The issue (I) see is this:   Do you have a written contract?  If so, what is WRITTEN is binding.   I see the possibility of all kinds of LEGAL troubles.

Suppose:  You say "Goodbye", The company dies, He sues you for "breach of contract"... and wins.  OH NOES!

On the other hand, I believe verbal agreements rarely hold up in court.

BEFORE you make any large decision in this matter it may be prudent to speak with a lawyer.  As we all know, The U.S. is the MOST litigious nation on earth

You have already made the statement that if he were to pay you the going rate it would kill the business.
"Over the years, the company's revenue has increased"
"the owner must keep lowering bids each year to get a contract"
In essence you are saying that a theoretical maximum increase of costs of $31,200 would kill the business,  (Double the IT cost at full time (2080 Hrs/yr), MUCH less if you work a few hours a week for him.
 NO owner would willingly cut his own throat.  So, a "raise" appears to me to be out of the question.

Point here now becomes:  Is this revenue stream large enough to put a dent in YOUR wallet should it stop?  With the economy as it is, I'd look hard at that.
Do you have MARKET RATE work to fill in the gap LONG TERM?

Since the "relationship" is good, you need to weight THAT too. Does that relationship bring work in via referrals etc?
Would severing the relationship harm your other existing streams OR hurt your ability to create more streams?
Is the  RELATIONSHIP important to you?   Sometimes it is about more than just money.  Add that you said, you are replaceable AND that if you walk, you will effectively slit HIS throat.
NOTHING will divide family/ friends/ relationships faster that money based issues.  I have personally witnessed a older friend lose a lifelong friend since they were both 5 years old and end up not speaking... permanently due to arguments regarding money.


Hope I've helped  :-)



Wayne






 07/10/2012 05:41 AM, keith smith wrote:

Andrew makes a good point of things must be win-win.  Sounds like they are not.  If the business is not viable, it may be time to cut your losses.  A sad fact, however this decision is the harsh reality of being in business.

It does sound like the business is hanging in there though.  Might be a good time to re-negotiate a more limited relationship.  From what you are saying you are not that easily replaced - from a financial perspective.  Of course you will have to take into consideration what your desired compensation is.  I would guess the business owner knows things are not as good as they could be for all involved. 

Maybe if you start by educating the business owner about your current compensation level, market compensation for a PHP consultant, you being at risk, etc, and then ask how to make this arrangement win-win, you might be surprised at what might be offered.

------------------------
Keith Smith

--- On Mon, 7/9/12, AZ Pete <plug@cactusfamily.com> wrote:

From: AZ Pete <plug@cactusfamily.com>
Subject: Re: OT: Software Licensing Fees
To: "Main PLUG discussion list" <plug-discuss@lists.plug.phoenix.az.us>
Date: Monday, July 9, 2012, 11:52 PM

Hi All,

First of all thanks to those folks who responded with some helpful points.
To clarify some of the questions asked:

I understand with glaring clarity that I'm am replaceable and know making demands never works.  Over the years, the company's revenue has increased. But also over the years, I've spent more time adding features. It was probably my fault for not clearly detailing how much time I'd spend adding features & functionality versus just maintaining the existing application.  Last year I did a bit of calculation on how much time I spend on maintaining and improving the application versus my percentage of revenue compensation and I came to a rate of about $15/hour.

While in the very beginning of this project, I did it more for the learning of building a large application and the money was a nice side job. But now, it seems the hours got longer (due to significantly increased code base) and the pay didn't keep pace.  At ~$15/hr it's just not worth the time to keep staying on the project.  However, to get the compensation to a more "market-rate" level seems very difficult.  The revenues for this business market (its academia & government) has been going steady down (the owner must keep lowering bids each year to get a contract). Looking at the numbers coming in, if he had to pay me a market-rate for programming, his IT budget would double or more and the business would go under.  Which leads me to think that perhaps this isn't a viable business anymore if one can't make enough income to cover the costs of infrastructure.

Maybe it's time to let this one go...

Thanks for letting me rant!

Peter



On 7/9/2012 8:01 PM, Mark Phillips wrote:

I don't quite understand what is going on.

Has their gross revenue remained flat for all these years, do you are not making add much as before? Or, are you now thinking that the percentage is too low?

Are you spending more time maintaining their servers and performing updates than when you started? Are you creating new functionality for them?

Mark

On Jul 9, 2012 7:16 PM, "AZ Pete" <plug@cactusfamily.com> wrote:
Hi All,

I'm in a bit of a quandary about fees I'm receiving from a long time client and thought I'd tap the PLUG brain-trust to get some input.

This situation is this:

A few years ago I developed a PHP application that a client uses to run their business (its a typical LAMP platform). Without getting into tedious details, this software application is used to run their entire business.  It is understood that the software ownship resides with me and they are paying for its use - licensing it, if you will.  At the start of this project, we agreed upon a certain percentage of gross revenue that I would receive as payment for use of this software.

In return, I would maintain the software, provide various updates or additions, and some light server admin work to keep the application running.  This arrangement has been working quite well and the business relationship is excellent. However, I feel now that the percentage I receive is too low (it hasn't been changed since the start of this venture).  I have broached the subject of having to update our arrangement, but was met with some resistance. 

I wanted to ask fellow consultants/contractor/software devs what is the "going rate" for such an arrangement.
Namely, if you are licensing a software product to a client for their use, what is a reasonable percentage of gross revenue a business should expect to pay. Especially, a software product that is the core component of their business without which the business wouldn't exist.

Any thoughts would be *very* appreciated.

Thanks,
Peter

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