Fixed fee (also called flat fee or project-based pricing) is a billing model where you agree to complete a specific project or deliverable for a predetermined price. Unlike hourly billing, the client pays the same amount whether the work takes you 10 hours or 100 hours.
When to Use Fixed Fee Pricing
Fixed fee works best when:
- Scope is clearly defined - You know exactly what the project entails
- You have experience - Similar projects help you estimate accurately
- Client prefers certainty - They want to know the total cost upfront
- Your efficiency rewards you - Working faster means higher effective hourly rate
Pros and Cons
Advantages
- Clients love budget certainty
- You're rewarded for efficiency and expertise
- Easier to communicate value vs. cost
- Less time spent on detailed time tracking
Risks
- Underestimating scope hurts profitability
- Scope creep can destroy margins
- Need strong contracts and change order processes
- Requires accurate project estimation skills
Calculating Fixed Fees
Don't just guess. Break down the project:
- Estimate hours for each task
- Add 20-30% buffer for unexpected issues
- Multiply by your hourly rate (or higher for efficiency reward)
- Factor in expenses and overhead
- Round to a clean number
Track your actual hours even on fixed-fee projects to improve future estimates.
Protecting Against Scope Creep
Fixed fee requires iron-clad scope definition. Include:
- Specific deliverables
- Number of revision rounds
- What's explicitly excluded
- Change order process and rates
Chronobill lets you track time internally on fixed-fee projects, giving you the data to spot scope creep early and justify change orders with real numbers.