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I have been working in what could be described as a niche marine sector for the last 12 years. Over the last 5 years, I taught myself how to code in python and a few other languages.

Once I became fairly competent at programming I started to see ways of developing a tool that would provide far greater news intelligence than was currently available in the market. I wrote the code during my spare time and after many refinements, it's working quite well on a standalone droplet paid for by myself and normally beats other news sources by a minimum of 6 hours which can provide a strong edge to major industry players.

Over the last 12 months, I have been forwarding alerts from the server to a company I have been freelancing for(Not as a programmer). The reception has been good but although undiscussed I was expecting them to make me some kind of offer or at least a financial contribution for the service I have been providing which has not materialised.

I made a few enquiries to other companies to see if they would be interested in my tool and have now been approached by one who has offered me a full-time contract albeit in a slightly different position than I am used to. They have asked under what terms I would bring my tool with me but I am uncertain as to how best to negotiate this.

Should I look at revealing the source code to them so that it can be further developed in-house as one of their own tools or keep the code private and just supply them with the service? Would it be best to safeguard my intellectual property?

Obviously, financial reward pays a large part in this but I have no idea how to value a piece of software like this. Even though the salary offer I received is good, it's slightly worse than what I am currently making as a freelancer and I am not sure if I should try to push for more at the risk of scaring them away from hiring me.

Thanks.

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    This one requires, even more strongly than usual, the advice of an actual lawyer experienced in patent law.
    – STT LCU
    Commented Nov 24, 2020 at 11:17
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    @STTLCU , why do you feel a patent attorney is relevant based on what's been mentioned? it's completely common to sell software suites, or data services like this, with no patent issues being involved.
    – Fattie
    Commented Nov 24, 2020 at 13:02
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    @Fattie You're right, licensing the right word, patenting is wrong. Apologies, English is not my first language.
    – STT LCU
    Commented Nov 24, 2020 at 13:14
  • We can not tell you what to do. But we might be able to answer any question you have which requests information which could help you to make that decision yourself.
    – Philipp
    Commented Nov 24, 2020 at 14:43
  • Let them be re-sellers or licencers. Odds are that they know the market better than you do, plus they already have a marketing department. Do not set a price on it, figure out what percentage split would make you happy. If unsure, ask them to guesstimate how much it might bring it each year.
    – Mawg
    Commented Nov 27, 2020 at 12:16

3 Answers 3

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Do not reveal the source code, without fair compensation.

If you're correct and this tool does provide a major edge to the big players in the industry, then the data it produces is going to be worth a lot.

They have asked under what terms I would bring my tool with me

Is the contract to hire you, or get their hands on your tool so they can show the door in a few months and sell it themselves? It's not clear if the contract offer is based on you bringing the tool with you.

I think option 1 and 2 are probably the most appropriate in your situation, either way you should take some legal advice from a professional.

To value the software, you need to look at the market. Who is going to buy it and how many potential customers you have. How much companies will pay, or how much they'll save or make using your tool etc... there are too many variables to suggest much else. You have to do the market research if you want an accurate valuation.

1. Sell it as a service

Charge a monthly subscription fee for the data. You can provide it via an API and sell it to any company that wants to pay for it. As you start making a profit you can hire developers and grow the tool yourself.

You'll have to try and work out how much your data is worth.

2. Sell a license

You can sell the tool and specify under what terms it can be used. You could have different levels of license with different payment options. Including a development license that would allow them to develop your software without cutting you out.

If your contract is based on bringing the tool with you, and you don't want to develop it yourself, then I think this would be the best option. It could even be a free license, but would allow you to keep ownership which I'm assuming you want to?

3. Partnership

If the company is going to develop it and re-sell, you could enter a partnership that allows you to take a share of any sales.

4. Sell it outright

If a company is willing to buy the software, then you can sell it to them outright, but make sure you get a good price. There are no rules and valuation is hard, but you want as much as you can get for it. Find some kind of accountant or professional that will negotiate a price that's in your best interests.

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    While this is COMPLETELY, ABSOLUTELY, TOTALLY TRUE, you do have to keep the scale in mind. if this is something that could be developed in a few days and which generates "a couple grand income a year", then YES it's perfectly fine to "throw it in" to secure a nice job or contract. If it's something generating perhaps a thousand or more a month, let's say, then for sure, it is inconceivable you'd give it away for merely a job.
    – Fattie
    Commented Nov 24, 2020 at 12:55
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    While this answer is an admirable partial list of the "ways you can make money" from something, I must say it really does not address in any way the question. (the two questions would seem to be "should I give to employer as part of salary deal" and "how to value a piece of software like this")
    – Fattie
    Commented Nov 24, 2020 at 15:18
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I have no idea how to value a piece of software like this.

it's extremely easy,

  1. write down how much income it is generating each year

  2. multiply that by a fudgey number around 10.

It's that easy.

Another good way to do it.

  1. get a quote from a software company on how much it would cost to reproduce it. (Or, just guesstimate that.)

  2. multiply that by a fudgey number around 10. ("since it's already viable and working")

slightly worse than what I am currently making as a freelancer and I am not sure if I should try to push for more

It sounds like you are new to software. Good news, every time in the history of the universe some programmer has been told "We'd like to pay X", the programmer has replied "that sounds great, what about Y"

It is completely normal that you'd come back with a higher figure. About 40% more than they offered and go from there. If you're struggling with language, be very polite and very brief: say they offered you 100 units,

Thanks, that's a fine offer and as you know I love the company. I was considering say 140 units (I currently gross 130 freelancing), what's your feeling on 140?

Regarding "throwing in" your tool. THIS DEPENDS ENTIRELY ON THE FINANCIAL SCALE OF THE TOOL. If you're talking something that could be programmed in a week or two (so, development cost would be 10 or 20 grand), and of which the income generating power is "a few grand a year", that's no big deal and yes it would be viable to "throw it in" as a deal sweetener. BUT OBVIOUSLY if it is something that is worth more than that scale THEN UTTERLY FORGET ABOUT giving it to anyone for any reason ever.

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    Can't say I enjoyed your formatting choices, but this definitely deserves upvotes instead of downvotes.
    – Kaz
    Commented Nov 24, 2020 at 13:22
  • Multiplying the money it's making by 10 requires the OP to already be marketing this tool to best effect, otherwise they'd get a much too low amount. Given that they're asking this here, they're probably not, and it sounds like you'd end up lowballing yourself. The second one sounds more reliable.
    – Erik
    Commented Nov 24, 2020 at 13:43
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    @Erik , hmm, not sure I agree. When we've priced and sold such tools for others, if as you say "it is not yet selling much / not yet developed much in a marketing sense" then ........... it's not worth much. How long is it going to take for it to finally come good? Months? A year? What makes anyone think it won't be knocked-off (like every single other software product or service) in much less time than that?
    – Fattie
    Commented Nov 24, 2020 at 15:22
  • @kaz - downvotes on the site are just funny. Formatting - recall, anyone can and should edit anything anytime, feel free! I OCD Format other answers all the time :)
    – Fattie
    Commented Nov 24, 2020 at 15:30
  • @Fattie I consider things like Bold, Underline, Caps etc. to be deliberate narrative choices intended to convey an effect, so I leave them alone.
    – Kaz
    Commented Nov 24, 2020 at 15:45
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The other answers address the tool itself. Let me address the real value.

In my experience, any piece of software loses value extremely quickly. To retain value, it needs constant updating.

Thus, the tools I have developed lost their value very quickly. The main value I got out of them is the skill in developing such tools. That is a very valuable skill that has earned me a lot more than I got out of the tools themselves.

You have two important skills: analyzing a situation to find a way of making more money out of it, and writing some code. You claim that they offer less than you are making as a freelancer. That makes the question clear. Don't go for less than you are making today. Duh!

Your skills are the real value here. Don't give them away.

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