Could you define T&M in this context? How does it differ from code sprints?
> If (ii), then the follow-up move for future deals with the same buyer is to clearly show why their final T&M billables could have been cheaper if they'd gone with FP.
I understand (i) and (iii), but why is showing them FP is better than T&M a good idea? Isn't T&M more profitable for me?
> ... that sentence implies a pattern of failed FP deals and lack of scope.
That's accurate unfortunately. There's always scope, but for sub-£2k jobs (and worse for sub-£1k) there's a trade-off between time spent tying down the scope and time doing the job. If I spend an hour on it, that's 5-10% of the overall budget gone.
T&M is "Time & Materials", which is the same as billing by the hour or week. The advantage of T&M for code sprints is because of the typically ambiguous and uncertain nature of the sprints. Even though there's supposed to be a well defined and constantly prioritized queue of features to be completed during each sprint, the fact that they can be changed and moved around means it's incredibly difficult to nail down an actual deliverable beyond a vague "payment of milestone X due upon completion of code sprint", which is really no different than a duration-based payment schedule which basically boils down to T&M :D
FP is generally (not always) better for both the buyer and provider because:
1. Buyer benefit: For a given scope there is a corresponding, known budget. Typically, fixed/forecasted budgets are preferred by buyers so they can forecast and set internal expectations.
2. Seller benefits:
(i) If it's a task that you feel can be done quickly or with less effort than normal (e.g. done repeatedly for others in the past), you can still charge based on the VALUE of the work vs. the # LABOUR UNITS, ultimately resulting in a higher margin for the seller with a tightly scoped budget for the buyer, even though it takes you less time to complete. The only time you need to consider lowering list prices for work done several times in a row is when a perception of commoditization creeps in, either by the general industry or (more likely) by the customer(s).
(ii) T&M is more profitable for you in the short term, but often causes more overhead and problems for the buyer on larger deals as scope uncertainty and ambiguity increases. Typically, the easier you make your buyer's life in terms of reducing overhead and paperwork, the more likely they are to want to work with you in the future.
>>There's always scope, but for sub-£2k jobs (and worse for sub-£1k) there's a trade-off between time spent tying down the scope and time doing the job.
Sounds like you're an independent freelancer. In this instance, you're in a tough spot. I suggest putting in 1.5hrs that you swallow from a cost basis with a firm goal to minimize potential risks during the engagement.
The worst part of being an independent is that your overhead is typically higher if you try to go the FP route for higher-valued deals as you are solely responsible for writing the SOWs, thinking about the timelines, managing the customer AND delivering. I can absolutely understand why, in that situation, you're comparative advantage is defaulting with T&M in most situations and hopefully raising your prices a bit to compensate for the inevitable pre-sales discussions you need to have with potential customers.
Sorry I can't give more advice there. I've found patio111's posts to be very informative for independents looking to grow.
Could you define T&M in this context? How does it differ from code sprints?
> If (ii), then the follow-up move for future deals with the same buyer is to clearly show why their final T&M billables could have been cheaper if they'd gone with FP.
I understand (i) and (iii), but why is showing them FP is better than T&M a good idea? Isn't T&M more profitable for me?
> ... that sentence implies a pattern of failed FP deals and lack of scope.
That's accurate unfortunately. There's always scope, but for sub-£2k jobs (and worse for sub-£1k) there's a trade-off between time spent tying down the scope and time doing the job. If I spend an hour on it, that's 5-10% of the overall budget gone.