The difference in one sentence
With a fixed price, the builder is paid for an outcome and carries the risk of estimating it wrong. With hourly, you are paid-for time and carry that risk yourself.
When fixed price is right
The scope fits on a page. The builder has done this kind of work before and can estimate it. You need a date, because a launch, a hire or a budget depends on it. Most AI workflow automations, MVPs and internal tools fit this description.
When hourly is right
Nobody can write the scope down yet. The work is research, or a prototype whose purpose is to find out what to build. The work has no end state, such as maintaining a system month after month. For that we use a retainer with a fixed number of build days, which is hourly in spirit but predictable in cost.
What goes wrong with hourly
Hourly contracts have a quiet incentive problem: every hour is revenue. Discovery phases grow. Meetings multiply. Junior work is billed at team rates. None of this is dishonest; it is what the contract rewards. You find out the total when it is too late to change it.
What goes wrong with fixed price
Fixed price has its own failure: the builder pads the scope to protect the margin, or cuts corners when the estimate was wrong. The protection is in the quote itself. It must say what “done” means, what is out, and how changes are priced. And the builder must absorb their own estimation errors, in writing.
How we do it
Builds are fixed-price sprints of 2 to 12 weeks with the scope, the end date, the payment schedule and the fix window in the statement of work. Our estimation errors are ours. After the first weekly demo you can stop and keep the work. Ongoing work after launch is a monthly retainer with a fixed number of build days and 30 days’ notice. We do not bill hours for a build.