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Subject:Re: Royalties (in lieu of fee) and contract From:Michael Krigsman <mkrigsman -at- CPUB -dot- COM> Date:Fri, 23 May 1997 18:17:40 -0400
From the software company perspective, a royalty represents a way to defer
the documentation expenditure until revenue from the product starts. This
might indicate that they have a cash flow problem. In essence, you are
absorbing some of the business risk that they would otherwise be taking.
I would be very careful about accepting a royalty. Unless you stand to make
a very good return by absorbing the risk, and the project is large, it's
probably not worth the hassle. If you go the royalty route, be sure all the
details are carefully documented in a contract before you begin work. It is
important to agree on issues such as your right to receive periodic product
sales reports. Also, be sure to get appropriate legal advice before signing
If the company has cash flow concerns, perhaps a payment arrangement
(including interest) would help motivate them to hire you. There have been
times when Cambridge Publications has negotiated payment terms with
customers, allowing them to pay us out of product revenue. This has always
been done before the project actually starts, and included specific payment
due dates, amounts, and interest. Most important: only offer such terms to
people you really trust.