Sign in to follow this  
Freshmaker

Custom work, License? Sell out rights?

Recommended Posts

Hello, I have a interesting situation that I have been presented with, and I was curious what someone else might think. A friend has asked me to program up an online application that would in the end be a pay-to-play game. However, at this time, he doesn't have any funds to pay me. My first thought was to just simply get a percentage of the income. This sounds fine except he is runing the site, and it may never bring in income (through no advertising, or perhaps he just gives out free accounts). If I were to be contracted out as of today and paid in full for my work, I would charge, for example, $40k. If I end up going in on a percentage of the income, and he wanted to buy me out later, judging by other posts, I would probably charge based on the profitability of the system at that time. I don't really see the system bringing in more than $5k/month AT MOST, so my cut would only be around $2/month eventually, so to reach my initial development estimate, it would take several years or more. On one hand, I am thinking to walk away because it not only sounds risky, but even I make money, it would take forever to make my expectations. On the other hand, if it does reasonably well, it would be a good second source of income. Does this sound reasonable? Or Risky? Just curious if this raised red flags for anyone else, or if I am just being over worried. Thanks!

Share this post


Link to post
Share on other sites
There are basically two reasons to do an "if it makes money" project. Either you're doing it totally for fun, or it's your own project and you're convinced it'll actually make money.

I have worked with friends of mine on projects like that, and have had pretty good experiences. However, that's only because I chose to work on a project that I thought was fun and useful, and it was with a friend that I absolutely trusted not to screw me over.

If it's with someone that you don't completely trust, I would probably not even consider it. Otherwise, I'd say go for it, but only if you'd be willing to do the work for free (since that's what's going to happen with 99% of those type projects).

Share this post


Link to post
Share on other sites
Be aware that close friends can make dangerous business partners. Often it works well enough. Sadly, when there is a dispute it isn't uncommon for friends to become enemies or for friend-preserving but business-ruining choices to be made.


As was mentioned, the "might make money" means you should prepare to make zero money. There are thousands and possibly hundreds of thousands of this type of venture, but most of them never turn a profit.

You should have a contract in place, in case money actually does start flowing.

The most important pieces to have in that contract are the assignment (or preservation) of intellectual property rights, the methods and frequency of payment, the amount of payment, and what to do in the case of disputes.

If you are going into the venture as equal partners, you should also have a separate written agreement in place to decide who is the tie breaker (essentially a 51/49 vote split), or how to dissolve the whole thing in case the equal partners disagree, and what to do when a person is married, sells their share, or wants to get out. It doesn't have to be a formal legalese contract, an informally written agreement is still a contract but is often less threatening when the venture is just getting started.

There are many web sites -- and more importantly authoritative books -- about writing this kind of simple contract. Nolo.com has many contract books that you could use. You might even be lucky enough to have copies of the relevant Nolo books at your local library.

Share this post


Link to post
Share on other sites
OP wrote:

>A friend has asked me to program up an online application that would in the end be a pay-to-play game. However, at this time, he doesn't have any funds to pay me. My first thought was to just simply get a percentage of the income.

Wrong first thought. Correct first thought should have been: "Let me know when you have funds to pay me. I love you to pieces, my friend, but sorry, no can do."

>This sounds fine except he is runing the site, and it may never bring in income (through no advertising, or perhaps he just gives out free accounts).
>On one hand, I am thinking to walk away because it not only sounds risky, but even I make money, it would take forever to make my expectations. On the other hand, if it does reasonably well, it would be a good second source of income.

"If."

>Does this sound reasonable? Or Risky? Just curious if this raised red flags for anyone else, or if I am just being over worried.

Your brain has two parts to it: one is smart and sees things realistically. The other part is emotional and sees things how they might be in an ideal future. It's up to you to decide which part of your brain should guide your decisions. I know which part of my brain I'd use to make this decision!

Share this post


Link to post
Share on other sites
Guest Anonymous Poster
> However, at this time, he doesn't have any
> funds to pay me.

So, the whole thing collapses if you say 'no' or can't complete the project?

Share this post


Link to post
Share on other sites
Quote:
Original post by Freshmaker
However, at this time, he doesn't have any funds to pay me.
So he can pay you in other ways (a % of the company). If he isn't paying you then you are investing your time into his company (and in so doing taking a risk that you will lose the value of that time). Given that you are investing in the company and taking a risk your reward should be considerably higher than a simple calculation of what you would earn on a hourly rate.

Quote:
This sounds fine except he is runing the site, and it may never bring in income (through no advertising, or perhaps he just gives out free accounts).
Does his business plan say he will give away accounts? Does he have a plan to attract advertising (or any sort of real plan at all) that makes you think it might make money? If not, stay away.

Generally I agree with everyone else. This needs to be put on a proper business footing or you need to walk away.

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

Sign in to follow this