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Someone - let's call him Bob - contacted me a little more than a year ago to create a solution to automate his business, this solution has been working great for Bob, it makes his job easier and I believe he is making more money with this solution.

Bob is the owner of his business, and I'm the only one who developed and know technically speaking about this solution, the solution is composed of a web app, a mobile app and a connection with two providers.

I charged him initially for building the whole solution, and after that, I charged him for every change I made. For some reason I have never signed a contract with Bob.

I work in a multinational company, which is my 70% - 100% of the total income each month, and also I do some side projects just like the one I made for Bob, but I feel these side projects are taking some days too much time from my free time, and I'm not seeing the amount of money I would like to see exclusively from those side projects.

So I'm starting to charge also a monthly fee/commission on new projects, the benefit for them is that they would not need to pay more if they want an update, the benefit for me is that even if they don't want an update I will get my maintenance fee.

There's no problem with new projects, because we can talk before we work together, but with Bob, we have been working for a year, and it is a deal/client I would not like to lose, because I see potential in this product.

Bob is planning in the long run (I think 3 - 5 years) to start to commercialize this solution and he mentioned one time that he would like me to start making money for this idea too, Bob also once said that he want to make money from a subscription model instead of a one payment only one, he explicitly said that a one-time payment doesn't make sense for him, but a subscription model does.

So, my questions at the end are:

  • Which is the best way to tell Bob I want to change the way we work together because I want a 10% of the money he is making with this solution each month and not charging him anymore for each change?

  • Should I mention that he has said in the past that he would like me to make money each month for commercialize this idea?

  • Should I mention what he said about the subscription and the one-time payment models?

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    Look at how much you've charged him for the changes in the last 12 months alone. Is that the sort of number you'd like to get per year? – AdzzzUK Nov 13 '18 at 16:44
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    why not ask for a cut of the revenue instead, and lower your rate? that way you get revenue monthly and are more aligned with Bob's company succeeding. operating a monthly "pay me for services" is fine, but then bob will always ask for something. so it won't reduce your workload. – bharal Nov 13 '18 at 16:45
  • @AdzzzUK not really, the sum of the monthly fee for a year would be like 2x the amount I have charged him since the beginning , and that's a good point, because I expect it to be 3x or even 4x over the years – Enrique Zavaleta Nov 13 '18 at 17:00
  • @bharal the revenue cut you are proposing, is a 10% cut? or a lower number so at the end the revenue cut + lower rate changes = 10%? – Enrique Zavaleta Nov 13 '18 at 17:03
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    @Enrique i don't know. It depends on revenue, see? If you do go this way, you need to know how much you need to earn - at the beginning - to keep you happy. The argument for you is that if this company grows, you get more money. The argument for bob is that it keeps you invested and aligned with the company succeeding. – bharal Nov 13 '18 at 17:19
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The solution you are proposing sounds like you want to become a business partner (with a 10% stake in the profit). That's the angle I would use when talking to him.

Sit him down when you both have ample time and say that you've been trying to get your income up from your side business by raising rates, but that you would like to try something different with him. Tell him that you are impressed with his idea/product, believe it will be successful and that you want to become a bigger part of it. Don't tell him that you want 10% right at the beginning of the conversation, first see how he reacts to the idea in general. Then you can begin discussing numbers.

Highlight the benefits this solution has for him:

  1. If there is no profit, he does not pay you.
  2. He won't have to pay per change anymore.
  3. You and your technical knowledge will be closely tied to the project.

[W]e have been working for a year, and it is a deal/client I would not like to lose, because I see potential in this product.

Make it very clear that you are willing to take 'no' for an answer. If he declines outright, don't push it, thank him and continue as is (you might be able to revisit this later down the road when he commercializes the idea). If he doesn't accept but seems open to negotiating, be prepared to compromise on a lower percentage (depending on the profits, 10% could be very high), or - if you are willing to become a true business partner - offer to shoulder 10% of the costs as well. You need to know beforehand if you are financially able to offer this.

Should it work out, put everything in writing! Make a proper contract and have a lawyer look at it before signing.

Should it not work out, you could come back to your first point about trying to earn more income and offer him the subscription model or just plain higher rates.

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Someone - let's call him Bob - contacted me a little more than a year ago to create a solution to automate his business, this solution has been working great for Bob, it makes his job easier and I believe he is making more money with this solution.

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I charged him initially for building the whole solution, and after that, I charged him for every change I made.

So, Bob already paid for the project, and in your current agreement he has to pay extra each time he wants to make a change to his project, but now you would like to change the agreement to one in which you get "royalties" for a solution you developed based on his specifications?

I'm the only one who developed and know technically speaking about this solution

based on this comment I guess you could offer Bob to join his project as a partner, but looks like your part on the project is almost complete and paid for I'm reluctant to believe Bob would like to partner up

Which is the best way to tell Bob I want to change the way we work together because I want a 10% of the money he is making with this solution each month and not charging him anymore for each change?

I dont think there is a good way to do so, you already charged Bob for the project not sure why he would like to give away 10% of a project of his own instead of paying on a changes-basis

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