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I usually avoid accepting share from business success because it always includes free work from my side.

However, after years being in the business, I found a client who is ready to offer business profit share ABOVE our regular costs. Like incentive to put even more of myself in the project and to easily drop any side offer on new products.

The app is a mobile app and generates income via in-app purchasing and ads. So how do I get X percents of the profit? How do I know the amount of profit on monthly/yearly basis?

The client is very serious and the question is serious. How can I assure that I actually get X percent and not less?

I am not a petty person, but if I am offered something, I do not like to be screwed, but I expect transparency. So I am asking this questions in advance just to be prepared if something bad happens to know how to react.

EDIT: Signing a contract (just that) is not an option because each contract violations request me to go to court which take a lot of time and additional costs. So I am looking for practical and concrete solutions aside of the legal ones provided by a contract.

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    This might be simplistic of me... but if you own shares, you'll be a shareholder and therefore get visibility of their profits to check you're being paid the right amount per month or year. Is that correct? There'll also be a contract in place, won't there? If they say you're getting 10% but you find out you're actually receiving 5% (for example), then that's a breach of contract and they'll be subject to a pretty huge fine.
    – dvniel
    Apr 7, 2017 at 9:49
  • Ask to sign a contract.
    – SmallChess
    Apr 7, 2017 at 11:04
  • @DanWilson Please check an edit. About other things, it's not company share, just profit share from this specific application.
    – Peter MV
    Apr 7, 2017 at 11:36
  • What country is the company based in?
    – Jeremy
    Apr 7, 2017 at 13:04
  • It doesn't make sense to me that you want to ensure a client is held accountable in some way, but do it without a contract. I don't see how that's possible unless the client were to give you collateral or something, but even they they'd want a contract.
    – Scott
    Apr 7, 2017 at 21:39

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There are a couple things to consider.

  1. you are being paid your regular rate, therefore anything above that rate (profit share) is a bonus however long of short it is paid out and if client did not offer you a profit share then you are charging the same yes? then you are ahead of the game.

  2. how to audit the profit share? have logins to the backend to see the purchases and advertising revenues. That said while you may see what is owed, there is no way to collect if they choose not to pay.

  3. a contract, as you said, enforcing a contract is expensive, and in this case could well outweigh the profits from the app so it not practical. It may make someone feel better to have the law on their side but the reality is it costs money to go to court.

  4. the problem arises when you are expected to put in more of your time without compensation based on future profit sharing. that is the risk. think of it as selling a car to the client, he says thank for the car, I want to give you a portion of the proceeds from my use of the car. Nothing out of your pocket at this point, but when he asks you to do service work on the car for free, in anticipation of a profit share, that is where you should have a problem.

  5. I would want to know why the client wants to give you ongoing profits above and beyond your regular rate. It makes no sense business wise unless he intends to leverage that on some way. Is the app legal? or doe sit push boundaries like another one mentioned here about collecting bank logins? You may be wanted as a "fall guy".

In conclusion, there is no way to enforce a contract due to the costs, you are already being paid your normal rate, so consider any profit sharing as a bonus but ask if you are expected to do anything in exchange for that profit share. Likely it will be updating the app and then you need to ask for backend access to monitor revenues and decide if you want to offer free updates in exchange for a cut. And if you do, and feel the profit share is advantageous over straight pay, I'd still ask for payment in advance to be subtracted from your profit share. This way you still get paid even if there are no profits.

A bit long winded...

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  • This is new to me as well. I am not new to this business and this does not look like a fake offer. He simply wants to share some portion of the profit from this application so he is sure that I am 150% dedicated to it and to easily avoid future offers from other clients. It makes sense to me. So aside of my regular costs, he offers a bonus for my extra dedication, exclusivity, thinking beyond the scope of my work, etc.
    – Peter MV
    Apr 8, 2017 at 7:14

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