Find the right pricing model for your project.
Pricing models dictate the costs, incentive structure, and flexibility of every product design project. Therefore, selecting the right one can be critical to your business’s success.
Innovolo offers three different pricing options to fit your project needs: Pay-by-Hour, Pay-by-Project, or Bulk Hours.
Which plan will work best for a particular project and company is usually determined by two things: work volume and uncertainty.
Pay-by-Hour vs Pay-by-Project
For low volumes of work, the choice between pay-by-hour and
pay-by-project usually depends on how much uncertainty is in a project. In order for us to quote a project complete, we need to be reasonably sure how much time it will take. This means we need to have a very stable scope of work, and usually experience with similar projects.
Projects that involve developing and testing new technologies, materials, or methodologies, are usually very difficult to predict and therefore better priced via pay per hour.
Why not quote everything pay per hour? We could, but this comes down to serving you better and saving you money.
Quoting a project complete, upfront, allows our clients to know how much to budget and decide if the ROI is worth it before they commit to anything. To quote a highly variable project up front, we would have to take a conservative estimate to cover ourselves from under-quoting and taking a loss. This would result in an unusually high quote. Because of this, it is better to simply bill by hour, so you only pay for the time you actually need.
You can see the influence of uncertainty on the gap between the pay by hour and pay by project price of two projects below, one with high uncertainty and one that is more stable.
As the uncertainty of a project goes up, the span of possible costs increases. The pay by project price must follow the top end of the expected costs, to prevent us from taking a loss. However, the pay by hour price can be anything within the possible cost range. When the uncertainty is low, the possible cost range is slim and can be safely quoted up front as pay by project, allowing for better planning.
If you have multiple projects, a single large project, or would like to use us to supplement, or serve as, your engineering department over time, then investing in bulk retained hours is the most economical and efficient option. In this scenario, we will review the portfolio of projects you want us to handle for you and recommend a combined total number of hours. You can then purchase the hours in bulk, at a discounted rate.
In addition to the wholesale discount on the hourly rate, there are other benefits to using the bulk hour structure. For instance, the reduction in project management costs. The savings come from the simplification of project startup, scope changes, and accounting work. Also, since the block hours can be applied to any project at any time, clearly defining scope limits up front is not necessary. This reduces the quote sign off lead time and allows for broad changes in project direction on the fly, at any point in the process. In addition, the hassle of tracking and coordinating payments on multiple projects is eliminated by merging them into a single repeatable payment plan.
When applicable, retained hour plans are our preferred method of operation, as it eliminates a lot of the red tape between us and our clients, and frees us up to focus on responding to their engineering needs.
We hope this helps you understand our different pricing options, and the pros and cons of each, so that you can work with us in selecting the best plan for your business and project.
Fixed Sum Project Estimate
Depending on the level of definition of the requirements provided by our clients we approach the pricing of projects in different ways. If a project’s requirements are explicitly defined, then we will quote a fixed price for the delivery of the work with an estimated delivery schedule. If the project is undefined then we can either quote an hourly or daily rate for our services or agree how to handle/control the costs and invoicing.
Alternatively, we can produce a ‘scope of works’ (SOW) document. The purpose of this document is to define the scope of the project to allow Innovolo to more accurately quote the total project costs. The document will outline the stages involved in the delivery of the project and the associated costs for each of these tasks.
If necessary, a detailed breakdown of our intended approach will be created to give us confidence to provide a formal quotation. Often in this process we will be providing potential solutions to fully understand the level of work involved and our client could then use these. With this in mind there is a cost to the SOW, which will be quoted to the client, and a purchase order will be required before commencement of the project planning and scoping. If after receipt and review of the SOW, the client wishes to proceed with the project the cost of the SOW will be deducted from the full project quotation.
We can also produce estimated costs for projects with undefined deliverables; however, these should be used for budgeting purposes only. Formal quotations are maximum project costs; however, we reserve the right to re-quote if the client changes the project requirements or deliverables and all quotes will be delivered in line with our terms and conditions.