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Please take your time to read the below otherwise click elsewhere. I will try and make it short but I feel I need to explain the situation fully so that you guys can help me decide whether my quotation is on point.

Hey guys, I'm glad there is a place on stackexchange to ask this question.

I have a great client, our business relationship has extended for a year now and I've offered him two solutions for his two businesses. I charged him £9k each. Everything went smoothly both iPad based applications were completed.

I flew to my client's country to take down all requirements in full for the third project. A full electronic college application. Then he realised that it needed to be put on hold and instead he would need a payrolls application for the college first since he makes payments to his staff members every month and the majority of his payroll office have quit knowing that it will all be electronic based in the future, hence the urgency for the payroll application.

Now, its a bummer because it does mean the price I wanted to charge will have to be reduced since hes reduce the project scope. This project will include the following:

  • a Biometric system that will interface with my application, it will clock in and out staff members attendance for payroll. These machines would be laid out around the college entrances and exits, and at the security office for security staff to clock in and out too.
  • client's iPad will display dashboard data, how much money he needs to pay his staff members at the college, in cash and to the banks.
  • There would also need to be another module at the payroll office where one staff member can check exactly which staff member is owed how much cash, with a printer printing out invoices/a little staff payroll sheet that will print that the cash was collected.
  • a timetable module for the head teacher of the college to be able to see all staffs time tables for when they should be in and when not.
  • To be able to edit staff's working hours.

For this project application for one business only he will be quoted around £23k.

This is fine, however I received a call a month ago where he's requested for these additional features.

  • He now wants a centralised payroll system for ALL of his businesses, (theme park, college, food company with head office and factories, hotel, and the future hotels that he is building) each business have staff members ranging from 30+ staff members, to 200+ staff members.
  • To be able to add biometric machines in the future, as many as he likes, that can be placed in his future businesses and any new businesses that he starts up.
  • To be able to monitor his range of businesses from his app all in one place.
  • So he can continue to implement a biometric full system in every single new business he opens with this application.

This is then means that he would no longer need to come back to me everytime he wants to implement a new biometric system for his other business and future businesses since my application would now be able to handle new biometric devices being added.

This is like an unlimited license that he's asking for. How much should one charge for a situation like this? What should be my multiplier?

Here's what I dont want to do:

  • Charge him for every new device that's added into the system say £2k for every new device. That's silly for me.
  • I also don't want to charge him for every new business he wants to extend the application for

So I have decided to give him a one of fee, the question is how much? I have thought about multiplying the original price by 2.3, £23k x 2.3 = £53k.

And thought of increasing maintenance by £2k increments for each new branch he extends within the app for every year after his initial 1 year free app maintenance.

Am I charging too much or am I charging too little for this unlimited license?

UPDATE 1

In regards to one question from one of the answers: The businesses that he will continue to install this application for will be his own businesses so that he can monitor the accounting information that would be automatically tracked. The information that will be tracked is how much to pay his staff members each month through the biometric system that he wants to continue to install and monitor in his future businesses to come.

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Regarding pricing, one thing you could do is to go to several ERP or Payroll type application sites, and see what the multiplier is that they are using to cover conversion of a one-company app to unlimited, or if they even allow that. That should give you an idea of what the market will bear and what standard practices for this type of software licensing are.

I'd not want to give him unlimited licenses, personally - I mean, how many legit businesses can one person be actually managing at one time? I'd give him at the most, say, 10 - 20 licenses. By the way, I hope you are thinking of possibly making this app a commercial product that you could sell to more than just this one guy. Negotiating a contract where you retain ownership of the code base and can market it to other businesses may be another way for you to keep generating revenue from it and make up for allowing this guy to use it multiple times for his business needs.

Another question - will this guy be charging the companies he wants to install this app for? My guess is yes - even if he's not paying for the app, he'll be spending time installing and configuring it and will want to be compensated for that time. If so, what's to keep him from setting up a business as a consultant to market and install the payroll system you've written, indefinitely, with no further compensation to you? In fact, with no licensing scheme built into it, it's only a matter of time before your application is pirated, and that's bad for you both.

TL;DR: With the changes your client wants to make, you really need to think hard about negotiating a more equitable contract than just giving it all to him to use anywhere he wants with no additional compensation to you.

  • Thats a lovely answer you've written up. Here's some extra information, the service will be running on my background server, the application is written so that all money owed to staff members will be sent to the CEO on his application so that he can then write up the cheque with the amount displayed on the app (on his iPad) and then give the cheque to the admin to then go to the bank transfer the money, take the money out so the admin can pay all staff members. Something along the line of that anyway/ – Pavan Jan 24 '14 at 16:44
  • so for him to then setup a consultancy business where he then can use my app for other people's businesses is not possible as then my client would get all accounting information from the other companies which is not what the CEO's of those companies would want :D My software cannot be pirated at all, because it requires a backend which is my server, and without any programming code on my back end the application ceases to fail – Pavan Jan 24 '14 at 16:46
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    Just to let you know that I do own all the code not my client, he owns my service and that is all. I liked what you said here and will heed your advice to compensate myself: ` By the way, I hope you are thinking of possibly making this app a commercial product that you could sell to more than just this one guy. Negotiating a contract where you retain ownership of the code base and can market it to other businesses may be another way for you to keep generating revenue from it and make up for allowing this guy to use it multiple times for his business needs.` – Pavan Jan 24 '14 at 16:55
  • Please do have a look at the update post so that you can get some more information in relation to your question Teresa – Pavan Jan 24 '14 at 16:58
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    Everything worked out well. I figured out a licensing scheme, and made sure that if the company could not afford it that they would only be able to adopt the application to select branches only, and would need to cough up if they wish to expand the service. – Pavan Feb 13 '14 at 1:34
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I'd not worry about the license price so much. If you can get yourself into a long term maintenance situation, you've struck gold.

  • Hmm thanks for posting an answer. I don't make money from maintenance lol. It's just some way to cover my cost, other companies charge for application update services. My maintenance fee will only be 2k a year. thats not much. That will cover labour costs for updating the app meanwhile the client is getting essentially a new free biometric solution for every single new business he opens up because of the dynamic feature he will have in my app which will allow expansion instead of having another project with me. Surely its wise to have an unlimited licence price? – Pavan Jan 23 '14 at 18:46
  • Say a university purchases an application, the software distributor can't make more money mean while the customer is installing this software in all the university labs benefiting thousands of students. That's why the company charges a licensing fee to make some money for all these installations that the university will end up carrying out but at the benefit of NOT having to buy at the same price of the original price for subsequent installations. I need to know whether my 2.3 multiplier price is right or if I should be charging more for an unlimited license. – Pavan Jan 23 '14 at 18:51
  • If you're going to have to design a system that scales to the degree you're describing, it's absolutely worth your while to make sure that if your customer succeeds, you succeed. It's known as residual income. Don't feel guilty. Whether you get it in maintenance, or licensing (i'd do blocks rather than 1 by 1) it's the best approach if you can swing it. – Xavier J Jan 23 '14 at 21:38
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    He owns a lot of businesses that transact credit cards, right? The card processors get a piece of the $ for each swipe. They're not feeling guilty about it, why should you? – Xavier J Jan 23 '14 at 21:40
  • Ok, could you elaborate on what you mean by you'd do blocks rather than 1 by 1? And how is that the best approach? Sorry im just trying to make sure I benefit too. Hence why I add the yearly maintenance cost for each app produced. So whether or not the company comes back to me for an update thats required or not, they still will have to pay me for maintenance. In this case, he gets the benefit of having a dynamic app where he can add biometric machines to all of his business and extend the application so that it will handle the staff clocks ins and outs from all his other businesses. – Pavan Jan 23 '14 at 23:16

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