Licensing fees

[Stephane Potvin-2]

Good day all,

I have developed a little program using 4D. My plan was to sell that  
program online on my own web site.

Last week I received a call from a rather large corporation who is  
interested in the product. What they would like to do is offer it for  
free on their web site as an incentive to buy their services. No  
limitations in features

They are asking how much I would charge for the "licensing" or the  
right to put an unlocked version of my software on their site.

They have asked me for a "quote" for the fully unlocked version, and  
upon discussion a feature limited version.

Honestly I was not expecting that kind of interest in my product and  
really don't know where to begin the pricing process.

Any help with pricing and also any other issue relating to this  
opportunity would be greatly appreciated.

Thank you,

Stephane Potvin
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[Sarah Brand]

Find yourself a good licensing/IP lawyer. It will not be cheap but it will
be worth it. There are firms that specialize in just this.


-----Original Message-----
From: 4d_biz-bounces@... [mailto:4d_biz-bounces@...] On
Behalf Of Stephane Potvin
Sent: Tuesday, August 12, 2008 6:51 PM
To: 4d_biz@...
Subject: Licensing fees

Good day all,

I have developed a little program using 4D. My plan was to sell that  
program online on my own web site.

Last week I received a call from a rather large corporation who is  
interested in the product. What they would like to do is offer it for  
free on their web site as an incentive to buy their services. No  
limitations in features

They are asking how much I would charge for the "licensing" or the  
right to put an unlocked version of my software on their site.

They have asked me for a "quote" for the fully unlocked version, and  
upon discussion a feature limited version.

Honestly I was not expecting that kind of interest in my product and  
really don't know where to begin the pricing process.

Any help with pricing and also any other issue relating to this  
opportunity would be greatly appreciated.

Thank you,

Stephane Potvin
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[Pat Bensky-2]

Hi Stephane,

I think the most important thing to think about will be that you then may
not be able to sell the product yourself, at all, if people know they can
get it for free elsewhere. But that might be OK as long as you are getting a
worthwhile fee from those guys who want to give it away. What amount would
be worthwhile is of course up to you to decide - but I would suggest making
it a monthly or annual fee.

Things to consider:

What happens if you or they decide to end the agreement? What about all
those free copies that are out there?
What about tech support and upgrades? Who handles those and who gets paid
for them?
You'll want to know who has a free copy so that you can contact them
regarding upgrades etc.

For all those reasons I would recommend putting in place some kind of online
registration. They would have to register their copy before they could use
it. You'd then know who everybody was, how to contact them, what version
they have, and so on.

HTH

Pat

On 13/8/08 02:50, "Stephane Potvin" <stephane.potvin@...> wrote:

> Good day all,
>
> I have developed a little program using 4D. My plan was to sell that
> program online on my own web site.
>
> Last week I received a call from a rather large corporation who is
> interested in the product. What they would like to do is offer it for
> free on their web site as an incentive to buy their services. No
> limitations in features
>
> They are asking how much I would charge for the "licensing" or the
> right to put an unlocked version of my software on their site.
>
> They have asked me for a "quote" for the fully unlocked version, and
> upon discussion a feature limited version.
>
> Honestly I was not expecting that kind of interest in my product and
> really don't know where to begin the pricing process.
>
> Any help with pricing and also any other issue relating to this
> opportunity would be greatly appreciated.
>
> Thank you,
>
> Stephane Potvin
> **********************************************************************
> 4D Server v11 SQL has arrived!
> Buy it NOW at http://store.4ddepot.com
>
> 4th Dimension Internet Users Group (4D iNUG)
> FAQ:    http://www.4d.com/support/faqnug.html
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--------------------------------------------------
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CatBase Software Ltd.
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skype: pat.bensky
--------------------------------------------------



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[Douglas Davis-2]

Stephane,

You will also want in writing who will support the product including  
enhancements and change requests.  Trust me, they will come - even  
with the best and simplest of software.

   -----
| Douglas S. Davis - Information Systems Coordinator
| Monical Pizza Corporation  (http://www.monicals.com)
   - - - - - - - - - -
| 815/937-1890 - voice . . . 815/937-9828 - fax
   -----



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[Stephane Potvin-2]

Good day,

Thank you all who responded to my posting about licensing.

Your comments were very helpful.

Further to your comments and questions, please allow me to provide  
further information and ask a few more questions.

<<What happens if you or they decide to end the agreement? What about  
all
those free copies that are out there?>>
I was thinking of putting a time limit in the software. For example,  
at the end of a one year contract with the client, the current  
version  would simply lock out. The end user could download the  
newest version from the client's website. In the event a contract has  
not been renewed with the client, the end used could purchase a  
license from my website.

<<This company has obviously seen something in your product that  
might attract people to their website.  If they are good management  
they will already have figured some kind of $ value in advertising  
terms that this is worth.
Why not just say you have not got a clue what to charge and ask them  
to make
you an offer.>>
I have tried that approach with no result. Any other suggestion?

<<Potentially there is a lot of kudos for you in the arrangement. So  
at very
least I would negotiate a limited version that they can offer for  
download
at a very reasonable annual price to cover your costs.  What you get  
is a
potential sales channel.>>
They are pretty clear that they want a totally unlocked version for  
free distribution at large.

<<I was in exactly this situation myself a few years back.
What we did was to sell the licenses in batches.>>
I had offered selling them the software based on a number of license,  
but they want unlimited distribution.

Here is my question.
My software sells for $35 per unit.
The potential client sells about 33 000 items with a profit of about  
$3000 per item in a year
33 000 sales a year X $15 for my software = $495 000

On one hand this seems very high, on the other, if one thinks of a  
$15 investment on a $3000 profit, it is minute.

One of your advice was "do not be greedy".

Am I being greedy?

Your continued advice would be greatly appreciated.

Thank you,

Stephane

_________

> Subject: Licensing fees
> Date: Tue, 12 Aug 2008 21:50:55 -0400
> From: Stephane Potvin <stephane.potvin@...>
> To: 4d_biz@...
> Message-ID: <BLU0-SMTP306CCB7CB60E749DAA07C295730@...>
>
> Good day all,
>
> I have developed a little program using 4D. My plan was to sell that
> program online on my own web site.
>
> Last week I received a call from a rather large corporation who is
> interested in the product. What they would like to do is offer it for
> free on their web site as an incentive to buy their services. No
> limitations in features
>
> They are asking how much I would charge for the "licensing" or the
> right to put an unlocked version of my software on their site.
>
> They have asked me for a "quote" for the fully unlocked version, and
> upon discussion a feature limited version.
>
> Honestly I was not expecting that kind of interest in my product and
> really don't know where to begin the pricing process.
>
> Any help with pricing and also any other issue relating to this
> opportunity would be greatly appreciated.
>
> Thank you,
>
> Stephane Potvin

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[Pat Bensky-2]

On 19/8/08 05:19, "Stephane Potvin" <stephane.potvin@...> wrote:

> I was thinking of putting a time limit in the software. For example,
> at the end of a one year contract with the client, the current
> version  would simply lock out. The end user could download the
> newest version from the client's website. In the event a contract has
> not been renewed with the client, the end used could purchase a
> license from my website.
Nooooo! If your client knows you are planning to do that they will never
proceed. The best you can do is make sure that you capture their details via
a registration of some sort and then you can contact them to try and sell
them upgrades and tech support.
>
> <<This company has obviously seen something in your product that
> might attract people to their website.  If they are good management
> they will already have figured some kind of $ value in advertising
> terms that this is worth.
> Why not just say you have not got a clue what to charge and ask them
> to make
> you an offer.>>
> I have tried that approach with no result. Any other suggestion?
Make them an offer :)

> Here is my question.
> My software sells for $35 per unit.
> The potential client sells about 33 000 items with a profit of about
> $3000 per item in a year
> 33 000 sales a year X $15 for my software = $495 000
>
> On one hand this seems very high, on the other, if one thinks of a
> $15 investment on a $3000 profit, it is minute.
>
> One of your advice was "do not be greedy".
>
> Am I being greedy?

I am guessing that if you sell the software for $35, then it is not a very
complex product. What would it cost to have something similar developed from
scratch? Less than half a million $, I'm willing to bet. Make them an offer
... I'd start at something like $50,000 a year and see what kind of reaction
you get. Even that may be way more than they are willing to pay but it's
better to start the negotiations high.

No matter how sophisticated your product is, with a $35 price tag it is
perceived as a low-value item. They are not going to pay a lot of money for
it.

That's my thoughts anyway.

Pat
>
> Your continued advice would be greatly appreciated.
>
> Thank you,
>
> Stephane
>

--------------------------------------------------
CatBase: The Database Publishing Solution
CatBase Software Ltd.
T: [phone]
W: http://www.catbase.com
skype: pat.bensky
--------------------------------------------------



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[Bill Weale]

Hi Stephane--

A couple of general observations...

Consider a clause in the agreement which provides you a minimum (no  
less than) level of revenue per time period. If that's not met,  
exclusive rights to the software revert to you alone again. You can  
even include an escalator factor--starting "slowly" lessens the risk  
to your licensee. The point here is to give your licensee some  
motivation to do something with the product. If you ask around  
enough, you'll run into plenty of people who had great products who  
sold their rights to a larger company. That company just wanted to  
"bury" any chance those products might have had in competing with  
products which they already had on the market. There was no residual  
revenue--just the often minimal up front payment. And the chances to  
develop the product and its market were gone.



Nobody is really going to care what your costs are to this point in  
developing your software. You shouldn't either. They are "sunk"  
costs, already spent. They are history. All you need to worry about  
now is maximizing your *net* income going forward. Beware the  
marginal cost of sales. With VM software, one of the biggest  
"gotchas" can be the cost of user support and training. In terms of  
potential sub-licensing agreements, you may want to discuss/consider  
making user support a revenue center,  
å la Microsoft and 4D, Inc.

;-)

Bill


William W. Weale, III

Business Owners Support, LLC.

Operations Analysis
MIS Advising
Decision Support Systems




On Aug 19, 2008, at 12:19 AM, Stephane Potvin wrote:

> Good day,
>
> Thank you all who responded to my posting about licensing.
>
> Your comments were very helpful.
>
>
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