Friend's Company Wants my program 5

[Swi]

I have written a small application that does data verification counts on DBF files for one of my friends and he has presented it to his company and they are considering purchasing it. Here were some of the questions asked:

What price range are you thinking about for this program as is?

What price range if you made all the changes I asked about?

Do we get a service contract with our purchase?

Are new version upgrades free, a small fee, or they must be purchased full price?

Can we buy the source code?

Are there any possible pitfalls in agreeing to any of these terms? Also, right now I am just messing around, but who knows, maybe in the future I could do this kind of stuff part time. One more question, since I am not my own business are there any legal issues/restrictions that I should concern myself with or do I just need to claim any monies made come tax time? Thanks for any and all responses.

Swi

 

[sleipnir214]

I think before anyone starts talking money, decisions must be made as to what the company is buying. Specifically, what rights to the intellectual property will the company get?



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TANSTAAFL!!

 

[Dollie]

I market and support a small banking program in addition to sysadmin duties where I work. When I was putting together a revamped website for it, I did a lot of research on other software websites. I looked to see what their terms and conditions were, return policies, privacy policies, pricing structures, technical support policies, the whole shebang.

I found that I'm not unreasonable in my pricing and return policy (software can't be returned once it's installed!), technical support (30 days free, after that it's free if the problem lies within the software). We offer free upDATES (update from version 1.1 to version 1.2), and upGRADES (from version 1.2 to version 2.0) are sold at a lower price than the version price.

You should take a look at where you plan to take this software. Do you want to continue supporting it and making redesigns at the customer's whim? Will you integrate these changes into future versions to be sold to other customers?

I know I'm missing a lot of points to think about, but this may be a good beginning.

Hope I've helped...

 

[DoubleD]

I'll give my two cents, but I'm going to reorder the questions.

1. Can we buy the source code?
If you aren't interested in selling this software to any other companies, or you don't want to support this software, then selling the source code is an option. If you want control of the program and want it to be a continued stream of revenue, don't sell the source code.

2. Do we get a service contract with our purchase?
If you sell them the source code, then the service contract should be strictly limited to bugs with the original code. Any services beyond that should be fee based.
If you only sell the program, a service contract is expected. Be sure to set service level agreements, as well as outlining what work is considered service versus new development.

3. What price range are you thinking about for this program as is?
This is dependent on whether you expect future revenue. If you're trying to get your first customer, selling it for a reasonably low price is not a bad idea. If you're going to sell them the source code, get what you can right away. To figure out a price, calculate the amount of time it took you to develop the app, decide what you feel your time is worth on an hourly basis, then add on to the top for profit you want to gain. Price is a pretty subjective issue though.

4. What price range if you made all the changes I asked about?
Figure out the amount of time for each of the changes and calculate your cost. Give them options if possible, Option 1 will cost X dollars, Option 2 would be Y dollars. Also note whether the options are dependent, or mutually exclusive.

5. Are new version upgrades free, a small fee, or they must be purchased full price?
This is up to you to set a price structure. Are you more concerned with making money up front, then doing additional work at cost? Or do you want to get the initial sale, then make money on upgrades? I would not suggest charging full price for upgrades, that will probably be cost prohibitive to the customer and will steer them away from the upgrade, thus causing more support issues for you as you'll need to support more versions.

These are just my thoughts, hopefully more experienced individuals will reply also.


Pain is stress leaving the body.

DoubleD

 

[Swi]

Thanks for your helpful responses.

Swi

 

[rphips]

Just my 2 cents


BUT SEE A LAWYER he can help you more then a forum can and he can keep you from bieng taken advantage of by corporate greed. When your small and you play with the big dogs get a hammer and even the sides.


Also see a CPA for all cost factors there are a lot of hidden cost besides your time, such as electricity, the computer you used to develope the program, etc.....


Just my 2 cents but I saw a a friend of mine get rack by a company because he thought he could do it himself.



bob

"ZOINKS !!!!!"

Shaggy

 

[Swi]

Thanks for the tip.

Swi

 

[Albion]

The biggest question I guess I would ask myself is, do I want to support this? Sure they may want your program, but is this what you intend on doing? Support for software can be a very time consuming business and it may not be the thing for you. Do you already have a full time job? Can you get away from that full time job to support your software? Do you want this software to be your full time job? If this isn't the case then you might want to sell them all rights to the software and let their developers deal with it. But this also mean you lose all of your rights to that software.

As for what you should charge... Take an analysis of the time you spent developing it and compare it to the ammount of customers you expect to have. If your R&D costs are $20,000 in time and expences and you only intend on having one customer then you should probably charge that customer $30,000. $20,000 to cover your R&D and $10,000 for profit. After all you shouldn't work for nothing. then again this all depends on how you want to sell the software. If you give away your rights you may want to charge more. Otherwise...

-Al

 

[Swi]

Thanks for the information. I do have a full time job and work 50 to 55 hours a week as it is. I will take your suggestions into consideration.

Swi