To all the freelancers out there…
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Have you ever made a partnership with a company for developing software? I work as a (starting) freelancer and I have a proposal to start building some software components to a company. Neither the company nor me want to have a relation like employer - employee. They are not in the business of software; it’s more like electronic components. They assemble and sell electronic components to customers and they want to have some applications through which customers can interact with those components. They provided me some electronic components and some software requirements. With their help on design, we started a little experience and I have built a tiny application which had a very good acceptance by customers. On the feed-back we had, we observed that customers are happy with the software and seek more functionality. This was a small experience, now we want to take it for real. They don’t have money to pay for the development, that’s why they seek a partnership with me and also because of support. Now I don’t know very well what conditions to impose. Who owns the software? 50/50 ? (They bought some development license for a framework we use) Should I impose that they sell a minimum number of licenses? They should pay me for each license they sell. Should it be a fixed amount or some percent on what they make with the software? Should I keep the license generator only to me? (Becomes hard to install the software on a customer and leave it running full functionality) So, I was hoping that some of you who had agreements like this to share their experience and point out things that I should keep in mind. Thanks vSoares
vSoares wrote: They don’t have money to pay for the development My 2c: Frankly, walk away. They should pay you at least some percentage of your normal rate up front. Sure, it can be considered an advance against royalties, but why should you bear all the risk? You might want to reverse the situation--have their customers by your software directly from you, and pay the company a small percentage. Avoid as many stipulations as possible. Things like "minimum licenses" only means you end up going to court to get your money. As for them paying you per license, be very careful of phrases like "net sales, gross sales, after expenses", etc. It sounds like they don't have much of an operating budget and certainly no budget for R&D. A bad situation, IMO. Marc My website Traceract Understanding Simple Data Binding Diary Of A CEO - Preface
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Have you ever made a partnership with a company for developing software? I work as a (starting) freelancer and I have a proposal to start building some software components to a company. Neither the company nor me want to have a relation like employer - employee. They are not in the business of software; it’s more like electronic components. They assemble and sell electronic components to customers and they want to have some applications through which customers can interact with those components. They provided me some electronic components and some software requirements. With their help on design, we started a little experience and I have built a tiny application which had a very good acceptance by customers. On the feed-back we had, we observed that customers are happy with the software and seek more functionality. This was a small experience, now we want to take it for real. They don’t have money to pay for the development, that’s why they seek a partnership with me and also because of support. Now I don’t know very well what conditions to impose. Who owns the software? 50/50 ? (They bought some development license for a framework we use) Should I impose that they sell a minimum number of licenses? They should pay me for each license they sell. Should it be a fixed amount or some percent on what they make with the software? Should I keep the license generator only to me? (Becomes hard to install the software on a customer and leave it running full functionality) So, I was hoping that some of you who had agreements like this to share their experience and point out things that I should keep in mind. Thanks vSoares
My advice: Do you *really* trust these guys? If not, get out. Quickly. You'll lose money, effort and time. I did it countless times. Let me explain. You'll develop a software. You'll spend time, money and effort developing it. They said they'll sell it, but they don't have money. How are they supposed to sell it? Do you know how hard and expensive is to knock on a lot of doors trying to sell a software?
vSoares wrote: Who owns the software? 50/50 ? (They bought some development license for a framework we use)
50/50? Are you insane? My salespeople receive 5%~10% of the software they sell. Business partners receive another 5%. They seem to be happy with it. You know what may happen if you decide to pay 50% of the price? You'll need to overprice your product, and this may stop your sales. And this is not good for anyone. About the framework: buy it yourself. If there's money on this business, keep 100% of it for yourself. This framework seems cheap anyways, at least cheaper than your software, since they have money for it, but don't have money for your software. If they still want 50% of the software, show them how much it will cost on your side. Now, ask them to show how much money they'll spend. They should spend roughly the same as you will.
vSoares wrote: Should I keep the license generator only to me? (Becomes hard to install the software on a customer and leave it running full functionality)
Actually, this is a subset of a broader topic: who will support the software?
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Have you ever made a partnership with a company for developing software? I work as a (starting) freelancer and I have a proposal to start building some software components to a company. Neither the company nor me want to have a relation like employer - employee. They are not in the business of software; it’s more like electronic components. They assemble and sell electronic components to customers and they want to have some applications through which customers can interact with those components. They provided me some electronic components and some software requirements. With their help on design, we started a little experience and I have built a tiny application which had a very good acceptance by customers. On the feed-back we had, we observed that customers are happy with the software and seek more functionality. This was a small experience, now we want to take it for real. They don’t have money to pay for the development, that’s why they seek a partnership with me and also because of support. Now I don’t know very well what conditions to impose. Who owns the software? 50/50 ? (They bought some development license for a framework we use) Should I impose that they sell a minimum number of licenses? They should pay me for each license they sell. Should it be a fixed amount or some percent on what they make with the software? Should I keep the license generator only to me? (Becomes hard to install the software on a customer and leave it running full functionality) So, I was hoping that some of you who had agreements like this to share their experience and point out things that I should keep in mind. Thanks vSoares
Sounds like a company that wants something for free. There are two reasons that you should not do this 1)you are most likely going to get ripped off - perhaps not because they are unscrupulous - but because if there is no money for it, then it is untested pie in the sky stuff that has not been well thought through. Many projects WITH money behind them are going to fail - what does that tell you about projects with no money behind them? 2) if it works on you, you encouraging more of the same by these people. I would only enter into that kind of agreement with REAL friends - people I have known for quite a while outside of business and even then I would have some peice of paper. I takes a while to accept this - because I think we are born trusting - but there are far more people out there trying to get something for free than people willing to share profits. I quote "Shakespear in Love": "How do we pay the actors?" "Share of the profits." "But there are never any." "Exactly." "Aaaah - I think you may have hit upon something Mr. Fennyman"
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Have you ever made a partnership with a company for developing software? I work as a (starting) freelancer and I have a proposal to start building some software components to a company. Neither the company nor me want to have a relation like employer - employee. They are not in the business of software; it’s more like electronic components. They assemble and sell electronic components to customers and they want to have some applications through which customers can interact with those components. They provided me some electronic components and some software requirements. With their help on design, we started a little experience and I have built a tiny application which had a very good acceptance by customers. On the feed-back we had, we observed that customers are happy with the software and seek more functionality. This was a small experience, now we want to take it for real. They don’t have money to pay for the development, that’s why they seek a partnership with me and also because of support. Now I don’t know very well what conditions to impose. Who owns the software? 50/50 ? (They bought some development license for a framework we use) Should I impose that they sell a minimum number of licenses? They should pay me for each license they sell. Should it be a fixed amount or some percent on what they make with the software? Should I keep the license generator only to me? (Becomes hard to install the software on a customer and leave it running full functionality) So, I was hoping that some of you who had agreements like this to share their experience and point out things that I should keep in mind. Thanks vSoares
All the replies so far seem to be quite negative but with a little thought it could turn out well for you. Whatever you do dont just go along with them assuming they have your best interests in mind because they wont. They want whats best for them. That being true if they feel your product gives tham a sales benefit they should be ok about you setting the terms for your work. As most others have said if they wont pay up front for development costs you have all the risks. They however are in the best position to push sales (they could include a leaflet with the hardware). At the moment it looks pretty unfair on you. As for them providing the hardware for you to develop against - so what. Many companies are willing to loan hardware if you are developing a product which could help them sale more units. Same for the API, look at how much it would cost to purchase this yourself. With no agreement so far the software is yours so keep it that way. Offer them 6 - 12% to sell your software with their hardware. DO NOT give them anymore (this is a more than fair rate if all they are doing is introducing a sale). Even at this rate it works very well for them given you have all the support/Admin overhead. Have a good think about it but dont do anything without good terms. It may even be worthwile seeing a solicitor or getting some proper leagal advice. Just my opinion. JJ
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Have you ever made a partnership with a company for developing software? I work as a (starting) freelancer and I have a proposal to start building some software components to a company. Neither the company nor me want to have a relation like employer - employee. They are not in the business of software; it’s more like electronic components. They assemble and sell electronic components to customers and they want to have some applications through which customers can interact with those components. They provided me some electronic components and some software requirements. With their help on design, we started a little experience and I have built a tiny application which had a very good acceptance by customers. On the feed-back we had, we observed that customers are happy with the software and seek more functionality. This was a small experience, now we want to take it for real. They don’t have money to pay for the development, that’s why they seek a partnership with me and also because of support. Now I don’t know very well what conditions to impose. Who owns the software? 50/50 ? (They bought some development license for a framework we use) Should I impose that they sell a minimum number of licenses? They should pay me for each license they sell. Should it be a fixed amount or some percent on what they make with the software? Should I keep the license generator only to me? (Becomes hard to install the software on a customer and leave it running full functionality) So, I was hoping that some of you who had agreements like this to share their experience and point out things that I should keep in mind. Thanks vSoares
Consider the Microsoft History, did IBM need Microsoft? You must sell the components for your self, the way Microsoft did, you own the software, and they have to pay you full licenses. The IBM PC without DOS is just a big box full of electronic components. Hardware is worthless without software to make it work, your product give value to their electronic components. You must conserve the ownership of the software. Eduardo Diaz site | english blog | spanish blog
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Have you ever made a partnership with a company for developing software? I work as a (starting) freelancer and I have a proposal to start building some software components to a company. Neither the company nor me want to have a relation like employer - employee. They are not in the business of software; it’s more like electronic components. They assemble and sell electronic components to customers and they want to have some applications through which customers can interact with those components. They provided me some electronic components and some software requirements. With their help on design, we started a little experience and I have built a tiny application which had a very good acceptance by customers. On the feed-back we had, we observed that customers are happy with the software and seek more functionality. This was a small experience, now we want to take it for real. They don’t have money to pay for the development, that’s why they seek a partnership with me and also because of support. Now I don’t know very well what conditions to impose. Who owns the software? 50/50 ? (They bought some development license for a framework we use) Should I impose that they sell a minimum number of licenses? They should pay me for each license they sell. Should it be a fixed amount or some percent on what they make with the software? Should I keep the license generator only to me? (Becomes hard to install the software on a customer and leave it running full functionality) So, I was hoping that some of you who had agreements like this to share their experience and point out things that I should keep in mind. Thanks vSoares
I sold out a long time ago, so I work for a contracting corporation. Can't help you much on the details, I get all the fun of contract work, less money, less risk. However, I will simplify a few things others have said and add a bit myself. 1) You say they put some money out for a framework. If you consider your hours worth $100 US an hour, what percentage of their upfront costs did they really give you? probably negligable. 2) People think that just because they have an idea, they should get 50/50. BS. Ideas are important, VERY important, but they are worth absolutely nothing without implimentation and not all ideas pan out. Applications work is turning ideas into reality, and ideas are like clay, they have to be shaped, rarely do you plop it on the table and it works right out. 3) If they don't pay for development, they are salesmen only. You took the risk, you get the benefit, they get a sales percentage (refer to the above post for appropriate percentage). 4) if you split the dev costs, they pay you half rate, you eat the rest during dev. THEN they can get 50/50 split. 5) find out the local contracting wages, assume that is what your time is worth PERIOD. Anything less than that is your assumed risk which runs up your percentage compensation. If they pay you full rates, they are assuming all the risks (like my company), then they get the most compensation. If you get a pittance, you take all the risk, you get the royalties. 6) Put it in writing, every time. No excuses, they are nice, etc. Assumptions make everyone miserable, everyone unhappy. Put it in writing PERIOD. 7) Don't sell yourself short, discount rates hurt everyone, most especially YOU. I did medical software once, the whole thing fell apart. It took twice as long, mostly due to poor dynamics of the team. One of the reasons for the poor dynamics was no real compensation. The guy organizing it, provided a computer (which he considered his and was returned), and $200 up front payment. The project took hundreds of hours and massive/multiple coordinated databases. When it was done he sold the software, inluding source and kept the money. I didn't feel like fighting him over it -- and he was cheated out of proper compensation (sold it for 20k). He was out of work, we had worked out of his savings for the upfront dev stuff. I kept my day job unlike the other programmers. I knew the risks and I wasn't willing to give up everything for some vision of being millionares. He broke even, the developers got the original $200 (probably about $1 an
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vSoares wrote: They don’t have money to pay for the development My 2c: Frankly, walk away. They should pay you at least some percentage of your normal rate up front. Sure, it can be considered an advance against royalties, but why should you bear all the risk? You might want to reverse the situation--have their customers by your software directly from you, and pay the company a small percentage. Avoid as many stipulations as possible. Things like "minimum licenses" only means you end up going to court to get your money. As for them paying you per license, be very careful of phrases like "net sales, gross sales, after expenses", etc. It sounds like they don't have much of an operating budget and certainly no budget for R&D. A bad situation, IMO. Marc My website Traceract Understanding Simple Data Binding Diary Of A CEO - Preface
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Experience of what? To get ripped off? There're thousands of small companies with no intention to pay you more than they'd pay plumber who'd gladly recruit your service for free. If you just want to build software, just do something on your own or contribute to Open Source. Don't work for companies who profit on your labour. [sorry I gave your post a rating of 1] Norman Fung
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Have you ever made a partnership with a company for developing software? I work as a (starting) freelancer and I have a proposal to start building some software components to a company. Neither the company nor me want to have a relation like employer - employee. They are not in the business of software; it’s more like electronic components. They assemble and sell electronic components to customers and they want to have some applications through which customers can interact with those components. They provided me some electronic components and some software requirements. With their help on design, we started a little experience and I have built a tiny application which had a very good acceptance by customers. On the feed-back we had, we observed that customers are happy with the software and seek more functionality. This was a small experience, now we want to take it for real. They don’t have money to pay for the development, that’s why they seek a partnership with me and also because of support. Now I don’t know very well what conditions to impose. Who owns the software? 50/50 ? (They bought some development license for a framework we use) Should I impose that they sell a minimum number of licenses? They should pay me for each license they sell. Should it be a fixed amount or some percent on what they make with the software? Should I keep the license generator only to me? (Becomes hard to install the software on a customer and leave it running full functionality) So, I was hoping that some of you who had agreements like this to share their experience and point out things that I should keep in mind. Thanks vSoares
I want to thank everyone for their replies, they’ve been most helpful. Here are the things I haven’t said because I want to look at this business the way I described in my first post. The company I was talking about it’s a small company with a life no longer than 2 years. Some of the owners (partners) of the company are my friends and we started this software because one of them had the idea and we started playing with this in each other house. When we saw the potential I accepted to start that little experience for his company. It has generated some income for both. Now we have the opportunity to spice up things but I’m not familiar with the other ones (their partners), so I can’t trust the company and I have to take the deal as I described I my post (the way I look at the business, not the conditions). Even if they were all my friends, this is business. Additionally, I should say I haven’t provided them any source code or Setup. I carried out myself all the setups on customers but things have to be different now on. Once again, thank you all for your replies. vSoares
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Experience of what? To get ripped off? There're thousands of small companies with no intention to pay you more than they'd pay plumber who'd gladly recruit your service for free. If you just want to build software, just do something on your own or contribute to Open Source. Don't work for companies who profit on your labour. [sorry I gave your post a rating of 1] Norman Fung
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I want to thank everyone for their replies, they’ve been most helpful. Here are the things I haven’t said because I want to look at this business the way I described in my first post. The company I was talking about it’s a small company with a life no longer than 2 years. Some of the owners (partners) of the company are my friends and we started this software because one of them had the idea and we started playing with this in each other house. When we saw the potential I accepted to start that little experience for his company. It has generated some income for both. Now we have the opportunity to spice up things but I’m not familiar with the other ones (their partners), so I can’t trust the company and I have to take the deal as I described I my post (the way I look at the business, not the conditions). Even if they were all my friends, this is business. Additionally, I should say I haven’t provided them any source code or Setup. I carried out myself all the setups on customers but things have to be different now on. Once again, thank you all for your replies. vSoares
vSoares wrote: Some of the owners (partners) of the company are my friends and we started this software because one of them had the idea and we started playing with this in each other house. great way to loose friends... I know we are all being rather pessimistic from your view. The group I mentioned, we were all friends, one had an idea, we started our own company to fill a need. None of us talk anymore. So from our view we are being realists, you are walking on thin ice and the probability of taking great loss in both friends and money is high. We've passed on the warning, you know your friends and the details better than us. I do wish you luck and success, and I hope your friendships with these people survive this work. _________________________ Asu no koto o ieba, tenjo de nezumi ga warau. Talk about things of tomorrow and the mice in the ceiling laugh. (Japanese Proverb)
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Have you ever made a partnership with a company for developing software? I work as a (starting) freelancer and I have a proposal to start building some software components to a company. Neither the company nor me want to have a relation like employer - employee. They are not in the business of software; it’s more like electronic components. They assemble and sell electronic components to customers and they want to have some applications through which customers can interact with those components. They provided me some electronic components and some software requirements. With their help on design, we started a little experience and I have built a tiny application which had a very good acceptance by customers. On the feed-back we had, we observed that customers are happy with the software and seek more functionality. This was a small experience, now we want to take it for real. They don’t have money to pay for the development, that’s why they seek a partnership with me and also because of support. Now I don’t know very well what conditions to impose. Who owns the software? 50/50 ? (They bought some development license for a framework we use) Should I impose that they sell a minimum number of licenses? They should pay me for each license they sell. Should it be a fixed amount or some percent on what they make with the software? Should I keep the license generator only to me? (Becomes hard to install the software on a customer and leave it running full functionality) So, I was hoping that some of you who had agreements like this to share their experience and point out things that I should keep in mind. Thanks vSoares
I'm a small business owner and I cannot say at this point I agree with anything you've been told. What you need to do at this point are two things. You need to seek counsel with a patent attorney who can at least advise you. The other thing is to start seeking venture capital investors. This will do a few things to really help and protect you. First off, you will have to formalize business plans. You will also have to establish how profit and payment will be made. See an attorney and get some venture capital going. - Rex
Some assembly required. Code-frog System Architects, Inc.
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I'm a small business owner and I cannot say at this point I agree with anything you've been told. What you need to do at this point are two things. You need to seek counsel with a patent attorney who can at least advise you. The other thing is to start seeking venture capital investors. This will do a few things to really help and protect you. First off, you will have to formalize business plans. You will also have to establish how profit and payment will be made. See an attorney and get some venture capital going. - Rex
Some assembly required. Code-frog System Architects, Inc.
One area you are smarter than I. :) I did at least preface mine that I sold out ages ago. ;) _________________________ Asu no koto o ieba, tenjo de nezumi ga warau. Talk about things of tomorrow and the mice in the ceiling laugh. (Japanese Proverb)
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Have you ever made a partnership with a company for developing software? I work as a (starting) freelancer and I have a proposal to start building some software components to a company. Neither the company nor me want to have a relation like employer - employee. They are not in the business of software; it’s more like electronic components. They assemble and sell electronic components to customers and they want to have some applications through which customers can interact with those components. They provided me some electronic components and some software requirements. With their help on design, we started a little experience and I have built a tiny application which had a very good acceptance by customers. On the feed-back we had, we observed that customers are happy with the software and seek more functionality. This was a small experience, now we want to take it for real. They don’t have money to pay for the development, that’s why they seek a partnership with me and also because of support. Now I don’t know very well what conditions to impose. Who owns the software? 50/50 ? (They bought some development license for a framework we use) Should I impose that they sell a minimum number of licenses? They should pay me for each license they sell. Should it be a fixed amount or some percent on what they make with the software? Should I keep the license generator only to me? (Becomes hard to install the software on a customer and leave it running full functionality) So, I was hoping that some of you who had agreements like this to share their experience and point out things that I should keep in mind. Thanks vSoares
A long time ago when computers took up big chunks of buildings, in a (large) company I worked for I had an idea for what a small program could do while the system was not running at capacity. Short story, someone else in the company liked the idea, but getting funds for development would be too difficult. Thus I signed a contract on a royalty basis for the software usage to be developed in my own time. After about 4 months work at night and in the weekends the code was ready. Now for over 23 yrs I have been collecting annual royalty checks. There have been some small legal disputes in that time, but overall it has been the most lucrative work I'll ever be likely to do. What you could do is something similar. Talk to a lawyer, a business management consultant, or people who know about this. Consider the Ownership split, and the profitsharing split as seperate deals. I suggest that you should look for control, thus a 51-49% or 60-40% split. Then you can command your products pricing. I agree with you about doing it for the experience, if you don't get the experience you will be worse off in the long term, and you need to take some risk. However you must be prepared to reassess your situation regularly to see if it is worth continuing. So set milestones and timelines on the business aspect of the venture. Regardz Colin J Davies The most LinkedIn CPian (that I know of anyhow) :-)
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Have you ever made a partnership with a company for developing software? I work as a (starting) freelancer and I have a proposal to start building some software components to a company. Neither the company nor me want to have a relation like employer - employee. They are not in the business of software; it’s more like electronic components. They assemble and sell electronic components to customers and they want to have some applications through which customers can interact with those components. They provided me some electronic components and some software requirements. With their help on design, we started a little experience and I have built a tiny application which had a very good acceptance by customers. On the feed-back we had, we observed that customers are happy with the software and seek more functionality. This was a small experience, now we want to take it for real. They don’t have money to pay for the development, that’s why they seek a partnership with me and also because of support. Now I don’t know very well what conditions to impose. Who owns the software? 50/50 ? (They bought some development license for a framework we use) Should I impose that they sell a minimum number of licenses? They should pay me for each license they sell. Should it be a fixed amount or some percent on what they make with the software? Should I keep the license generator only to me? (Becomes hard to install the software on a customer and leave it running full functionality) So, I was hoping that some of you who had agreements like this to share their experience and point out things that I should keep in mind. Thanks vSoares
vSoares wrote: Who owns the software? This can be a loaded question, and I would be interested in other people's thoughts on this. I have been doing software development for a small company over the past few years. I knew early on, from past projects with them, that they were experts at "feature creep", and insisted on formal paperwork, sign-offs, and project check-points tied to invoicing and invoice payments. Before a project starts, I draw up a Functional Spec document and a Statement of Work. I provide time estimates for a schedule in the SoW, but make it clear where certain things depend on hardware or feedback from them. I do basic product testing, but they are responsible for acceptance testing. I have, unfortunately, had to put expirations into beta releases in order to ensure prompt testing and feedback from them and in some cases to ensure invoice payment. In the initial development, I probably worked for under $10 per hour, but I knew there would be further enhancements. Over the course of later releases, I believe I received a reasonable fee for the service. Now, as for ownership, I always took the position that they owned the "product" (i.e.: the idea of what it does, and the executable software, and the user documentation) while I owned the source code. Up until now, this has had little, if any, importance on the product and its development. However, I am thinking of moving on, but will provide them with a copy of the source code. However, since they never contracted me to provide them with source code, there is no documentation other than comments, about the source (i.e.: documents describing classes and how they interact with each other). Providing this was never part of any specification for any project. How do others deal with the ownership issue of software when doing freelance work? Has anyone ever done a job where the requirement from day one was to produce an application and fully-documented source code that was all handed over for them to work with themselves in the future?