Reversing the Risks for Your Clients and Partners (Part 2)

In today's challenging business climate, how do you reassure potential clients or partners that it's safe to proceed with projects they may have been considering, but have been putting off because of their concerns about the economy?

Part 1 of this series discussed ways that a service provider (a contractor, vendor, or consultant) could share the risks and rewards of a project venture with clients. This method can greatly expand the options for doing business in uncertain economic times. If you each have the ability to stay afloat while you take calculated risks, you could consider joint project development, followed by a revenue-sharing agreement, such as:

1) Becoming "partnering affiliates," where, after a joint product or service is developed and ready for sale, you could use the affiliate module of an online e-commerce system to automatically track accruing revenue splits. This simplifies accounting and boosts the trust levels among partners.

2) Exploring other "share of results" methods, such as splitting a percentage of any royalties, dividing a vested interest in the long-term returns, or a similar equity-sharing arrangement. (Be sure to consult an attorney or accountant to assist with any unfamiliar agreements.)

This article, Part 2 in the series, suggests more ways to reduce, remove, and even reverse the risks of doing business, making it far easier for prospective clients and partners to say "yes."

They include using tests, prototypes, and project phases; as well as non-disclosure agreements to protect proprietary ideas. Although these tools are standard in many business situations, each can take on a whole new level of importance and value when creatively applied for risk reduction purposes.

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Propose Using Tests, Prototypes, and Project Phases
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One frequent and frustrating project scenario involves a client with a long list of desired features but only a miniscule budget and/or schedule. Negotiations tend to break down easily in such situations. To maneuver through the impasse and jumpstart the project, the parties could consider the following risk-reduction solutions:

1) Develop and test new processes first.

When a project requires designing a new method to produce the deliverables, the unknowns involved can increase the estimate significantly. Therefore, you could propose eliminating unknowns and reducing the estimated price tag by allocating time up front to develop and test the new processes. With some experimentation and fine-tuning, you could optimize those techniques to be both efficient and effective. After neutralizing various risks in this way, your overall project estimates might be substantially lower. This could boost everyone's confidence in moving the project forward.

2) Use samples and prototypes to model results.

When it's really not clear how long an effort could take, or what the output would look like because the requirements are too vague, you can discuss producing a sample or prototype of the work (such as developing one widget, editing one chapter of a book, or completing one training module). The results would help the stakeholders get a feel for the complexity of the work and understand what is possible to produce. These samples also would allow all parties to fine-tune the requirements before completing the estimate and committing to the entire project.

3) Reverse the risk of testing and prototyping.

If you're a service provider who's anxious to move a project forward, and you also have sufficient financial reserves to bear this particular risk, you could test new methods and/or create samples on your own time. You could use small, low-budget, incremental tests to verify many kinds of assumptions. After reviewing the completed test results or work samples with your prospective clients, you would be able to estimate the remainder of the project with much more accuracy. Or, you and the clients could take the alternate route of sharing downstream revenues, as explained above.

4) Propose completing the project in stages.

If the parties are trying to muddle their way through an open-ended and unclear set of requirements, you could propose completing the project in phases. Phases allow the features, functions, and deliverables to be defined over time. Another reason to use phases would be to kick off a project with a tiny budget or schedule, and do only a small, foundational subset in Phase 1. 



Focusing only on Phase 1 initially lays the groundwork for future expansion. The stakeholders could then decide whether to add or refine features in later phases. A decision regarding whether to proceed to Phase 2 could depend on successfully testing, using, and/or marketing the Phase 1 results.

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As a Service Provider, Offer Your Own Non-Disclosure Agreement
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Another angle that could set a service provider distinctly apart from other professionals, and further reduce the risk for potential clients, would be to routinely offer non-disclosure agreements (NDAs) as part of doing business.

Instead of waiting for the client to bring up the need, you can do it proactively as you offer your services. That way, you could more easily pursue projects that involve "ghost authoring" or behind-the-scenes development of books, training, or designs that the client would later be selling under his or her own name. You would simply advertise this benefit in your service package as one way you put your client's mind at ease!

In conclusion, even in uncertain business climates, service providers can reduce, remove, or reverse the risks for clients with worries about cash flow. Using creative approaches such as partnering, results sharing, preliminary testing, prototyping, and NDAs, you can keep the project options flowing despite the challenging times.