How much should I charge for a software package?

[Robert]

Hi,

I realize that this might not be the right group to post this kind of
question. If someone knows where I could post it instead please let me
know. Still, I think that some of you must face or have faced these kind
of questions. I'd appreciate any suggestions.

I have developed a package in C++ and C# that consists of 3 apps. There is
a management app (C++), a playback app (C++) and a simplified C# interface
to a database used by the management app. The playback app runs 24x7 and
can be installed in unlimited locations.

The management app consists of ~30K lines of C++ code (excluding empty and
comment lines) and the playback app consists of ~20K lines of C++ code.
The C# Web app consists of ~1K lines of code.

I have been approached by a company that wants to buy the package with
source code. The company is currently using 2 different packages that they
license on a per installation basis from 2 different vendors. My package
is definitely better and would do exactly what they want it to do. In
addition, I'm willing to put new features if requested. The company has
been testing my package for over a month and they are very satisfied with
it.

The problem (or maybe not) is that they want to buy my package with source
code and all intellectual rights. This means that I would not be able to
re-sell it or reuse it in the future.

I have never been in a situation like this and don't have a clue how to
price it. Should I simply calculate approx. number of hours I've spent on
the development and multiply it by an hourly rate? From what I know this
would be too much for the company. On the other hand I'm afraid that I'll
be stuck with a software package that nobody uses.

Could someone please point me in the right direction?
Thanks,
Robert.

 

[Ole Nielsby]

I have developed a package [...]

I have been approached by a company that wants to buy the package with
source code. [...] The company has been testing my package for over a
month and they are very satisfied with it.

The problem (or maybe not) is that they want to buy my package with
source code and all intellectual rights. This means that I would not be
able to re-sell it or reuse it in the future.

I have never been in a situation like this and don't have a clue how
to price it. Should I simply calculate approx. number of hours I've
spent on the development and multiply it by an hourly rate? From
what I know this would be too much for the company. On the other
hand I'm afraid that I'll be stuck with a software package that nobody
uses.

Could someone please point me in the right direction?

This is just a suggestion - I don't have experience with pricing or selling
of software so take my advice for what it is worth:

Tell them they can buy the whole thing with exclusive rights if they
pay for every hour you spent on it and then triple that. (Your two
next attemts of writing useful pachages will probably fail and you'll
still need to pay the rent and feed your pet.)

Tell them they can buy a non-exclusive right at a price slightly higher
than you think they are willing to pay - and hint that you might give
them some discount if they agree to let you go public about their use
of your software so you can market it to others as "succesfully used
by company X".

They might be at unease with the prospect of their competitors also
being able to use your package, but that's their problem, not yours.

 

[Bruno van Dooren]

There are several things you should think about:

- would you be allowed to advertise that you developed that package?
If it is going to be a hot selling package, you'll get lots of free
advertizing.
- calculate the number of hours that you spent on it, multiply by what you
think an hour
is worth, then multiply by 3 (as Ole already indicated). do not go below
that.
If the company is a professional company, then it will still be peanuts
compared to what
they are going to earn.
- take the price of their current package, multiply by how much they sell of
that per year.
If it is very much, you can ask for a good sum yourself. your goal here is
to make money.
- if you are going to do modifications afterwards on their request, specify
hourly prices in advance.
- and very important: have a lawyer read the agreement first before you sign
it.
the contract will be formulated in legalese. it is easy to get screwed over
if you are not careful
(section5, paragraph d, subsection 4f clearly states that we own all your
future work...)

That being said, I work for a small consulting company. while I have made
quotes and sold projects,
I have never sold software as a private person, so there might be things I
am forgetting.
That's another reason why talking to a lawyer might be a good idea.

kind regards,
Bruno.

 

[Michael Viking]

Like the others, let me suggest that you get a good lawyer. If your package
is worth something that a company wants all rights to it, you could lose out
tremendously. Don't get yourself some jake-leg lawyer. Get a good one who
knows this business - this isn't an area to be cheap in.

Also, I'm not sure I agree on the 3 x salary formula stuff. It depends on
what you've made. If it's a "rubic's cube" kind of thing, selling it for 3
times your hourly rate would be a bad move. Think hard about giving away
all your rights.

Of course, this is just my opinion Good luck to you.

-Michael Viking