Creating a business from a customized application solution?

I have been working on a medium sized web application for a large client, on site, for 3 years. I work as a contractor on the project, handling most of the coding, but the application itself and code is owned by the client.

Several days ago I got a query from another fairly large client in another field about the application. They had seen the application through a 3rd party and are interesting in hiring me as a consultant to advice them how to implement a similar solution for them.

I have once or twice discussed potentially using the application at other sites and my current client sees no problems with that, they are only interested in maintaining and improving the application at their site. I would of course have to come to some agreement with them as it is after all their code.

I'm looking for some advice on this:

Would you recommend spending a few hours consulting the second client and then just forget about it or set up some kind of a licensing agreement with the first client (through a new company) and then hiring sub contractors to handle the necessary modifications on the code ?

Adding one client is not going to launch a company, but it might kill a contract. If you feel that a licensing agreement is possible, hire a lawyer that specializes in software licensing agreements to draft a offer. Then without bring up the offer, but knowing the terms it offers, have a friendly talk with whoever you feel might make the deal happen.

Point is that you should do this without bring up the offer from the other company with the current client, but that's not to say you shouldn't mention it to the lawyer.

If you land the contract, great -- but only do it based on the current client getting more service/security than they already get. For example:

• Reduce cost
• More people trained on the software
• Better response time
• Less bugs
• Etc

If you're able to get a written offer that expires in say 90-days from the new company, maybe you find a lawyer willing to draft the contract and doc the payment based on getting an upside on the close of the deal; meaning get a quote, then offer to give 30% more than they asked if the deal closes, but nothing if it doesn't.

Main thing is you need to be honest with yourself about the risks of the plan, and the upside too.

IANAL - but I would get an agreement in place that defines your usage rights to the code asap. Who knows what the other "large" client wants, and if you make changes to the code for them, you would be required to provide such enhancements back to the original client? Would the new client demand exclusivity? Things get dicey without a good foundation to start from.

At first you say another company in another field "are interesting in hiring me as a consultant to advice them how to implement a similar solution for them".

Then you say you "discussed potentially using the application at other sites".

You may have a better understanding of what each firms means, but these don't look like the same thing to me.

Most consultants work in the same industry or with the same application areas. Just because you did an application of one type for a client doesn't mean you can't ever work on that kind of application again.

We all like to think the next guy wants exactly the same thing, but we soon learn that the way we understand the problem after the first try is not the way everyone sees it. The next firm may wind up wanting something very different - and usually does. If they actually do want the same thing it's more often because they don't want to spend the effort to figure out what they want and simply think it will be cheaper to simply copy the same app.

So, you can't take the same programming or application design. But you can certainly work on the same kind of application. You'll only have real success if you get them to pay you to help figure out what they need first.

All of that said, you should see if you can get some agreement to market that first application - especially while you are still involved and have a good relationship with the people who you know. You may never use it. Try to get an agreement for future benefits such as giving them enhancements and the benefit if they help you stay involved with the application. Dont pay cash for something you may never use, and don't set up complex future payments that can cause disputes and little money.

Good luck