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
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.
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)
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!
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.