How to license with a revenue-based model?

Hi, What you're contemplating is a licensing model. It's like 'franchise lite.' There are several questions you need to answer for yourself before you go recruiting any licensees. For example, are there any business systems that will come with the franchise in addition to the brand name? How will you control the systems and guarantee the client experience? The more 'controlling' your agreement is, the more you may be deemed to be selling a franchise which introduces complicated compliance requirements. I've helped many others work out licensing schemes before. Arrange a call if you'd like to chat. Also, you should read Franchise Warnings. Available from Amazon. David Barnett

SaaS is the way everyone seems to be going these days, as it is a huge revenue producer for software vendors. Why make $50 once when you can instead milk someone for $10/month for life? As a holder of multiple desktop licenses for products like Quickbooks, Photoshop, etc I can say that I HATE when I am forced to go to a subscription-based model unless it comes with some very good perks. Quickbooks is using pretty brutal tactics to get everyone to switch, including disabling real-time sync with bank accounts, etc. For this reason I will probably switch to a different software vendor in the very near future. If you do decide to go to an SaaS model, make sure that you give the users a very good reason to switch and ideally give them a choice, don't force it on them. Free upgrades are petty much a given, or else what are they paying for?

The question that pops up for me from your question is, "Why would you trust someone who isn't behaving like a partner?" How common is this situation, where a licensee declines to share buyer contract info with you? I'm guessing very infrequent from your description of "one" licensee behaving this way. If that is so, and the far more common situation is a licensee agreeing to share the end user contract data with you to have fully accurate revenue data, then I would simply screen out those potential licensees who won't cooperate and not work with them. If, however, your marketplace sees the resistance to sharing data as being more commonplace, I would review the structure of how your software is being delivered. The software licensing program could capture this revenue data so you wouldn't have to worry about trusting licensees. An example of a third party licensing program I've seen (to which I am not in any way affiliated) is https://www.licensecloud.com/ As another option, you could also dispense entirely with the idea of following licensees around and making sure they're telling you the truth about revenue. Restructure your billing system so you charge a profitable flat fee per end user, and leave it up to your licensees to sell the services for whatever they are able. This keeps you out of the business of looking over your licensees' shoulders and in my opinion is healthier in many ways over the medium and long term. Revenue models are tricky to calculate and many intelligent people will miss expensive cost factors on the road to developing a price that truly makes them money. I help businesses who have any kind of problem on the path of competently delivering a product or service to their customer. If you'd like to discuss this further, reply here and send me a message because I don't always check previous threads. Thanks, Jason

I am not a lawyer or an attorney and this is not "professional advice." Hire an accountant who is familiar with licensing. Stay away from the franchising route if you can: it's expensive, the lawyers are expensive, and you are open to attack from inside and out (franchisees and customers). I was a senior executive at an Inc. Top 1000 franchise firm and saw this from the inside--though we didn't have an issue with our franchisees, I saw plenty of franchisors who did. Learn about licensing. Figure out how to write the contract so you have control over some measurable variables, eg. customer count, revenues, # of complaints, etc. As long as the licensee remains in tolerance, they're fine, but if they go outside you drop them. You are going to have to invest in an attorney to create the boilerplate contract, and an accountant to manage the process (which you should probably do first.) Don't cheap out. You're protecting yourself here. BTW looks like Jeff Retchman in this thread could help you as well: https://clarity.fm/questions/1258/how-to-license-with-a-revenue-based-model

I would say travel industry experts first. Based on what you have described, it sounds like you need to figure out what the market segment within the packaged travel/tourism industry that can benefit from your product. Then look at your competition in that market segment and see how they sell their product. Once you have a good understanding of these, you should then be able to figure out whether licensing is the right way to go or if there are other alternate models. All the best.