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Commercial software development opp.

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by bcrimmins

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A client has approached us to build a commercial application that they believe they can market; we think the idea is a good one and we believe that they will be able to market it successfully -- we even created a similar application (those much lesssophisticated) for our own use a while back. We also believe that our firm can market the application successfully.

The client has no technical skills and no budget for the project. As such, they bring the idea and a market to the table. We are willing to contribute our software development experience and marketing resources on the belief that the application will be profitable. The application is a relatively simple one and we expect it to cost 30K - 50K to develop. We would also be responsible for producing and supporting the application.

We are looking for ideas on how to design an agreement that is mutually beneficial to our two companies. We have brainstormed a number of approaches that involve sharing revenues based on which company made the sale: if they sell, they get 80% of the net profits of the sale (i.e., after production and support costs) and visa versa.

Any advice or experience you can share with us is appreciated.

Thanks for your time,

Bob Crimmins

2 replies

by oldefar

The traditional approach is for the company with the idea and market to hire the developers. All risk is with the hiring company, and also all reward.

Since you are looking for a different approach, why not create a limited liability company to develop and market this application. Each firm brings to the LLC their expertise. Determine a capitalization cost if you went with outside money, and work out your contribution percentages from that.

Make sure the property rights are spelled outbetween the parties and include an exit plan for either party. Typically a cash settlement based on current and limited future value. Other options include a royalty agreement.

by rooster

We though we had worked things out with a major IT dev. where if they did one thing they would receive 30+10% revenue sharing and if not only 30% of PART of revenue sharing - they said OK at first on the 40% then changed and said they would go with the 30% until they looked at a 3 year projection of $53,Mil down to $12,Mil- now they want to play games with ownership. So, get EVERYTHING worked out, in written with YOUR signed agreement before given full details. You may own the concept which means little. If anyone out there knows a IT developer who want to look at our project - let us know.

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