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In the last few years, I have been working with several software development projects which I decided to outsource. Unfortunately, many of these projects did not succeed for various reasons but provided me with a valuable opportunity to learn from failures.

Our main objective for outsourcing was to reduce cost without compromising the quality. Software developers with many years of experience charged around $20 per hour in developing countries in contrast to over $100 per hour in Australia.

First, I worked with a dedicated IT service provider in Eastern Europe that was developing custom software in all major programming languages. The company demonstrated its capabilities by helping us prepare a tender application for a government-funded agency. We became one of the two shortlisted applicants but lost this tender to another supplier. I then successfully outsourced website development for several Sydney-based small businesses to the same IT service provider.

My next software development project was focused on building a custom software that allowed a web-based order processing & payment, and online contractor management. After confirming our maximum project budget to the IT service provider, we devoted almost two months summarising software feature requirements and preparing a draft of the project specification. But we mutually agreed to abandon subsequent software development because estimation of the project cost from based on the final project specification was beyond our budget. The IT service provider has not charged us for any work performed, and agreed that the bulk project costs could have been estimated earlier in the process.

After internal discussions, we decided to outsource development of a custom web-based software allowing customers to design and buy printed products online. Similarly, we told the maximum project budget and created a draft of the software specification. During the next few weeks we worked with the IT service provider on preparing the full project specification.

We wanted to get the software with a lot of desired features but did not want to increase our project budget. When you are working on complex software projects it is often difficult to anticipate all of the issues that may stand on your way. In our case some software features, such as display of over 30 different fonts and support of these fonts in all major browsers, became particularly complex. The software developer has proposed to consider alternative solutions based on his knowledge of lean software development. But we believed that most of software features in the agreed project specification were very important to our perspective customers. We insisted that software development should adhere to the mutually agreed specification. In the end, this inflexibility became a deal breaker. In the middle of the project the IT service provider recognised that he can no longer work from a tight budget that we allocated to the project because several complex features in the specification were substantially increasing software development costs. It became too late to renegotiated project requirements to continue the project. The IT provider stopped further development until we were prepared to increase our project budget more than twice.

Here are some of the lessons we learned. These can help you make more informed decisions when considering software outsourcing.

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Remember that even the best business ideas require time and significant effort to execute them. That is why it is important to recognize whether you have sufficient motivation that will keep you committed when you are faced with obstacles. Building a business is hard, takes a lot of time and dedication that comes from personal passion. Be persistent and do not give up.

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The act of forming a business is not particularly difficult. However, planning for and developing a profitable, growing business is a complex, ongoing process. Adequate planning, attention to details, and realistic expectations are critical to your success.

Start with evaluation of your business idea. A good feasibility assessment for your idea involves a detailed examination of financial, personal, and market realities. What is unique about your new service or product? Is the market large enough to enable growth? Will customers buy your new product or service? How will you be able to reach your target customers at an affordable cost?

Even if your business idea includes a unique product that solves painful problem for large number of potential customers, having a strong management team is critical for success. Hiring experienced manager can be costly, while if your plan to run the business yourself you may want to explore whether you have sufficient management skills. Such skills, for instance, include financial reporting & planning, marketing, employee management and training.

Also, it is unrealistic to assume that you will be able to borrow all of the money you need to start your venture. So you need to estimate how much of the business’s financial requirements you can meet from your personal funding.

Finally, starting a business successfully can depend upon how well you understand your competitors, their products, marketing strategies and competitive strengths and weaknesses. The first thing customers usually do when they hear of a new product or service is compare it to existing alternatives.

See the Sample Business Idea Evaluator Report

Additional suggestions for evaluating your business ideas

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Your idea may involve filling an unmet need in the marketplace with a new product or service, providing an existing product in a new form, making improvement to a product available from competitors, or providing an existing product to a new customer group or other ways in which value can be added.  Remember, an idea is only viable if people are willing to pay you for what it provides.

If you are already operating a business listen to your customers and create products or services that better fulfill their needs. Also, talk to your staff as they would often know what works inefficiently, what creates problems and what is too expensive.

Assessment of your business ideas is the first step in developing new business opportunities. When assessing your idea ask yourself what is the problem that this idea will solve? Who will pay for your solution and how much? Talk to other people in the industry or your customers and ask them about their opinion on your business idea.

In today’s fast paced market environment many small businesses and entrepreneurs have a growing need for efficient and affordable evaluation of business ideas for new products and services. Planning4business has developed an Idea Evaluator tool that combines principles from several business assessment methodologies and provides you with an objective evaluation report.

There are several benefits of the Idea Evaluator report. Read How It Works page for an overview of each step involved in the Idea Evaluator process.

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• Independent and cost effective evaluation your business idea. It includes analysis of competition, market, and likely financial requirements, and suggests next steps for your business planning
• Identifies aspects of your business idea that need improvement before you invest more time or money into building a business venture
• Helps you think through your business idea in a systematic way
• Within 10 business days you receive evaluation report that you can use for other business planning activities including preparation of a business plan or a loan application

Read How It Works page for an overview of each step involved in the Idea Evaluator process.

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In today’s business world, where many new businesses fail within the first few years, it is very reasonable to search for every opportunity to increase your chances for success.  Planning4business offers a range of small business services (include URL) addressing your startup business needs.

Outside business advisors can assist you in making decisions based on facts rather than intuitive guessing. They can also refer you to their business networks and provide insights during and after launch of your small business.

As an entrepreneur, you will want to protect your interest and minimize your business risks. The right time to address these important issues is during the business planning stage. To develop a solid business plan you will need to work with other professionals in accounting, business and law who can assist you in developing risk mitigation strategies and in identifying your best protection options.

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On the other hand, you will need to pay franchising fees and royalties, will have to adhere to a restricted sales territory and will likely experience less freedom in your pricing strategy. As with any opportunity, both advantages and disadvantages must be examined before a decision to invest into a franchise is made.

Once you completed commercial due diligence of the franchise and you remain happy with selected franchise opportunity contact a solicitor specialising in franchising to help you review and negotiate the agreements that will enable your franchise to grow now and in the future. Similarly, if you are attracting a loan the best tool to communicate your proposal to a financial institution is by writing of a business plan that discloses all the changes you will be making in developing your new franchise. Additionally, benchmarking actual performance of your franchise against objectives in your business plan helps you understand how well you are doing.

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You should also perform own due diligence as many business owners want to sell their business because they anticipate unfavorable conditions in the future or because there are some fundamental issues with the business. Make sure that you fully investigate the business and assess its future potential.

When making due diligence ask a lot of questions regarding various aspects of an existing business. Some basic questions may include: Why is the business for sale? What is the business model? What kind of reputation does the business have currently and what is the business’ client base. You will need to carefully review all financial records and understand existing contractual obligations. Using services of a solicitor and an accountant can be helpful in finalizing your evaluation and purchase of the business.

Our company can provide independent review of a business that you consider for investment. We will assess products or services, market, competition, operations and can survey existing customer base.

It is likely that you’ll be making certain changes to the business after acquisition. In case if you are looking to secure a loan or other form of investment it is advisable that at least some sections of a business plan, if not an entire plan, are prepared. Include the business plan with your loan proposal based on what you expect the business will accomplish under your ownership.  As part of your business planning, you may decide to change business’ specific mission and objectives, sales focus, management team, financial forecasts.  Your banker will want to know that you have a viable business plan for operating the business that you are acquiring. For example, if you will be changing the financial structure of the business, this can have major impact on your company. That is why the financial plan is especially important.  Your lender will want to know that the business can be profitable under your financial proposal.

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