Fixed cost and hourly billing models are fraught with conflicts of interest, and other issues, and are better suited for the Waterfall approach to project management as it requires detailed upfront planning. As believers in, and practitioners of, the Agile methodology, our client work is centered around iterative execution and validated learning and as such requires a different way of billing, which we call Agile project billing.
A story point has a point value. Each user story has story points. A sprint has user stories. Our clients help to define the sprints during sprint planning, then prepay for each sprint for as long as the project is active.
Agile billing addresses the concerns of both the client and the service provider. Since the client (and optionally their in-house team) is part of the sprint planning process and thus are collaborating with us on the scope, definition, and perceived-difficulty (story points) of each user story, they become intimately aware of what the work costs and why. This is an important aspect of our business model because it speaks to our commitment to transparency.
Clients with a fixed budget know that they'll get all the work their budget will allow, and those without one know they won't pay for more work than they themselves deem necessary. Sometimes a project needs to be canceled or put on hold. Agile billing makes this a non-issue because the work is performed and billed-for iteratively, so halting or ceasing work at the end of an iteration is fine.
This billing model makes calculating the cost of engineering easy and obvious. The cost per user story is simply the "point value" multiplied by the number of story points associated with a given user story. The cost of a sprint is simply the sum of the cost for all user stories in a given sprint. Because the sprint cost is so precise, prepayment is required, but virtually all of the risks have been mitigated so this isn't a problem for our clients. Essentially, our clients only pay-in-advance for the work that they've requested to be done. It's worth mentioning that we also offer products (web services, etc) which we can use in the service of engineering a larger software solution which will likely use a subscription model and have different pricing.
Our clients have the ability to stop or cancel a project at any time without risk or penalty. Occasionally, clients need to respond to feedback, changing the scope of work or project direction which our process and billing model fully supports.
Our clients are involved in every way, from data modeling to backlog creation, user story creation to sprint planning. We believe in iterative execution, rapid feedback loops and validated learning, and we've tailored everything around that.
Our clients are billed for work and services with complete clarity and control and only pay for work they request. Sprint payments are made in advance and subsequent work is contingent on the client approving the previous deliverables.