Overbudget and unable to complete software contract. What can I do and what can I expect to happen?

I am so sorry that you have had an awful experience with such a big project for your start up company. Clearly no one is beating you up more than yourself.

If it is any condolence -- we have all been there. We have all had project grow, migrate, change. We have all worked with clients that have expectation on the suspect side. We have all given ourselves timelines that become unrealistic.

It sounds to me that a "let's solve this problem together" meeting needs to happen. You need to facilitate a meeting with your client that lays out that the deadline is not going to be met. Period. Spend a limited time acknowledging the reasons -- balanced between their changing of the business requirements, and the disappointing changes to your team. Acknowledge these but don't allow them to become a bunch of finger pointing. It it heads that way you can simply say "There are lots of reasons we are here today, none of them will get us where we want to be tomorrow."

Make it clear that you would like to continue to move forward with them -- but that if they would like to take the current product and go find someone else they can. But that you can not continue in the current model. Period. If they have any sense they will realize that bringing on a new team at this time is just not feasible. The ramp up time, the lack of funds, the learning curve, the deadline . . .

So then bring the conversation to focus on the cost and time to realistically accomplish what needs to accomplish. Layout the critical path's baby steps. Set up no more than "two day" project scopes. Make sure there is an equal amount of what they need to do and what your team will do.

Make sure that you are getting paid to move forward -- even if at a significantly discounted rate. Offer to allow up to "x" amount in built up differed compensation as a reflection of your commitment to seeing this effort through.

You are an LCC for a reason. . .you can always shut it down, walk away. Lawyers only sue when there is something to get. Let's hope that it doesn't go there, but it wont be the worst thing that's ever happened.

Thank you for sharing your experience with us so that we could all be reminded how import the project development and management is, and how important it is to maintain ongoing management of client expectations and responsibilities.

Another one bites the dust.

You made three core4 mistakes. First, you did not understand an estimate is an estimate. Heck, one year detailed project plan? Not worth the paper written on. Second, you obviously did not have good milestones, good control and an adequate management aproach (like scrum). Proejcts are not suddenly late. projects are late a day at a time. Third, you failed to communicate the impact of constant changes with the client.

Fourth, you are unfit to run a business, because you pretty much put yourself into a dead cornder. Chance to salvage the company are pretty low now if you can not even pay a lawyer.

Four is actually the worst. Running a company is like playing chess, and you are two moves away from being checkmate and now ask how to win.

The best you can hope is:

• Immediately stop development. Lawsuit? Talk to the customer. Tell him you have to take capacity off as you are running out of money. Point.
• Try to find another project (bad news - even with the current market that can take some months, and you have none).
• Try to work that out with the customer.

At the end an estimate is an estimate. On the other hand, you as professionals, have an obligation. As you said - the project was behind timeplan from one.

But at the end, unless your customer gets more funds, and you find an agreement, your company is history. Chances of finding another revenue stream within a month is close to zero. Sorry. Unless you have them:

If we do not continue the project and just provide the client with what we have completed so far. We would be able to work on enough other projects to keep the company afloat. However, I fear that would open up the potential for a lawsuit.

What do you care? Seriously. To give you an example - your house is burning, but you don't want the firefighters to extinguish the fire because of the water damage. NICE joke.

If you can do it, do it. Communicate with the customer. But whatever lawsuit comes, comes in some months. And you can proove you tired what you could. But if you dont do that - your alternative is liquidation NOW. Not "possible maybe some damage later on".

Only alternative. move capacity to other projects, talk to customer and then see what happens.

NetTecture pretty much got it right, but there is a silver lining to all this that you probably forgot: your client is just as dumb and inexperienced as you.

1. They took an unrealistically lowball bid for the project, setting themselves up for failure.

2. Then they failed to manage you properly, keeping in touch and requiring status reports on a weekly basis. It sounds like your project is pretty important to them, so this is more or less inexcusable.

3. Now they have run out of money for the project and are going to have to take a complete loss or come up with more funding to carry on.

By the way... this is how every home remodeling project ends up going down :)

From your post I can't really tell much about what is going on with your client (which might be a sign that you are having trouble seeing things from their perspective).

• How important it this project to them? Are they going to shut down now? Are they really out of money?

• Why did they hire you to do it, when $100,000 for three developers for a full year is obviously a ridiculous price?

• What are all their possible moves? If you were in their shoes what would you do?

Chances are they're not likely to sue you, because there's literally nothing to be gained. You probably don't have anything that they could win in a lawsuit. But you should start thinking about things from their perspective right away so you know what to do next.