Q & A

Goku asks “I have a project from client, shall I open a startup or play a mid man and make a cut”

I have a project from Client to implement ERP software(starting project of worth 450K$, and may get similar 2 or 3 more projects), I do not have any company for now and is doing a regular software job(earning ok but steady). Now following are the options I am thinking of

  1. Open my own startup with above project(The max profit I may make of it is 100K$ of each project), also as I do not have any practical knowledge of ERP platform so need to hire few resources and deliver it(also pay their salaries from that profit) and I have no other projects after these 2~3 are over and not sure how to survive thereafter(I may be getting some maintenance amount from above projects but that may not be suffice for long run) and hence little scared about leaving my software job, but again ain’t I am into software field only as a founder/entrepreneur and can join back good software firm in future if all fails.
  2. Open my own startup with above projects, and hire contract developers from other startup company who has delivered such projects before and execute it to completion, however the client would not know I have outsourced it to others or involved others as I have some agreement with startup company, How does such a model works and is it ethical, does startups practice this ?
  3. As Client is providing project to me based on my goodwill so I rather play as a consultancy firm role which finds the right technology and people or company and outsource it as I lack expertise and capacity, and take some cut as consultants charge. Client knows I have outsourced the implementation part to sub contractor but the management and supervision is controlled by me. This way I can continue building my consulting brand and expand business in longer run if needed. I may add 1 more partner and that’s all until we grow large.
  4. No need to open a startup, continue doing my job and just find a company who can do it introduce it to client, and negotiate with company to provide me my cut.

Which of it you think sounds more feasible to you ?

Thanks in advance!

My Answer

It depends on what you want to do long term.

If your not that interested in starting your own business then just do 3 but negotiate your fee before introduction and not afterwards.

If you want to start a business and build it up over the next 5-10 years then I would start with option 2 but modify it slightly.

You can be the brand name that subcontracts most of the work to a few local companies. Your brands job would be to find new work (marketing and sales) and possibly charge for project management and account management functions, being the middle man that can smooth issues over with both parties.

You don’t need to hide the subcontractors if you get their agreement and your contracts sorted out, you just become the brand clients come to in order to ensure the job gets done. We have this style of arrangement with various companies from time to time and it usually works out pretty well.

Over time as you find experts you could look at taking on option 1 but if your good at what I’ve said above then your risk may be lower if you just stick to option 2 because you have no staff to worry about and if you get the contracts right you can offset your risk between the client and the implementation crew.

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