I have a potential customer who has an idea for an ipad application but is unable to find sufficient fundings for this.
One idea that came up is that I do the work either for free or for a minor fee and then receive a percentage of the income from appstore.
How do I decide what percentage is realistic?
How is this affected by the price in appstore and how do I protect myself from the scenario where the customer suddenly decides to offer the app for free?
Ideas are cheap. It's implementation that really matters. If he's not commissioning you to create the app for him and paying you what your time is worth, I would give him a very meager cut of the profits. Certainly less than 50%.
How do I decide what percentage is realistic?
No %. At best he gets a free copy. (Also, You post it on the App store.. NOT him)
EDIT
IT'S NOT STEALING! The Customer has NO interest in this Business, he is just trying to get free work. This is one of the oldest Scams in the book.
You know what i used to tell My customers who suggested this? "Great Idea! Write up the Business Spec, feature list, and get back to me with the some market research. Then i get right on Coding"
They never bring up there idea again, Why? Because I asked them to do some real work.
Are you willing to take the risk that if you work for free/almost-free, and the product does not sell, you will make nothing? Do you have enough saved to pay the bills if this happens? Is the idea so amazingly revolutionary that you will make a small fortune on it?
...Avoid this if you can. The customer should pay as much as they can, but never nothing. Assuming you can get > 75% of your development costs covered by this customer/partner, then you could consider taking a percentage of sales - take as much as you can for as long as you can and get everything in writing.
Do it like a record contract. He gets 90% of the profit, but first you get to recoup the development costs. Simple.
How much is your time worth? If you are into charity and want to spend the time to learn and help out a friend, then go ahead and do it for a percentage. However, if you expect to get any return for your time ($$), then either get paid for your time via a real contract or implement it yourself and get the rewards.
Your time is not cheap or free my friend - only YOU can decide how to spend it.
The bigger problem is how do you protect against the app not selling at all? (The median paid app sells less than one copy per day. Many sell less.). 50% of nothing is nothing. Even a 90% cut is still nothing.
It's obvious that the execution is the money maker, but execution on a bad idea is usually just as worthless as an unexecuted good idea. So the quality of the idea is worth something. The way I see it, if a client wants to pay my full development fee, then the app is theirs. Conversely, if I do ALL the work, the app is pretty much mine. To give them options on striking a shared-risk deal, I think the profit (not revenue) split should be an inverse of the fee split. So if they want to pay 70% of the upfront cost, you split the profits 70/30 in their favor (70% of the risk = 70% of the return). If they only want to pay 25% of the cost (or do 25% of the work), then you take 75% of the profits... and so on.
Let me know what you guys think of that. Only do this if you think the app will make money over time, though. Otherwise, recoup your time & materials costs as quickly as possible and move on.
I would do the percentages in tiers. The quality of the idea will be reflected in sales alolng with the amount of support, sales and marketing. If you are going to do the upfront work, you're taking more of a risk and should be compensated early. Figure out what you would get just for your time. If you feel you built an app worth 10K, take 70-90 of the first 10K. Maybe you get 50-80% of the next and so forth. At some point, you need to determine your level of involvment in the support and upgrades. The sales and marketing efforts (especially if your partner is paying for those) may exceed your early efforts, so the percentage may shift to his/her favor.
I'm a developer discussing a similar arrangement and was considering 50/50 split of revenue for these reasons:
1) the client is providing extensive content that's been successful in the form of a book with accompanying CD
2) the materials are required for a class at around 1,000 universities (don't have data on class sizes)
3) the client has a good name in his field and has been marketing-savvy in other enterprises
4) the content is really top-notch - actually I approached him with the idea of adapting it for iOS, and he was enthusiastic about my proposal & quick demo
5) I've got only one app in the store; the visibility gained from working with this person would do me good
But please tell me if you think I'm crazy even given the above - all comments/reactions welcome.
