Tech & Work

Discussion: Are ailing companies worthy clients?

It may sound strange, but one consultant believes that it can be advantageous to do work without guaranteed pay at the project's end. Find out how this TechRepublic member works with struggling firms and then decide if his practices are for you.

Gambling requires a high tolerance for risk and unmet expectations. When you undertake projects for struggling companies fighting insolvency (and there are a lot of them out there these days), your work is essentially a gamble. You could do your work and make some money from the contract. You could do a great job and win even bigger with future contracts, referrals, or a retainer payment. Or—and this is the part people would rather not think about—you could come out with a "thank you very much, but we're sorry" and a cash remittance far below what you expected.

If you're risk-averse, then accepting work from struggling companies is probably not the best thing for you to do. However, for consultants who don't mind a little uncertainty and are willing to be creative in their contracts, ailing businesses may be good client prospects. We'll present some potential problems and considerations when working for these companies—but we're really interested in hearing your thoughts on the issue.

The first warning sign
For consultants like TechRepublic member Phil Griffiths, struggling companies represent exciting job prospects because of the challenges the companies face. Griffiths, a New Zealand-based IT consultant, says he welcomes the opportunity to work with these firms, but he has learned to evaluate the company's problem conditions before accepting work.

"Consider why the company is in trouble," wrote Griffiths. "If it's due to management intransigence, then there is nothing anyone can do. Walk away."

Griffiths believes that the chances of changing a stubborn manager are slim. These types of managers are unlikely to give up control to an outside consultant, and consultants would probably benefit by seeking projects elsewhere.

Understand the consequences
Considering the fate of so many dot-com enterprises, it's hardly a surprise when another one goes belly-up. However, before accepting projects with any company, it's important for you to ask yourself if you're prepared to have your name or consultancy associated with a potentially wrecked firm.

According to Griffiths, New Zealand's market is small and word travels fast: "The publicity from a closure in certain industries can ruin a manager or consultant."

If your beat covers a small area or you work in a particularly incestuous marketplace, you may run the risk of being guilty by association, no matter how well you perform on the job.

Creative compensation
Unless the client is conniving and dishonest, the ailing company should be up front about whether or not they will be able to give up cash in accordance with your proposed terms. If they anticipate a scarcity of cash, you may be able to devise alternative compensation measures that could mean more business in the long run.

Griffiths suggests using the cashless client as a reliable reference to generate more business. "This involves more than just using the [company] name," wrote Griffiths. "The client must be prepared to take calls and even discuss some details with any of my potential clients."

If the agreement generates a lot of good leads, foregoing the cash on one project may be worth the initial loss.

But if referrals don’t seem like the most equitable compensation, there's always the timeless option of bartering. If the company produces a product or provides a service of some use to you, an exchange of your services for theirs may be fair. One of Griffiths' clients manufactures household cleaning products; he hasn't bought floor cleaner for quite some time.

But is it worth it?
We all know that there's no shortage of troubled firms in the marketplace. Is it really worth taking the risk of working with struggling firms? Will a contract effectively minimize the risk or will it just guarantee you a place in line behind numerous other creditors? Do you have any creative compensation tips in mind? Share your thoughts or experiences by posting a comment below.


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