What's typical in terms of royalties?
I'm a developer negotiating compensation for a commercialized version of some data analysis software I wrote (see my profile if you like). This is a completely new experience for me. I want per-unit royalties, but I don't have the slightest idea what the standard amount is. I also want to be compensated for my time, so that's an upfront R&D cost for the company I'm negotiating with, but distribution cost to them is presumably virtually nothing once it's out there. But then there's support costs. What sorts of deals have you folks negotiated?
Payments Negotiation Compensation Royalties
1 Answer
There's no one answer. It depends largely on the additional work they have to do on top of your software. So, consider not just other software that needs to be added, but the effort involved in doing support, marketing, administration, etc....
As far as "being compensated for your time," recognize that your time so far should be incorporated into the license -- if they need more of your time in the future, then that's something that should be billed separately.
In the license, though, you really want to be careful about 'outs' that they can take. So, for example, what if they give away the software, but charge for support? What if they sell your software alongside a bunch of other software, but your code is really the meat of the package? What if they have the software in a hosted environment? Who gets to set pricing?
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Thank you. As for their additional effort, should I just ask them what their expected costs are, or would that be odd/naive? – Matt Phillips 12 years ago
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Yeah, that'd be odd. You should really talk with them more, find out what they're planning to do. It's not really the dollar cost that you're looking for; it's the effort. If your code is a small part of their product, then a 1%-2% royalty may make sense, or just an annual flat fee. If your code is the meat of their product, then something more like 30%-35% would be appropriate. – Chris Fulmer 12 years ago
