marketing, sales, partnership, contractsFor the last 1-2 years I’ve been developing a software program based on an idea I had while working in corporate IT departments.
Now around 6 months ago I finalized it into a product and approached a consulting IT company that I’m familiar with about partnering to sell the software. I and the manager of the IT company, a friend of mine, made an oral contract stating that they would incorporate the product into their lineup and we would split any sales 50/50.
After talking with several potential clients it seems the product is filling a dire need in IT departments so fairly quickly there have already been several agreements signed and customers seem to be lining up.
So I’m at a crossroad and would like some guidance!
I own the product, it was designed and implemented by me only. Should I do anything to make that unequivocal apart from a copyright symbol in the code?
The IT company selling the product has one or two other products and would like to sell the product in a bundle. How can I ensure they won’t lower the price of my product, unrealistically, in an effort to pay me a lower percentage of the sale?
Is there anything I should be aware of when dealing with a partner like that which handles sales and marketing?
Thanks in advance
I own the product, it was designed and implemented by me only. Should I do anything to make that unequivocal apart from a copyright symbol in the code?
Get a lawyer and an agreement in writing.
The IT company selling the product has one or two other products and would like to sell the product in a bundle. How can I ensure they won’t lower the price of my product, unrealistically, in an effort to pay me a lower percentage of the sale?
Negotiate this as needed. Keep a long view: sometimes, a bundle allows to sell a lot more of a product for less and you still end up earning more. Make sure you keep your costs in check when you do - the last thing you want is to get bogged down in support while earning peanuts.
Is there anything I should be aware of when dealing with a partner like that which handles sales and marketing?
Yes: don’t put all of your eggs in a single basket.
An exclusive reseller deal is only fine for a specific geographical area and only provided they’re doing their job. Make sure your deal includes a clause whereby your exclusive relationship no longer stands if they underperform. Take steps in advance to ensure you have plan B (and a plan C) on your radar. Rinse and repeat for other geographical areas.
The same deal is usually not OK for online sales. In that case you either want as many resellers as possible or you want affiliates who steer leads into your direct sales funnel. Be wary of affiliate fraudsters if you opt for the latter approach - they’re not common in B2B markets but they exist.
You need a written contract.
Oral contracts are insufficient when large amounts of money are involved, because each side can twist them as much as they want. When push comes to shove and you do go to court, you have a he-said-she-said situation where no side can prove what were actually the terms you orally agreed on.
Get a lawyer, talk to them what your interests are and then schedule an appointment with your friend business partner and their lawyer and negotiate the exact terms.
You might think that a contract is unnecessary because you are friends. Your business partner might use that argument to talk you out of it. That’s easy to say for them, because they are currently the one who gets paid by the customers so they would be the one who benefits from not having one. When you value your friendship, that’s one reason more to write a proper contract. Arguments about money can easily destroy a friendship.
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