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We've started beta testing our WordonWiki software. WordonWiki is a Wiki with all the features you'd expect from a wiki, but it lets you create and edit pages with MS Word.

We're getting good initial responses, mainly from companies already doing a lot with MS Office.

However, about half of the questions we got is from other entrepreneurs wishing to integrate in some way our product into theirs. Most of the time, they propose some kind of revenue sharing scheme.

Although this may turn out really well if one or more of these integrators has a lot of success, I do have some questions:

  • How are typical prices set for this kind of deal?
  • Would we better turn down these offers and concentrate on growing the business?
  • Any other things (legal, engineering,...) we should think about?

Please post an answer if you got any thoughts on this.

Thanks for your time. Roland

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There are really no typical pricing on something like this but there are some guidelines. It really depends on what the two of you can negotiate. In general, the deal structure could look something like:

  • Upfront Licensing Fee: The value can range a lot, depending on your royalty schedule and the value of your software. You can value this by determining how much business you would have received if you went after that market.
  • Royalities: Either per unit or per user or whatever. These can be a fixed price or a percent of selling price. Sometimes they are even capped.
  • Licensing Fee + Royalties: Combining the two is common since some money up front helps with getting the technology over to them.
  • Support Fees on top of above: Support can be a nightmare with deals like this. It's best to get a separate support deal in place if practical.

Licensing you technology is a way to grow the business. The question you have to answer is will it grow your business at the expense of your SaaS business.

The licensing deal will have a bunch of rights that need to be sorted out. These include: exclusivity, market segments, ownership rights, indemnification, etc. On the engineering front, you will probably have to do some work to help your partner integrate your technology into their product. That can suck a lot of bandwidth and could distract from growing your main-line business.

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