Hourly vs Fixed

To quote hourly or fixed, that is the question...

When we started SmallBox we quoted everything fixed- "we will design and build this roughly sketched idea of yours for $5000!". This led to many long, painful baths. Not the client's fault really, we agreed to do something that wasn't well defined and we had no real process for executing. Wishful thinking abounded on all sides.

This wasn't working well so a couple years in we did a 180 and started refusing to do fixed bids. Everything was hourly with an estimate of hours per task. This helped us stabilize our cash flow and better manage expectations. But we still had some projects going over budget and clients frustrated that the original projected budget was no longer valid. 

Then it occurred to me that the real problem, with fixed or hourly, was that we didn't have mastery of our process. When you don't have mastery of your process for your leading products then how can you predict with any kind of certainty what they will cost? 

Ideally you want to charge for value not time, right? If something is worth $1000 and takes an hour to do, it's still worth $1000. Our team, over the last 5+ years, has been able to plan, design and build custom websites in record time (and even in 24 hours a couple times). There is little waste now in our system. It's not perfect but it's efficient and effective.

So we have come full circle- foolish fixed bidding as a start up, rigid hourly quotes and billing during our grow-up years and now back to fixed bids as we more narrowly define our products and master the related processes. 

Do we still bill hourly at times? Sure. For some projects and engagements we still bill hourly since the work is custom or exploratory and not part of an existing process. We feel this is fair for us and the client.