Agile Contracting

Oh man, this topic is a doozy. Customers want to know how much something will cost and when it will be done without knowing what it is we are really going to end up doing. When you suggest that we will discover things and course correct, they stare at you blankly and ask if that means they are getting a discount. Customers generally don't want to have to think, and they want to shift the responsibility of designing their business model onto you, the contractor, because bless their hearts, they probably don't even have a business plan that would let them articulate their business and revenue model as it applies to the work they want you to do.

Having a consulting services based business means that your business consulting service model must be laced up and iron clad. You need to be the Delta Force that your customer is looking for. When you are a small business trying to keep all your customers happy, doing operations and support, figuring out your own revenue model that's required to support your existing client base, while at the same time figuring out how to grow your company to cover your new expenses that have emerged from your own success... it's really hard to do this. This is why most small businesses fail. An added challenge is when your business is small and there are limited numbers of partners, the partners tend to be the business development team, the sales team, the account execs, the PMs... and those roles have conflicting agendas that can make course correction in the middle of a project very hard. Sales people don't want to admit that the company's capabilities are a work in progress.

Here are some very cool articles on alternative contract models. The fixed cost, fixed scope, fixed time model ALWAYS fails without a change control officer pounding the client relentlessly, which often results in an unhappy client; on the other hand, if you don't pound them with change control, they eat into your margin, for us, typically by 50% of our margin. We desperately want to be fixed scope bucket, but varying content of bucket; we want to be fixed cost and fixed time, where we append the emerging requirements into a new bucket of cost and time.

http://www.sparkboxx.com/sparkboxx/types-of-contracts.html
http://alistair.cockburn.us/Agile+contracts