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I created a SaaS that became quite popular over the weekend. I had a steady stream of users sign up and many are actually still using it (lots of folks who signed up out of curiosity).

Anyway, I received an email from a company that wants to "fork" my code. Basically, I would need to make some modifications and sell them the code. In addition, we would have a revenue sharing model for future profit.

With that said, how do I price out the software? Right now, I'm not charging a penny since I'm still working on additional features.

Their target market is completely different from mine.

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Might we get a linkage? :) – Itai Sagi Jan 15 '12 at 12:02

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up vote 2 down vote

Just to add to Ryan Doom's point - given you're a fledgling start-up money up front is important to you, rather than revenues down the line. So I'd suggest a hybrid deal (once you've got the million-and-one other points agreed) and ask for an advance against royalties - that is a fee up front which is effectively a minimum guarantee for royalties. They account for the x% of royalties of any apps / products sold but don't owe you any further revenue share until they've effectively recouped their advance.

Good luck and hope it goes well!

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up vote 3 down vote

At this point I'd talk to lawyers. The target market they are in may be different from yours but the question is what would you do if they decide not to pay or how do you know that you actually making as much as you can make. Contract negotiation is an art wrapped in science that I have not been able to master yet.

You might want to determine the revenue they are planning to extract using your software and plan your fee plan accordingly. You also have to determine at what point the fork of your code doesn't resemble your code enough for them to say that it's not your code anymore and on top of it you might want to protect yourself from them entering your target market.

On that note the fact that someone is interested in your application it's great!

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Yea, I set up a meeting with a lawyer next week. The company is pushing for a price but I'm not comfortable discussing it until I learn what it is they plan on doing with it. I've also sent them an email in order to understand their motives. – luckytaxi Jan 13 '12 at 23:16
Well.... Let me know if you get anywhere. Announcing your motivation or intention is giving someone a competitive edge. Noone likes it. – Karlson Jan 14 '12 at 2:27
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You obviously can't give them a price until you know what modifications are necessary, and to know that you need to know more. (And you may be able to do additional modifications based on their target market). Their negotiator will try and get you to name a price first (in case you underestimate how much it is worth to them), and you will try to get them to name a price first (in case it is worth much more than you thought). – Mike Jan 15 '12 at 20:50
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I would definitely think in terms of percentages not just fixed fees. You would probably want them to license it for $X initial dollars and Y% of sales annually or something like that. Would probably be most advantageous to you. – Ryan Doom Jan 15 '12 at 22:30

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