Loading...
Answers
MenuShould I charge for a pilot project?
We are in talks with an enterprise to start a pilot project for our software. Is it a norm for companies to pay for a pilot project? Or should it be free to get a foot in the door and learn more about their problems and processes
Answers
Generally speaking, Yes.
I say this for a couple primary reasons.
1) If you do not place value in your product, why should the customer? And if you are not charging for it you are not placing value on it.
2) the customer will be more "invested" in the success of something that has cost them something. If it was free and it fails, "who cares"? if it cost them resources they may be more interested in making it work.
There could be overriding factors, but this is where I start with a question of this nature.
Definitely yes!
Your product and your time are valuable and that should be recognised. Also, neither you nor the company you pilot with will benefit from you running any financial risks.
But...there are various things you can do to ensure that the pilotcompany feels just as recognised as you do. Just some thoughts:
- Cost prices only during the pilot
- Engineer on site during pilot to immediately fix things
- Special discounts
- Lifelong premium service for free
- Be a prominent use case (they might need the innovative publicity)
Good luck!
Yes! When I started my company, I offered services for free, and after putting in a lot of work, the test client did not value my time during the process.
Even though this is a pilot, you may still incur costs to produce and time is a valuable resource that you will never get back. Getting in the habit of getting paid helps you build confidence and evaluate what you can charge in the future. Also, when the client pays, they will have "skin in the game" and will be more active during the process.
If you ever need help evaluating your sources of revenue vs cost of goods or determining your break even number, please feel free to schedule a call!
I wish you the best in your business!
Yes, charge.
The concept is called a Monkey's Paw, which comes from big ships coming into port. They need to be tied up to a pier, but the cable used is too thick for dockhands to handle. So they connect a thinner, lighter rope to the cable, and throw that down to the dockhand...who can then reel in the big cable as well.
When you do a pilot project, or a consultation, or put a plan together, charge for it with the Monkey's Paw approach. "I'll do this for $X,XXX." Cover your costs and pay yourself enough that you're happy regardless of whether you get the full project or not. Then: "Once you have this [pilot project / plan], it's yours. You can do whatever you want with it. Have me implement it. Have someone else carry it out. Leave it on the shelf. Throw it away. You own it. But if you want me to implement it, I'll deduct the initial investment of $X,XXX from the total. Sound fair?"
This way, your client sees value and not just 'Cost Plus'.
It totally depends on where you are in the product life cycle. Of course you want to get paid but you also need success stories and objective information about your product and how to improve it, especially if it's a newer product. You could always limit the pilot to 60 days and charge for professional services up front and then get the subscription after the pilot if it goes well as an alternative. I think you need to evaluate long term value of the customer - will they be with you for 6 months or 10 years? What's the difference if you start off in a pilot without a large sum of money exchanged if the relationship lasts over multiple years and they generate referral business for you that exponentially increases. Have some other ideas that could be helpful if you want to chat through it.
Great question! Answer should be always ask for the order! There are some caveats to consider regarding the maturity of your software, what value it delivers, who already is using the software and the overall strategic value of the account.
If you ask me, I believe yes, you should charge for your pilot project. One approach is to think in terms of “value exchange”. That is, what value are you receiving back from the customer that is going to assist you in determining product and services viability along with feedback on your business model. With this approach, you can offer a substantial discount because of the tangible and intangible benefits you are receiving from the pilot project. You are asking the customer to spend considerable time on a new product, to try things that may not work, to live with the frequent changes that you will be making, etc. With the value exchange approach, you can compensate them in some way for their time and effort by giving them a discount.
It’s difficult to put a one-size-fits-all model around this so one way is to diagram it out and put a price on the activity/feature they are receiving and then to guesstimate how much value you are receiving back in terms of feedback, testing, dealing with bugs, etc. With this approach, you can be transparent with your pilot project customer and show them that you appreciate the value you are receiving back from them and how they are contributing to the overall project.
Besides if you do have any questions give me a call: https://clarity.fm/joy-brotonath
Related Questions
-
What are the best ways to generate traffic or ways to reach to the customers you are looking for as a startup?
It really comes down to 2 major buckets. 1) CONTENT / INBOUND MARKETING Some people consider this option free, but it's not. Time is money, and it requires an major investment to do it right. The options are: - Company blog - Guest post on other blogs - Engage on social media (Facebook, Twitter, Instagram) - Press - Videos on YouTube - Create a free App (web or mobile) etc ... This strategy is all about create amazing content/information/tools for your customers. Think about their major questions they have for your industry, and answer them. Even consider teaching them everything you know about your industry. Doing so will attract them, and make you look like an authority. I've done this with my past 2 companies Flowtown (300K U/V), and Clarity (40K U/V) blogs. Each of the items mentioned above have a unique strategy and tactic .. so best to pic the one you'd be most excited about creating, and do just that one with all your resources. 2) PAID MARKETING Paid means using advertising to introduce your company to potential customers. Some options you have: - Google Adwords - Facebook Ads - Twitter Ads - Bing Ads - Banner Ads etc ... The only way I would suggest paid marketing is if you truly understand your customer LTV (Lifetime Value). If you don't know that, then you could be wasting money attracting views to your startup that aren't profitable. So be sure to have a product / service that makes profit, then you can test different paid marketing channels. My rule of thumb, is it'll cost your $200 to get 1 new paying customer (on avg.), so unless you're making $600 profit from a new customer, don't both for now. If you need to discuss further, you know how to find me.DM
-
What's an alternative to equity based compensation that recruits, motivates and retains employees?
Before we dive into the equity,salary and such. Motivation and retention begins with the CEO. Ask yourself what is the culture of the company? If you don't know anything about culture then start with the basics: 1. Do you value employee opinions? Do you ask for others opinions? 2. Do you encourage people to listen to employee problems? Do you listen to what other people have to say? 3. Do you encourage others to come up with ideas and suggestion? 4. Can you sell your dream? 5. Can you build consensus? 6. Hire people for their strengths and fix their weaknesses 7. Don't assume shit, always ask 8. Treat your interns like employees and mentor them 9. Have a clear vision and be able to articulate it 10. Can you admit when you are wrong? VERY IMPORTANT So if you have a strong company culture this will help with new hires, motivate, and retain talent. The frosting on the cake is free food/snacks, happy hours, company paid healthcare benefits, etc.TP
-
I'm having problems with ideation for a startup, I'm a web developer, what needs of yours aren't being met? Or how can I find a big problem to solve?
It's really ill-advised to solicit your vision from anyone. In my 20 years of building, investing and supporting tech companies, I don't know of a single success story that has it's origins in someone with your approach. Running a tech startup is incredibly hard. It demands sacrifices few are truly able to make and come with it tremendous risks that most people are unwilling to take. It sounds to me as if you want the startup life because you have an impression of what it's about but haven't yet experienced it first-hand. I'd encourage you to first join an early-stage startup. Developers are incredibly in-demand. Find an entrepreneur who has some experience, funding and a compelling vision that you believe in and get to know what the journey is really like.TW
-
Business partner I want to bring on will invest more money than me, but will be less involved in operations, how do I split the company?
Cash money should be treated separately than sweat equity. There are practical reasons for this namely that sweat equity should always be granted in conjunction with a vesting agreement (standard in tech is 4 year but in other sectors, 3 is often the standard) but that cash money should not be subjected to vesting. Typically, if you're at the idea stage, the valuation of the actual cash going in (again for software) is anywhere between $300,000 and $1m (pre-money). If you're operating in any other type of industry, valuations would be much lower at the earliest stage. The best way to calculate sweat equity (in my experience) is to use this calculator as a guide: http://foundrs.com/. If you message me privately (via Clarity) with some more info on what the business is, I can tell you whether I would be helpful to you in a call.TW
-
What is the best way to write a cover letter to an early-stage startup?
Better than a cover letter is to actually proactively DO something to help them. It'll show them not only that you've researched them, but you're passionate about the startup and worth bringing on. A man got a job at Square early on for just making them a marketing video on his own (back before they had one). Since you're a web designer, design a stellar 1-pager that's targeting their message to a particular niche. Something they could use on social media or something. If they're like most startups, they're not interested in reading cover letters. They're interested in passionate individuals who can add value to the organization.AS
the startups.com platform
Copyright © 2025 Startups.com. All rights reserved.