What are considered fair license software fees for vendors?

Discussion in 'Growing and Managing a Business' started by jgaa1970, Feb 3, 2011.

  1. jgaa1970

    jgaa1970
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    We are a new Nevada start up security software company and just was offered by a European Telco to have them license our software in about 20 countries --starting with 2. Here is our dilemma, we are so cash strapped that we cannot afford any consultants, etc to help us structure this deal properly. So I am asking ..what would be considered an acceptable license fee if it is part of a package that includes services (customization, installation, support, training, etc)? and how much does one charge for annual fees? any sound advice on how to structure a solid license deal would be appreciated. I am not sure if there is some set formula to set a license fee, etc.
    They asked us on Monday what are license fees are and we froze?
    Is it also appropriate to ask for an upfront fee when signing the Letter of Intent? How much is appropriate? I ask this because we are hoping they can advance some funds so we can complete this deal. We spent the last 8 years building this software and getting it properly copy-written and strained our own personal credit scores --so no one will lend us money and we do not have the time to try and get venture capital as they want to sign the letter of intent next week and move this forward. Please if anyone can help it would be so appreciated. Thanking everyone in advance.
     
  2. Fergal

    Fergal
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    Welcome to our Business Forum jgaa1970 and congratulations on your achievements so far.

    It's difficult to give you an estimate of what your license fee should be, without knowing the specifics of your software and your business. One approach would be to do some online research on your competitors and see what they are charging. Is that something you have done?

    When setting your price, it needs to be a price that works for your business. It needs to be high enough so that you have enough cash flow to continue running and developing your business, whilst making a profit. Have you put any figures on paper, to estimate the costs of running the business?

    In my experience this is not something that would normally happen. A letter of intent, generally signifies just that - an intention to do business together. It is not a contract to do business and hence there normally isn't any money involved.

    What do you need those funds for / how will you use those funds once you receive them?

    It sounds as if the people involved in the business are all technical people and that your business has now grown to a level where you need input from someone with business knowledge and experience. Have you considered taking a partner on board, who has this experience?
     

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