Making new friends is hard, and building trusting relationships in business is even harder. To set the foundation for a promising partnership, consider starting with a fixed-price pilot project to show the client what to expect in the future.
Why pilot projects?
Even if clients have a ton of work in their backlog, never jump into a partnership without testing the waters. A pilot project not only shows a client what it will be like to work with a new vendor, but it also reveals a client’s expectations and collaborative style. If one side proves to be a difficult partner, the two parties can scrap the arrangement with no hurt feelings and little time lost.
In most cases, though, pilot projects help clients and vendors set the stage for better partnerships. By limiting the scope and providing detailed estimates, vendors can avoid communication breakdowns and adapt to potential partners’ working styles. This process is especially important for more technical companies, where scope creep and minor details can quickly grow into major obstacles.
Typical prices and schedules for pilot projects vary by industry. In software development, projects typically last from one month to three months and cost between $25,000 and $50,000. Those figures are substantial enough for both sides to take the work seriously — but not so significant that they lock anyone into a bad agreement.
Small tech startups, for instance, tend to operate in unusual niches. We once worked with a small but established log management vendor. The partnership began when the vendor sought a kernel-level monitoring solution; its team didn’t have the exact expertise to execute this one-time need. Thus, finding an expert third-party partner for this limited-scope project made the most sense.
Eventually, we landed on a 60-day fixed-price pilot project that suited the client’s needs. Outsourcing the work made sense, and by starting with a pilot project, we worked through the early challenges and began a great new partnership.
Pilot projects work with current clients, too. If an existing partner wants a new kind of work but lacks a clear vision, pilot projects allow everyone to explore new ideas without jeopardizing the relationship.
When pilots go awry
Effective though pilot projects may be, certain situations necessitate different approaches. Fixed-price arrangements are more about the type of work at hand than the client asking for the work. In some cases, one-time agreements simply cannot address the need.
Consider this example: A cybersecurity firm wants to migrate its servers from Windows in a private data center to Linux-based technologies on Amazon’s cloud. A third-party expert team may be able to accomplish that from a technical standpoint, but in this instance, there is no room for one-off arrangements — there are too many variables to consider. The estimate would likely be inaccurate and take too long to complete.
Projects like this one are better suited for situations where the client has plenty of work to offer in the same vein. One-time migrations do not qualify, for instance, but first-time forays into new arenas do. The key is to build a relationship based on trust within parameters that keep both sides comfortable.
Designing a pilot project for everyone
Pilot projects work because of their fixed nature. The vendor cannot go over budget or past the deadline, but the client cannot change the scope of the work. If something goes awry, the vendor must work without additional compensation. This is the time to address issues: In the future, they will not create hard feelings between parties.
Few businesses feel comfortable offering money-back guarantees, but we’ve found these agreements highly effective on our fixed-price projects. In 17 years of pilot projects, only two clients have ever exercised that guarantee.
Whether in technical spaces, construction, marketing or logistics, pilot projects make sense for business partners in every industry. Every partnership carries some risk. But by outlining specific terms and seeing how two sides work together, vendors and clients can hash out differences in the early stages before they become problems. The next time a client asks for something tricky, propose a pilot project with a money-back guarantee to test the waters first.
Dennis Turpitka is founder and CEO of Apriorit, a software development company that provides engineering services globally to tech companies, including Fortune 500 tech giants. Turpitka’s team works and lives in Ukraine.