Validating Clients
May 9th, 2008 by VladimirOnce we where proud to win 75% of all enquiries. We where good to all people. And we where cheap. Now where more money is at stake in every project, it is good to be selective. Getting right clients is important for client’s sake, not only for ours.
Here is some practical guidance that we use internally to determine how much effort to put into pitch, and whether we need this client at all.
Introduction.
Our objective as a company is to achieve high productivity and maximum value for our clients, retaining reasonable profitability in the process.
We have to consider each of those leads carefully. Time spend taking part in tenders, and writing proposals is indirectly paid by existing clients. The less time we spend on sales activities the better value we can deliver.
We have to ask specifically abut the number of companies taking part in a tender, and their calibre and set-up. (We want to make sure that we are on the level with other companies. As if a prospect selected mostly more powerful, or on the opposite: cheaper competitors, it is more likely that they will go for it). We also have to ask on what basis a prospect will be making a decision.
The following questions should be addressed when making a decision on an effort and approach to bidding for a new work.
Can client pay us, and how much?
As we are in business to make money this is the primary question to find an answer for. And if the answer is mainly negative, there is usually no need to go any further.
Is there an evidence that potential client have invested substantial time and resources into researching a new venture and preparing detailed specification or brief? Client can invest a substantial time in house: a revision header showing several people involved in preparing a document, and several iterations of reviews is a good indicator. If a company pays third party consultants to prepare this document it is even better.
Is the business established, solid and with good cash flow?
Some basic information can be acquired via companieshouse.org (Directors, year established, abbreviated accounts) or 192.co.uk
It is worth then to Google some research on company leaders.
Most of SME leaders are registered on networking web-sites such as www.ecademy.com or www.linkedin.com
Is there a scope for ongoing work?
If the business heavily uses or relies on internet technology there is more possibility of ongoing work. Long term service insures better understanding of client’s business and better relationships between people. This reduces misunderstandings and communication overheads in general, meaning better value for a client, without impact on developer’s profitability. This sort of business is also more likely to benefit form our input. With ongoing work there is no or very little sales cost attached.
Are the benefits of the project we do for our client measurable?
If it is a new product or service it is obvious. It is less obvious with online automation system, for example job/time tracking system. Simply having one does not assure the benefits in form of more efficient operation. The same system can be used by different clients with different level of efficiency, depending on their commitment.
Where the benefits are measurable it is easier to get re-invested.
What is the total project Budget?
There might be a declared budget or budget brackets. If not some budget expectations, or at least rates that clients are used to pay. Those expectations should be realistic and in line with market rates.
Adequate budget is more important than absolute figure. We’ve done many small but well defined jobs profitably and with good client satisfaction. Small jobs, however, do not always lead to bigger orders. The more the budget is in % to our yearly turnover the more attention the client will get both form the UK and offshore staff.
It is still possible to deliver and meet clients expectation under a restricted budget, although one needs to keep in mind that more effort should be put into expectations management and scope control, and we have to put a reasonable margin in our estimate and expectations management to include that.
Is the work similar to what we’ve done before?
If a new project is similar to what we’ve done previously there is less risk, and potentially more profit. As our experience shows, it is not always easy to re-use the code, unless there is a near-match of functionality, but the expertise and knowledge of subject area, use cases and workflows can be re-used easily.
Project Risks
Most of IT projects are high risk ventures. For client it is a high risk high reward business. Developer however should make it medium risk good reward business.
As a development company we provide services to several businesses, who rely on us in their operation. Engaging in high risk activities (taking more risk and responsibility with possible higher gain in mind) can undermine company’s stability and affect businesses we serve.
What is the ratio of budget to potential responsibility? Doing a small change on a high traffic transactional web site, might not earn a lot, but carry a substantial financial/reputation risk for client and developer. In those situations even small errors on developer’s part can seriously impact on relationships with client, and in some circumstances even lead to a claim for a loss of business.
How important this project for client’s business? If the project has little impact on client business it tend to drag over longer period of time, gets little attention from project stakeholders. For those types of projects more account management and sales effort is required.
Can we do this job well? Low risk project provide less opportunity for portfolio/skills growth.
Does a project/client has any other values other then financial?
- Good reference.
- Extension of portfolio into particular industry or theme.
- Contacts with other businesses.
Learning new skills and technologies. - Learning new subject areas.
Every project will open doors to other similar jobs.
Existing clients can give references and recommend us as developers.
Credibility/profile of developer will augment the credibility of the business.
We can have some links from client’s web sites we’ve developed.
Is the work challenging, provides good opportunity for employees to learn/grow?
New experience - does the project allow us to expand our areas of expertise?
Are we contributing to business, or just coding? Understanding client’s business itself and impact of the software product on his business will allow developers to make better, and sometimes autonomous decisions on selecting best functional options. Proactive approach from developers. Less supervision required.
Is the client a good Reference/Authority in this type of market (considerable market share) Stronger reference points and possibility of further recommendation.
Can client be a business mentor? Can give us insight into improving our own business.
Human Factor.
Mutual understanding and respect will improve long term prospects of cooperation.
Is client psychologically/emotionally stable? “We are all going to die” type will make life of developer difficult. “super-positive” type will give little feedback and can live to another provider without revealing what went wrong.
Perception of your setup: are they looking for a company with a plush office? Do they mind subcontracting, and using freelancers? do they buy from a salesman or a person doing the job?
Is client tolerant to different culture?