For a V1, a fixed-price package almost always costs less than time and materials, because it shifts the risk of overrun — deadlines, scope, bugs — from the client to the provider. Time and materials (billing by the day or hour) only becomes worthwhile when the scope is genuinely moving and you steer the team yourself. Here is how to decide, with numbers.
Fixed price or time and materials: two ways to share the risk
Both models pay for the same work, but they place the risk on opposite sides of the table.
- Fixed price: a scope defined up front, a firm price, a delivery date. The provider absorbs any overrun.
- Time and materials: you pay for every day or hour worked, whatever the outcome. The scope can move — but so can the invoice.
Where the risk really goes
With time and materials, every surprise — a stubborn bug, an integration that takes longer than planned, a hesitation over a feature — turns into extra billed hours. You are the one paying for the provider’s learning curve. With a fixed price, that same surprise is already covered: the price does not move. The provider is incentivised to go fast and scope tightly, because every day saved is their margin.
The real math on a V1
Take a typical SaaS V1. At €500/day on time and materials, a quote of 40 to 50 days almost always becomes 60 to 70 actual days: €30,000 to €35,000 instead of the €20,000 to €25,000 announced. The Khufu package, by contrast, is fixed at €15,000, delivered in 7 days, source code included. You know the final amount before you sign, and it will not move.
With time and materials, you fund the provider’s uncertainty. With a fixed price, they fund it for you.
When time and materials still makes sense
- The scope is genuinely unknown and discovered as you go (R&D, product exploration).
- You have an in-house team able to steer and prioritise day after day.
- The engagement runs over months, with priorities that shift every week.
Our take
To launch a V1 and put a product in front of the market, the scope needs to be fixed — which is exactly what makes a fixed price both possible and protective. Time and materials makes sense later, once the product is live and you manage its evolution in-house — or through a scoped monthly maintenance (from €1,490/month). The rule of thumb: fixed price to build, time and materials or maintenance to evolve.