Compare the three models on the same criteria
| Criterion | Hourly | Project | Retainer |
|---|---|---|---|
| Commercial unit | Delivered time | Defined outcome or scope | Recurring capacity or service |
| Duration risk | More visible to customer | More carried by provider | Shared through included-capacity rules |
| Scope requirement | Time boundary and estimate | Clear deliverables, exclusions and acceptance | Included work, cadence, response and overage |
| Capacity effect | Revenue follows billed time | Capacity committed until delivery | Capacity reserved for the period |
| Cash timing | Invoice and expected receipt follow the agreed time-billing cadence | Invoice and expected receipt follow the project event or milestone | Invoice and expected receipt follow the recurring billing event |
| Change handling | Record added time and approval | Issue or approve a scope change | Apply included-scope and overage rules |
| Review signal | Effective realised rate | Estimate-to-actual margin | Usage, overage and displaced capacity |
Worked comparison: one engagement, three duration cases
The scenario uses user assumptions in generic currency units. It demonstrates risk transfer, not a recommended price.
| Delivery case | Hours | Hourly at 100/hour | Project fee 4,000 | Retainer 3,600 for up to 36 hours |
|---|---|---|---|---|
| Best-duration assumption | 30 | 3,000 | 4,000 | 3,600 |
| Base-duration assumption | 36 | 3,600 | 4,000 | 3,600 |
| High-duration assumption | 44 | 4,400 | 4,000 | Apply stated overage rule |
Use boundary conditions to choose
- Define the same outcome, service level, delivery horizon and receipt horizon for every model.
- Estimate best, base and high-duration cases instead of using one point estimate.
- Record who carries duration, revision, dependency and approval-delay risk.
- For a retainer, state included scope, reserved capacity, unused-capacity treatment and overage.
- Compare contribution, capacity and dated cash exposure after applying the same cost basis.
- Choose the model that makes the relevant uncertainty easiest to govern and review.
Related tools
- Service Rate & Quote Planner
Set a viable rate and project quote
- Fixed Price vs Hourly Planner
Compare fixed-fee and hourly economics
- Retainer Pricing Planner
Set a sustainable monthly retainer
Frequently asked questions
- Is fixed project pricing always more profitable than hourly pricing?
- No. It can reward efficient delivery, but it also exposes the provider to estimation error and scope ambiguity. Compare margin across more than one duration case.
- Should unused retainer hours always roll over?
- There is no universal rule. Decide what the fee reserves, how unused capacity is treated and whether rollover would create a future capacity obligation, then state that boundary clearly.
- Does hourly pricing remove the need to define scope?
- No. It still needs an agreed purpose, time-recording boundary, estimate, approval point and change process. Hourly pricing changes the commercial unit; it does not remove governance.
Calculation methods used in this comparison
- Fixed Price vs Hourly Planner methodology — Margin101: Same-scope duration and commercial-model comparison contract.
- Retainer Pricing Planner methodology — Margin101: Included-capacity, overage and retainer scenario definitions.
- Service Rate & Quote Planner methodology — Margin101: Underlying recovery-rate boundary.