Why software development startups lose money?

Why software development startups lose money?

One of my clients had approached me with a 1 line requirement that asked us to make inventory management software.Nowonder i refused the job considering the fact that projects with less requirements or vague requirements are always a risk to work on. When I spoke about this incident with one of my friends who have been a part of Software Industry for last few years, I realized that we all have been doing similar mistakes in this industry.

I have been a part of a Startup and understand how important every client is at the infancy stage of a company. The problem here is that once clients come to us with requirements, we ask our developers to start working on the data base development from the word Go, which harms all of us at a later stage.Web Application, Software Application,Business Application Development or Database Application development require a similar approach and that is, every single screen should be well documented.I have seen companies not charging clients for requirement analysis and my suggestion is that at least 10 to 25% of the cost should be kept for requirement gathering.In fact if you realize that the cost of software developed

would be more than you had expected re approach the client and explain him fairly on how

the initial assessment went wrong.The whole process should be well defined in stages:

Requirement Gathering

Screen Designing

Software application development goes wrong due to the fact that the next step is performed without assessing the initial step properly and believe me, you will be back to square one, if you don't do the above two steps properly.

Development

The final sign off on the last step would mean taking the prototype to your developers and giving a data base designed and screens programmed. Don't change the screens and work on what has been agreed in between you and client. My personal experience is that if you be a bit lenient with clients at this stage, you will bleed with money and will end up losing more than what you are supposed to earn. Ask them to pay for every single change involved at this stage.

Testing and Final Delivery

QA/Testing is one division startup companies usually do not have. Developers have this tendency of making small mistakes, which is unavoidable, as they are too involved in coding and a QA/Testing is required before project is delivered to client.You do not want to see a client finding bugs like numeric values being entered in phone number filled. It gets embarrassing and makes you look like a fool in front of client.

I have followed this approach for last few years and that has led to better project delivery and better products. We all learn with times and I know that most of the startups don't care about this process and end up losing fortune on their projects.

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