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I am negotiating a contract where the customer wants an exclusiveness option. The project is about development of software and exclusiveness means that I am not allowed to resell it to third parties later.

What coefficient should I apply to value this exclusiveness in the contract ?


It is worth to know that this piece of software is indeed reusable by others as such or with minor adaptations.

  • does it include every letter of code or just the application as a whole? – user3244085 Jul 26 '17 at 4:45
  • @user3244085: I am not sure this makes a difference, but yes, every letter. – Harry Cover Jul 26 '17 at 7:25
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    Can anyone care to explain the downvote ? – Harry Cover Jul 26 '17 at 7:26
  • it makes a difference: if you can reuse some of the code you used in other applications there is less need to increase your price. – user3244085 Jul 26 '17 at 9:33
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    @PeterMV: I am developing image processing functions which are in a way "standard" and there is a true opportunity for selling to others. And this customer is right to ask for exclusiveness against their competitors. – Harry Cover Jul 26 '17 at 12:21
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I really can't answer for code....

... but ....

in my field, design, I'd find this comparable to illustrations. I customarily charge a multiplier for exclusive rights to illustrations. Somewhere around 3x or 4x works out well.

What I generally do is estimate the time needed to create the original... then apply the multiplier. This generally covers many future usage scenarios since that creation time would be needed at least once if I were to come across the need for something similar and not be able to use what I've already created or have on-hand.

This somewhat depends on rights as well and not merely exclusivity. If the client wants all right then a higher multiplier is warranted. If the client merely wants an exclusive license, then I negotiate a time frame for exclusivity. After all, if the client doesn't want the rights, but wants exclusivity - what benefit is there in me not transferring rights unless the exclusivity ends at some future point?

I always include the cost of exclusivity as a separate line item on quotes so that the customer can see what that specific factor is costing them.

So either:

Exclusive License For XX years/months/etc ... $xxxx.xx

or

Transfer of Copyrights ... $xxxx.xx

Some clients quickly change their mind about exclusivity when they see figures. On the other hand, like all quotes, some clients don't have a problem with the figures at all.

In truth, it's very difficult to quantify values, at least for me. There's no telling exactly how much I'm giving up in terms of future usage. So really, it's all just "best guess" and figures are high enough where I won't feel I shorted myself when looking back on things.

  • The idea is similar: granting exclusiveness means that you will/may miss other sales, and this must be compensated. As x3/x4 seems a lot to me (I doubt my customer will find this attractive), I am thinking of a yearly fee as long as exclusiveness lasts. – Harry Cover Jul 26 '17 at 17:13
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    @HarryCover that's a very viable option... a usage fee for the length of use would be fine with me. And many clients do balk at the multiplier. However, that doesn't mean you, and the work, aren't worth it. – Scott Jul 26 '17 at 17:16
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Although I have never signed contract for the purpose you state, a friend of my how is a game developer and has his team, does this often.

They charge their time for one price and as the output give you ONLY the game. A client does not get access to the source code.

If a client want the source code, they treat this as if they have built some generic platform which can produce more games with a different theme and charge 5 times more.

You may try to think about a similar way for charging the exclusiveness they seek.

  • Yep, my main concern is to know what coefficients are practiced. In my case I guess that 5 would be a no-go, but it is good to know. Thanks. – Harry Cover Jul 26 '17 at 12:30
  • @HarryCover As in every business, try to get as much as you can. Of course, set the minimum you are not ready to go below and try to get as much as above it. – Peter MV Jul 26 '17 at 13:08
  • Setting too high a price causes blocking situations. Because the buyer won't buy and you need to lower. But then trust is broken because you were asking a the higher price "for no reason". – Harry Cover Jul 26 '17 at 13:13
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You won't find a coefficient that you can apply, as there are many factors to consider:

  • How much work is involved?
  • Do you charge per hour or fixed price for the software?
  • Can you reuse some of the code in other applications?
  • Will you also be given the same exclusiveness regarding maintenance of the application? (i.e. the guarantee that you and you alone can do the maintenance)
  • Is this a product with an annual license fee or do they just pay for the software and that's it?

In short: if you just make the software, no license fees, no maintenance,fixed price, and you can't reuse any of the code in other applications I'd be putting a very big premium on the total price.

But it really depends. In the end you'll just have to crunch the numbers and decide on a price that makes it worth the effort for you. I would recommend to add some recurrent revenue to the contract (e.g. maintenance or yearly license fee).

  • I am more looking for typical coefficients met in the practice (a reasonable figure would be x2 or x3 in my case, but I have no idea how this would be appreciated by the customer). – Harry Cover Jul 26 '17 at 12:34

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