TIME HAS CHANGED, AND THE WAY YOU PAY FOR THE DEVELOPMENT”

 

Whether you choose hourly or fixed price project, there are chances where you will feel pain when you pay extra money when your developers exceed their quoted estimate to build your software. That’s a reality. The software is expensive; it’s very hard to commit to a large budget, especially if you’re not well-funded. Unfortunately, many freelancers or agencies don’t care your situation because they are too busy in making money form themselves

 

What if you can hire professional designers and developers on pay-as-you-go monthly subscription? We at Vivirhub, have replaced exploitative hourly fees with easy monthly subscriptions.

 

Here are some reasons why monthly pay-as-you-go subscriptions are better than hourly or fixed fee-based pricing model:

 

  • You don’t have to make a big commitment upfront
  • Fair and transparent prices
  • Simple Pay-as-you-go monthly plans
  • You can upgrade, downgrade or cancel your subscription anytime if your product is completed or if you’re simply out of the budget. Of course, we want our customers to continue when projects are completed even if it means they downgrade to a less expensive plan as we can work on adding new features, bug fixes, incremental improvements etc.
  • There are no hidden financial surprises for you as clients (business owner), You have 160 hours (maximum) in a month. You can get any work done in the selected package.

 

Conclusion

 

Choose the process of wisely.

 

You need to understand the difference between hourly, fixed fees and monthly subscription models of paying for your software. Make sure you’re not wasting your money, time and efforts.

 

So how you’re paying to your developer? Share your thoughts

 

For more information, I can be contacted directly via email: aman@vivirhub.com