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.
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!
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!