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The basic scenario is that my former employer has been approached by another company who wish to license some software I wrote for them while I was in their employ and have approached me to work with them on making the changes required to commercialise this software (it is currently very specific to my former employer's environment and systems, so some work is required to change this).

My former employer is not a software company and has no software developers of their own so this is strictly a side-project for them as well.

I am currently in full time work elsewhere so anything I do will be in my own time at evenings or weekends. They have suggested a commission deal whereby I get a commission on every sale, which I am fine with. I expect there will be a maximum of 100 hours of work required prior to first sale.

We have still to work out details of who supports the customers, I certainly have no intention of being first line support!

My question is how do I go about working out what sort of commission is reasonable in this scenario? What factors need to be taken in to account?

hermiod
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    A small minimum amount or a small percentage of every sale or license would be nice if you think they are going to make a lot of money off of this internal software. If not or if they want you to support them, perhaps just bill them for the project at (at least as much as your day job) x dollars per hour? – kush Mar 20 '13 at 15:23
  • I do not believe this question is in scope for PM. Perhaps it could be addressed in workplace.stackexchange? – MCW Mar 20 '13 at 15:39
  • I don't think this will be a massive money spinner, it would probably generate sufficient commission to be worth doing for me but probably pennies for the company. – hermiod Mar 20 '13 at 21:05

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I had a similar situation when I left a small start-up a couple of jobs ago. While I wanted to help them out as they transitioned my replacement, I also wanted to prevent them from overly relying on me.

The solution I came up with was to set up a consulting contract with them. The key things included in this were:

  • A reasonable hourly fee that didn't provide an incentive for them to rely on me. While the fee was less than what would be charged by a professional consultant it worked out to a significantly higher rate than what they had been paying me as a salaried employee. I went with a rate something around 130%-150% of what my salaried pay rate was.
  • A limit to the number of hours that would be worked. This was also expressed in the contract as a ceiling to what I'd get paid in dollar terms.
  • A limit to the term of the contract. I set this to 6 months so that everyone was clear that my effort was temporary.
  • Documentation of payment requirements. So answering the questions "At what frequency do I invoice you? How fast do you pay me after invoicing?" Depending on how much you trust your old company you may also want to include an up-front fee for yourself. I've worked for companies where it is like pulling teeth to get them to pay for services rendered, and for others where you aren't really sure if they will be able to pay the bills in six months. In either case you will need some kind of protection.
Doug B
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  • I left the company 18 months ago, during which time I have gone in under consultancy fees a few times to help them out as my replacement didn't work out so they were short for almost a year. I think they're looking at this as more an opportunity to generate some additional money that they would not otherwise have. – hermiod Mar 20 '13 at 21:07