Revenue Sharing Agreement I am discussing with my boss


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Three years ago I got employed at the company I am working for at the moment as a software developer. The company is an ERP solutions provider in the finance, procurement and logistics industry. I performed my job description with excellent results and got good recognition.

About two years ago I had an idea on implementing an SIS for education institutions. At that time when we presented ideas to the CEO. The CEO watered down the idea and said it was not within what the company was doing. Some of the other ideas went through and got factored into RND budgets.

I began developing the system individually (without company assistance) and above my normal workload, I still am the sole product development, engineer, tester for the solution till this day. Now that the solution has taken shape, the CEO is interested in it and has thrown me all this "work for hire" stories to shrink my clout. But am not taking non of that.

We are at a point of inflection as a company due to limited resources. Where restructuring is inevitable. The CEO is now receptive to the idea of a Revenue Share Agreement as we are in agreement that the business derived from the solution should be handled differently.

Both sides me & CEO know the cards we have. My side: I have created the solution I have the blue print of the whole solution coming up with idea, actioned the idea, did initial marketing by creating a website and brochure to define what the business will be. On CEO side he has me as an employee. The company now has thrown full weight to this effort.

If we were to share on revenues what would be the most fair percentage that I am entitled to?

Revenue

asked Jan 14 '13 at 07:21
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User22526
1 point
  • Asking "what's fair?" isn't a good question for this site. It's subjective and the answer won't be of much use to you or anyone else in the future. A better approach is to ask about best practices or ways to better communicate your position to ensure you get a good deal. – Zuly Gonzalez 10 years ago

2 Answers


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If we were to share on revenues what would be the most fair percentage that I am entitled to?

To be honest it seems to me like your boss isn't really concerned with the concept "fair". You probably are from the goodness of your heart and because you feel for your company, just like I used to be for the companies I worked for.

I think this is a common problem for software developers like us. Most of the good software developers I know value fairness, adding value to the greater good and other concepts that matter. We do things with emotion and want to give purpose to our lives by being expressing our creativity.

At this point you should realize that being a CEO usually means having investors or feeling the pressure of money in some other way. His left ball is on the chopping block while he gives a warm smile to his employee's, hoping that they will make more money for him tomorrow.

The CEO watered down the idea and said it was not within what the company was doing.

What usually happens is exactly what you describe: the CEO doesn't understand the difference between value and money and you end up implementing it yourself.

Think back about the left ball of the guy that's still on the block. While he already feels the pain that it is chopped off (because he doesn't make the money he promised his investors), he realizes that you have something that can potentially solve his problem and notices that this might be the solution for his problem.

We are at a point of inflection as a company due to limited resources. Where restructuring is inevitable. The CEO is now receptive to the idea of a Revenue Share Agreement as we are in agreement that the business derived from the solution should be handled differently.

So from the goodness of your heart, you decide to help the company out and make a deal with him?

What's missing in the equation is how money is distributed throughout the company; for example, this CEO might have a salary per month of 10 times what you earn a year. Or perhaps the company has a huge loan from its investors and money flows away like that. If you're concerned with 'fairness', this is an important point IMO. Really, the situation the company is in, might have nothing to do with anything you described so far.

Sure you can think about what's fair and shares and so on - but I think you're in no position to negotiate with such a guy, while being the nice, fair and warm developer that cares about your coworkers, the company and the rest of the context.

I sympathize with you, so these are some other options I have for you that you probably haven't considered yet:

  • Setup your own company. Make a contract with your current company that (exclusively?) licenses the software to them. You get a price X and allow them to make a margin of max 10 to 20% on the product (to make sure you don't compete with yourself). If it goes into the wrong direction, screw them and break the contract. Either way, you keep all the rights and protect your work (!)
  • Setup a new venture and keep 51% of the shares in that. They can buy 49% of the shares of that venture for [give it a price, and don't be shy].
  • Or don't just get shares but also the ability to have influence in the direction of the company. If your solution saves the company, I'd definitely try to get 50% of the shares and eventually accept 35% or something like that, without paying a penny for it ("you don't accept 50%? Fine, then I recommend you just use your other SIS product to keep the company alive.. oh wait... :-)").

I'd probably go for option 1, since it is the direction with most flexibility for you while protecting your work. The CEO feels the pain of his left ball on the chopping block, so remember you're in a strong position. If he doesn't take it, just walk away - he'll probably be back to renegotiate and give you another offer.

answered Jan 20 '13 at 02:43
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Stefan De Bruijn
21 points

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Whats fair? As much you can get. Fair is subjective, and depends on how much you believe the solution is worth and if you are willing to go it alone. Consider the risk / reward of going it alone vs. entering in a revenue share + keeping your current job.

Some people love the thrill of taking a concept into production & dealing with everything that goes with it. Others love just the creation process. Decide who you are, and negotiate accordingly.

answered Jan 15 '13 at 09:20
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Jim Galley
9,952 points

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