Software Sales & Marketing Deal Structures?

Entrepreneurs asks: "My business partner and I run a small but growing software company. For approximately the past two years, we have been collaborating with some outstanding overseas developers, have established a strong relationship with this group, and plan on continuing our collaboration with them in the future. As a means of jump-starting our business, we have entered into discussions with this same group regarding some would-be sales and marketing deals in which they would develop and support some products while we would be solely responsible for sales, marketing and would bear all costs associated with these activities. Both parties are in essentially in agreement as to the overarching roles that would be played, but we are as yet far apart in regards to our respective perception as to what represents a fair deal structure (% revenues) for the developer as opposed to the sales/marketing partner. What wisdom can Slashdot readers offer regarding the typical structure of software sales and marketing agreements?" "Previous experience in the biotechnology industry (an industry that I argue shares several similarities to the software industry) tells me that sales/marketing partners typically get anywhere from 60 to 75% of topline revenues, with the remainder going to the development company. Our overseas partners are essentially arguing for the exact opposite, something to which we would never agree, as we believe it would represent an abandonment of our fiduciary responsibilities. Having never negotiated a deal such as this, we are somewhat at a loss as to what the industry standard terms are for situations such as this and have had a difficult time obtaining quality information that addresses our situation."

Comments

SCORE

[HalWasRight]

Ever heard of S.C.O.R.E?

This is just one of the resources available to entrepreneurs. You need to reach out to business people with experience, not just broadcast to the /. crowd. I strongly suggest you search out mentors in your local business community.

Re:With the given data, all answers will be wrong

[MerlynEmrys67]

Sounds nice - but here is something interesting...

The software development house is taking all the risks. Frankly - any interesting development is going to take 1-2 years to go from idea into a fully coded and tested product. They will have to purchase capital, pay developers, QA, product management, etc.

When they are close to being "Done" the risk goes down that the whole shebang will go up into shambles (ie - you are pretty sure you will get a final product out the door and be able to sell it) you bring marketting on board to start priming the channel, creating contacts, paying advertising, etc.

Yes you need marketting to determine what to build, get some product requirements, do some user studies - but that is far from a full time job in the early stages of a true startup company.