profit-sharingok so maybe my question is badly put so please amend if you can find a better way of stating my problem :-)
I have built a digital app and I charge people 20$/month to use it. The app has been put up for sale on an app store but I’m not paying for advertising or anything so it’s just there and if someone happens to come across it during their search and they like it they will buy it.
Some people have started signing up for it.
The company I work for learnt about this and want to strike a deal with me. They have customers that could potentially like to use my app so they want to suggest my app to those customers and if those customers end up signing up the company obviously wants to get some part of my earnings from those customers.
How much should that be ? i.e. For every 20$ I make a month from a customer, how much of that should go to the company that suggested my app to that customer ?
I’m really bad at this as I’ve never done anything similar before so any percentage I give will be basically random. I am a tech guy and quite bad at finances I guess… It’s definitely not going to be 50% but should it be 5% ? 10% ? 20% ?
Please keep in mind that the company in question will not be looking for customers for my app, i.e. they won’t be spending time for my app. They get customer for other projects and they’re simply thinking of suggesting my app as something extra just in case they and I can make some extra cash out of it.
Let me make things a little bit easier to you: You're looking for a finder's fee.
See, a finder's fee is:
A commission paid to an intermediary or the facilitator of a transaction. The finder's fee is rewarded because the intermediary discovered the deal and brought it forth to interested parties. Depending on the circumstance, the finder's fee can be paid by either the transaction's buyer or seller.
How did I figure it out? When you said "the company in question will not be looking for customers for my app, i.e. they won't be spending time for my app."
So they're not entering as Business Partners (helping in the development, etc) neither as Sales Partners (actively looking for new customers), so your relationship with them will be based only on a finder's fee agreement.
Do you want a finder's fee agreement template? Here it is :)
I really think you should use it, no matter how good your relationship is with your current employer. You know the old saying, friends friends, business apart!
Other things than money
Now, before we discuss the numbers, let's get back a little bit: You said that the company will obviously wants to get some part of the earning. Well, that's a strong word.
Are you 100% sure of that? Did anyone explicit mentioned that to you?
Of course everyone likes money and I understand your thinking here, why in heaven would someone care to indicate my product for other reason than money?
Well, believe me, it could be for SEVERAL other reasons. So before bringing the finder's fee option to the table, just ask what they are expecting from this partnership.. you may be surprise :)
Now the part everyone is looking for: How much should you pay.
Short answer: 5%
For how long? Not for ever I must say (never sign eternum clauses!!).
I should talk about CLV - Customer Lifetime Value but it would make the answer too long so I'll just give you another (very commom for SaaS business) number: 5 years at maximum - or, of course, as long as you have that customer.
If there are no charges from the company to advertise your app id say give them 5% for the next year and review it then after the year. Only then will you be able to determine whether its working or not. If the app is selling up their percentage 10% with a two or three year review (so for the next two/three years theyll only take 10% until the next review) and so it goes on…
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