I’m impressed by how many tech startups (specifically SaaS) are started by using the Time & Material model of cooperation with the hired agency.
And there are even more startup founders who keep on asking about what to choose when it comes to the time and material vs fixed price dilemma.
We, being on the side of those for whom the Time & Material model is of high interest, still would not recommend using it when hiring a software development agency for building and launching the MVP version.
Would you hire a developer to build your house without knowing how much money and time would it take in the end?
Of course not!
So why would you choose to pay hourly for software development without knowing ballpark numbers?
I’ve got an answer for you…
We’re in a tech startup boom right now. The same way we’ve been in the dot-com bubble back in 1995-2000.
Professional money is flowing over the roof. Nobody cares about spending.
Funded startups are more worried about utilizing all allocated money than wasting a couple of extra grand. A lot of things are done in a highly ineffective way.
But that would be finished soon…
And most of the successful tech (SaaS) startups (again) would be mainly bootstrapped. With a careful eye on costs, proper MVP planning, and becoming profitable as soon as possible.
We love limitations. Limitations are what make new creative solutions and new technologies thrive.
You’d ask, how can I go on a Fixed Price model and still be flexible with requirements?
For this, there is a dedicated model which we call Adaptable Fixed Price.
Also, there is a very important step to any SaaS startup idea at the very beginning…
Do proper ROADMAP upfront:
- Build a product strategy
- Extract project requirements
- Cut down the fat and outline a true MVP list
- Finally, make detailed costs and time estimation
That is a proper way to increase your chances to launch MVP for your SaaS idea within budget and on time. No other way around.
Time & Material is only good once you have stabilized monthly profit from your SaaS. At that point, you’d be worried about quality and deadlines more than about budgets.
So, this is, basically, our conclusion on the time and materials contract vs fixed price dilemma.
Agree or Disagree? How you started your SaaS?