Landing big contracts as a small company - it's not all bad. They can bring in a lot of revenue, for not that much sales effort. And if you have good processes down, they can also be much easier to deliver on. At least in the US, contract law can be very fair, financing options to facilitate large contracts are plentiful, and most large businesses act in good faith.

So it isn't so much landing a big contract is bad, but landing a big contract that you can't deliver on is very bad. Determining what you can and can't do, how much you need to invest into your internal processes and capabilities - that is the challenge of running a business.

Usually, in successful businesses I have worked at (or business units), I see a split. Ideally it would be 50-50 large contracts to small accounts, but usually realistically is is more like 60-40. Probably depends on the industry too.

Yeah, it's a double-edged sword. On the one hand, you are getting a lot of money and probably a great case study for your marketing material. On the other hand, you are probably going to be asked to move your product in a direction you wouldn't have otherwise taken it. Sometimes that's great, sometimes you're just a contract software engineer for much less money than you'd get doing that explicitly. You can be wary or you can be excited, every case is different.

Rollout clauses can help with this.

For instance, don't draw up a contract blindly, mandate an install base and training as part of the package, and that contractually, it must be installed, training complete, and in process for X number of days, and in that time period requests are limited to direct support (IE, actual bugs or user questions). You should be meeting with users as much as possible during this time, if you can. Make it clear that you only want and will listen to their feedback and make changes in that respect.

Then, schedule a meeting with the users at the end of the specified period, to get a sum of all the positives and negatives of the product, and have a separate with management about whats next, what your roadmap with them looks like (if applicable) etc.

This keeps the relationship in control in a positive way, usually for everyone.

I've seen clauses like this before in enterprise contracts. If you can everyone to agree to it, they turn those fears into assets real quick, and helps manage the burdensome spam of support requests for X or Y feature.

How does “I want x feature for $y or I terminate the contract according to our terms” bring contract law into the equation. Most often you have a single person in the big org as your champion. If they leave, you leave.

There are many ways to be their bitch. Many, many ways.

I ran into this early on and it’s a very tight rope to walk. You’re early and trying to keep the big fish so you over-extend and then you’re stuck with that level until you figure out how to reset the expectations - which can be tricky to do.

It blocks you from doing other more critical things that, while they might not make you revenue today, will potentially make you revenue later.

I’ve never been a fan of VC money but if you’ve gone through this kind of bootstrapping you can certainly appreciate some of what it solves - tho the grass is always greener and all that.

Yeah this happened to me and it killed my business. I didn’t have enough time to expand the business and I didn’t charge the first customer enough to scale it up with employees.

It was really the stress that killed it. Being in that situation was not fun and I ended up burning out and telling my big customer to go jump. They threatened to sue me and I was done so I just said “give it your best shot”. Nothing came of the threat in the end. The experience has left a lot of scars and after 15 years not all of them have healed.

I can see how this might happen, but it's also a very good way to establish credibility with other customers (and funders, if you're looking to go that route). IME, it all but eliminates questions about "are you too small?" if you're already doing business with a big, well-known company.

You should try to ascertain whether they are likely to be aligned with your other customers in terms of feature development, and seek to find other large-ish customers so that you're not totally dependent upon that one. You should also try to make the dependence bilateral — make it so that you're delivering tons of unique value to them, so that they can't say "add X feature or we're dropping you".

I looked around and found one or two articles that essentially said "If one customer is more than x percentage of your revenue, time to diversify. Start actively drumming up new business."

If you are so small that you can't actively look to take on more customers because they take up all your time and you don't want to gamble on hiring more help when you don't really need it, you have a problem.

This seems to be partly a self created issue. Small businesses seem to think "We're friends!"

No, you aren't and big businesses know that having dealt with enough assholes themselves already.

No one can make you work only for them but the reality is if you want to stay a one-man operation and not hire more people and this one customer is 80 percent of your revenue, the tendency is to feel like "This works!" -- until it suddenly doesn't and they have you over a barrel.

Yeah, if you've got 80% of your revenue coming from one customer, that's not great. But it all depends on how you work with your customers. In my business, things are pretty hands-off, and we have calls only a couple times a year, largely to talk about promoting our work together (our tech is a customer-facing differentiator for them, so we give joint talks at conferences and such).

I don't think there's some magic percentage, over which you need to diversify. You should always be looking to get other customers, and if you have one big one then it should be easier to get other big/medium-sized ones.

In my experience it's not so much that they are out to screw you. It is just there is a mismatch when a big company buys from a small company. Big Co has long sales cycles, needs a lot of paperwork done, wants training, may need consultants onsite etc. Small companies are not generally well set up for this. Also your income is more predictable if you average 1000 customers paying $100 per year, than if you average 10 customers paying $10,000 per year. Also a few big paying customers can push you around in a way that lots of smaller customers can't.

Yeah, I didn't say they set out to screw them, just that it does happen.

I had a corporate job. People have trouble seeing big companies as having the same cash flow issues etc they have. They imagine they are sitting on a fortune, not that a lot of those assets are needed to just run the company.

I remember reading one story about a small company waiting to get paid by BigCo and BigCo ran into issues and then tried to stiff them on payments by saying something like "This is for the latest thing we ordered and we no longer owe you those old payments cuz (legal loophole)" and the small company updated its language to counter such claims and insist "Payment is for the oldest thing we did for you...etc"

They probably weren't trying to kill the small company. They were just trying to survive their own financial downturn.

It's why I used to think "I should collect such stories when I see them." Small businesses tend to be "The new kid" who learns this the hard way and may not survive the lesson. I would like this issue to get more publicity so small businesses get better at managing such things realistically.

I've seen this firsthand. If the relationship isn't well managed, all resources go to niche big-customer use-cases, and the product stagnates.

You can also just accept that is "best what you can earn" with the product and earn that money on BigFish and move to the next project.

It is also perfectly fine option. I just wanted to add that it never is so clear cut and one might be having "going to the moon" ideas where product is basically in BigFish niche and no other company will really use it as much and especially other BigFish2 wont hop on the bandwagon because they are competitors and will never take risk of having some part of their business in the same pot as the other.

Even if technically it is super cool or whatever.

> Feel free to bite off more than you can chew and view it as a growth opportunity, but be aware that getting too much of your revenue from one client makes you their bitch. It's like all the downside of being an employee plus all the downside of running a business.

One mistake is charging the client with thinking that you will be able to service the contract yourself, but fee being not enough to hire a capable employee and have nice profit on top of that.

Rule of thumb - if the client doesn't want to pay you enough so that you can hire someone or even a small team, with everything that goes along - office space etc and you can't have a profit on top, then this is not really a client, but employer who wants an employee without having to be actually responsible for one. It's not a business relationship.

That's probably a big part of it.

If you undercharge on some small, one-time job, afterwards you go "Whoopsie! Time to adjust my fees. No big."

You undercharge on some big, ongoing contract and it can feel like you can't make any real changes. And now you're stuck in this bad deal. (Or at least feel stuck.)

People tend to not know how to "fire" a bad client and the idea that you can choose your clients, at least to some degree via market positioning, is alien for many people.