How to evaluate risks?
There is a project that a company wants us to build, so we now have the opportunity to start our company with a customer that will pay for our modules/app.
How do you evaluate the risk? There are a lot of changes in graphic design, definitions and so on, they want things from one day to the other and things like that, so it is a little problematic.
- How do you measure the risk of going with this project to start the startup compared to starting a from scratch consultancy?
- Should we separate the startup consultancy from our own projects?
- In general, how do you evaluate that something is not worth the risk?
2 Answers
It sounds like you are experiencing risks because you have not set out good terms for a project.
Make sure the following are covered and it shouldn't be so risky:
- Have milestone payments so that you don't need to wait until the end of the project to get paid
- Ensure that you have a clearly defined scope of work so that you can bill for any changes separately. The client should be able to make changes to the original plan, but they should also pay for them.
- Make sure you are billing enough. If you are paying contractors to actually do the work, you should be billing approximately 3 times the rate you pay the contractors. If you are doing the work yourself, whatever you value your time at.
It is generally better to have no project, than a project with bad terms. Sometimes you are desperate though and don't have that luxury, so you take what you can get and hope for the best.
To which risk are you referring?
Are you worried that the customer won't pay or decide to abandon you, or are you worried that the customer will demand a lot more then you expect?
Assuming that the customer is is solvent, and won't go bankrupt any time soon, then most other risks you can minimize with a good contract that states exactly the scope of the work you are expected to deliver, with any additional changes being billed at a per-determined rate.
If you foresee problems with this customer, you need to decide if that is the customer of your choice, or you would rather look for a different one for your company.
If you are happy with the agreement, and believe that this is what you want to do (more then any other project at this time) then I say for for it.
Good luck!
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The principal problem is that we don't have much money to handle more than 2 months and the projects are more than that time. – Tyoc213 12 years ago
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If you don't get paid enough for the project to be worth while, then its not a good project. Experience and reputation you gain should be considered in addition to money, but if the whole package is not worth while, then its not a good project. If it is worth while only if it doesn't go over budget, try to minimize the risk with a good contract. You can try to do stress tests and other risk related calculations, but I think that minimizing the risk is the way to go. – Ron Ga 12 years ago
