How to license with a revenue-based model?

This is always a question of who wants whom more. I've seen deals where the percentage was in single digits. The thing is, I've seen both deals where a LICENSEE ended up with a single digit percentage and deals where a LICENSOR ended up with a single digit percentage. It all comes down to your ability to convince the other side that you are bringing in so much to the table that the other side should get a smaller piece of the pie. Essentially, this depends on these factors: - whether you are well-known in the industry; - whether the other side is well-known in the industry; - the level of uniqueness of your product (if you've developed another minor variation of a product that already exists on the market, chances are the distributor will want a larger piece of the pie); - your level of desperation (it's one thing when you partner up with someone else who will commercialize your product simply because you can make more money by investing your time building new stuff; it's another thing when you have no realistic way to commercialize the product yourself, and if you don't find someone who can do it for you quickly, you'll starve...) MOST IMPORTANTLY, no matter what number you agree to, make sure you read the contract extremely carefully. Contracts can create rights and contracts can destroy rights. Contracts are more powerful than any rights vested in you by IP laws. So, the bottom line is: - Know EXACTLY what you are trying to get out of your contract; - Get your contract reviewed by an experienced lawyer, but make sure you tell the lawyer what it is you're trying to get out of the contract. Lawyers are not going to create "the right deal" for you. We're not going to tell you whether you should be getting 9% or 90% of the revenue. We're going to make sure that you understand whether the contract you are about to sign reflects what you think the terms of the contract are. You're welcome to schedule a call if you would like to discuss this in more detail. Cheers, Andrei

A lot will depend on your negotiating leverage. Where there's leverage, there's opportunity. But your leverage is going to largely depend on what your license agreement says, and the form of the transaction between Company B and Company C. For instance, if Company C buys Company B's assets (as opposed to shares), and your license agreement includes an assignment clause that does not allow for assignment without your consent, you have a lot of leverage to impose terms because technically they can't transfer the agreement to Company C without your permission. If you'd like, I'd be happy to look at your agreement and let you know my thoughts. Ronan

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.

Here's what I don't see so far: executive (buyer) INVOLVEMENT by your target customers. Go to them. Show them what you've got. Get the testimonials from your employee-level advisors to show them the need is legit. (Use these same employees to start going up the chain and finding out who are the decision makers you need to talk to.) Find out if they are interested. If they are, say that you want their help with compliance issues (they already employ highly experienced experts in this department, believe me; and you can leverage this). In return you'll give them a deal in licensing the use of the software. I want you to understand something: User Adoption is key here. Right now, you have nothing. But get ONE user, one client, one recognizable name in your target market using the software, and now you have something. So be prepared to basically give that initial license away--at least for the first year--if you must. That's your Best Alternative To A Negotiated Agreement (time for you to read up on negotiation, I think). Because after that, you can go to the next whale and say, "Yeah, ABC Oil is using our product and they sure like it." If Customer #1 wants a guarantee of exclusivity, like this software is going to give the user a competitive advantage, then guess what, the price goes up. You cannot protect your idea from being stolen. So quit worrying about that (if you are.) Frankly, most firms and their staff are too darn busy with their own daily firefighting and are only too happy to outsource something like this to someone they can delegate out to. If you want further detailed strategy help like this, wording for conversations, and more, book a call.