Every firm considering fixed fees has the same fear: what if we underprice and eat the loss? It's a valid concern — and it has a straightforward answer.
Start with what you know
Pull your last 20 similar engagements. What did you actually bill? What was the effective hourly rate? What was the range from cheapest to most expensive?
This historical data is your pricing floor. Price your fixed fee at the 60th percentile — not the average, and definitely not the cheapest. The 60th percentile accounts for normal variability while leaving room for the occasional blowup.
Build in the safety valves
- Define scope explicitly — what's included and what triggers a change order
- Include a complexity clause for matters that exceed defined parameters
- Set a term limit — fixed fees that run indefinitely are a trap
The psychology advantage
Fixed fees aren't just a pricing model. They're a trust signal. When you quote a fixed fee, you're telling the client: I'm confident enough in my ability to do this work that I'll bear the risk of overruns.
Hourly billing punishes efficiency. Fixed fees reward it. Choose which incentive you want to live with.
Track your EHR religiously
Every fixed-fee engagement should have time tracked against it — not for billing, but for learning. If your EHR on fixed-fee work drops below your target, you have a pricing problem or a scope problem. Both are fixable, but only if you see them.