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How would I determine what to "Sell" my Developed Applicaton for?

Posted on 2004-04-29
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Last Modified: 2010-04-17
I am a financial consultant and make my living "by the hour" providing consulting services.  I have developed an Access Database using Access 2000 which enables a Company to automate the process of documenting their internal control structures.  I have been approached by an acounting firm (the "buyer") that wants to use the Database in their firm of about 200 people.  About 40 people would actually have the application on their Laptops.

The buyer has offered:

1. To use their IT staff to migrate the Access Database toSQL and enable Web Access using ActiveX (or WebX) controls.  MS Access would continue to be the front end.  I was going to outsource this development using my own money and found it would cost around $15,000 - $20,000.
2. They would NOT own the software - I would always own it, and the intellectual property, and be able to use the newly improved version for my own consulting engagements on other clients.
3. They would pay me a retainer of sorts to provide training to their people and to modify the software as needed.  The "contract" would be for a year and basically say that they will pay me my hourly rate at say a minimum of 8 hours/week.  
4.  If a "major' tweak needed to occur, I'd price it out acordingly based on the time estimate.

My question is this - Am i getting screwed, or is this typical in such an arrangement?
Can anyone direct me to any websites that gets in to agreements of this nature?

Any help would be appreciated.

Thanks folks!!
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Question by:gastondef
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7 Comments
 
LVL 101

Accepted Solution

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mlmcc earned 500 total points
ID: 10951482
It is hard to say.

Since you will be able to use the software with other clients or sell it to them under a similar arrangement you are probably ok.

As a guide to pricing the program
What would it cost in time to do document the internal control structures and maintain them
 with your program
 without your program

The difference is the time & $ the company could save.

How many copies do you think you can sell and support?

Will they need more than 8 hours per week for training?

Be sure to estimate the updates accurately.  They shouldn't have to pay the full bill since other customers will benefit.

mlmcc
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LVL 22

Assisted Solution

by:cookre
cookre earned 500 total points
ID: 10952282
The common thing is to sell by the desktop, e.g.,
1-5 licenses - $x each  per year
6-20 licenses - $y each per year
21 - up - $z per year

Price support separately.

Bug fix patches are free.

Offer reduced rates for version upgrades with new features.


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LVL 6

Assisted Solution

by:PreachDotNet
PreachDotNet earned 500 total points
ID: 10960840
If the software is client server, charge for the server then sell client seats at a reduced rate.
If you are going to give the customer access to your source code you better have the rights stitched up, either look at copyright if you can find a unique feature in your software, notoriously hard to do, or ensure you have a legal document drawn up ensuring your intellectual property rights and the intellectual property rights of any future development.
In terms of how much you should sell it for, it depends on your market. The formula would be something like
Cost of Development + Annual Profit / Worse Case Sales Scenario.  If you're only going to sell it once you need to cover all your development costs in that one sale.  If you can shift 10,000 units then you can give it away with cornflakes.
make sure you license the product as opposed to selling it, ensuring future revenue streams.  The length of the license depends on how long you're willing to support your product, 3 years would probably be the maximum.  Anything over that and the technology will have moved on so far your time will be consumed with maintaining legacy code on new operating systems.
As well as your license document, document of ownership / copyright make sure you have some form of liability insurance and / or a disclaimer.
An annual maintenance charge is preferable to a weekly figure, work at around £400 sterling and say £25 per client as maintenance is a variable cost dependant on the number of machines you are supporting.

I never set out to write a novel.  Hope I can save you some of the problems I've encountered.
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LVL 1

Assisted Solution

by:T_Herman
T_Herman earned 500 total points
ID: 10965496
Had, I just got in this situation myself.  I found an excellent book at the book store and it was only $19.00.  It's called "Software Project Management:  From Concept to Deployment" by Kieron Conway.  the entire book is basically a case study involving a programming project a software development group was bidding for.  The author of the book run his own software company.  The book covers everything from gathering requirements and writing a proposal to delivering the final product.  The book covers how to plan the project.  Once you can properly come up with a full plan and what time you will spend on it, you can more easily give a quote.  THe book covers quotes as well.

It's a great book regardless and goes into great detail involving all aspects of the Software Development Life Cycle.
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LVL 101

Expert Comment

by:mlmcc
ID: 11229537
Glad I could help

mlmcc
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