[Advice Needed] Taking a cut of profits, or hourly rate?

Hello,

I’m the sole developer on a project designing a 3D Anatomy application for medical students in the UK. I am working for 2 (new) doctors. I’m kind of new to working for other people, and so need a little bit of advice for what payment type I should take.

They say that the product will mostly be purchased by new and current medical students across the country, and that they have a solid marketing strategy in place. There’s no estimates as to how much profit they will make, but they’re selling the product for £1.99 on the App Store. They are offering me 20% cut of the final profits.

Alternatively, they are offering me £20 an hour (I reckon this will take upwards of 100 hours to complete).

So, taking that into account, which do you think would be best for me? Are there any other issues with each of the payment methods? (for example, I think a ‘cut of the profits’ is quite ambiguous. Do I need to get some sort of solid contract in place for this? —> stating terms and conditions that reflect when and how I should be paid?)

I’d really appreciate any advice you can give me, and if you’ve had any experiences with this situation! I've included a poll to see quantitatively which people recommend, but it'd be very helpful to gather qualitative advice.

Thanks,
Rich

 

Well, if you need the money then do the hourly rate but if you don't need it but it would be nice then go the 20% cut.

I would go for the 20% cut personally

 

(Profits are never 100% disclosed, so it's safer to go hourly rate)

 

Royalty (i.e. cut of profits) schemes will generally screw you over. Basically they risk nothing at all and they get your work regardless (if it fails to make profits, as these things are likely to, they don't have to pay you a penny).

I'd go for the flat rate paid up front.

 

Flat rate is better. A lot less risk.

1.99£ * 0.7 ( 30% apple cut) = 1.393 * 20% = 0.2786
Flat rate = 100 hour * 20£ = 2000£

You need to sell 2000£ / 0.2786 = 7178 Unit with a profit cut to earn more than a hourly rate.

If your target is only medical student with iphone in UK, you will probably be lucky to sell this amount of unit.

The other solution is to ask for a reduce plate rate + reduce cut in profit ( 15£ + 5% ).
Like that, you won't have any regrets is the app if it's a big hit.

For the cut in profit you need to ask an access to sales data (though itune connect or other tool).

 

I'd go for the flat rate.
95% of people who release something on the app store believe their app will sell amazingly with their 'marketing strategy'.

If you go for the cut, I'd suggest getting a formal agreement in place. The agreement should define their responsibilities and your responsibilities in detail.

So if they have this 'marketing strategy' in place, get it on paper, how much will be spent on it, where will the product be marketed etc.
Estimated target market size etc.

If they don't share this info or are very vague rather take the hourly rate.

 

If they are offering you that kind of flat rate knowing they could be investing a few thousand dollars they must be confident to know they will make sales. Otherwise they are idiots blowing their money and not knowing what they're doing, in which case who knows?

 

Not neccessarily. Just because a business invests money into something they think will make sales.. doesn't mean they will make sales.

That's kind of saying, if you start a business and invest in it.. it will be a success.

 

right but they are dedicated to make it.
If you pay for the application by offering a 20% share on hot air, there is no need for them to get it right, they lack the financial incentive to recoup the investment

 

The applestore are full of people thinking they will become rich with their first app.

Even if they have a marketing plan, they haven't any experience on what they are doing (for a the small target audience they have, I would personnaly charge more than 2£ for the app to be able to make any kind of profit)

 

If you don't really need the money, why not do a split? Like $10/hr. and 10%. If they have never released an app before it is extremely unlikely that they have a "solid marketing plan". But if you believe in the product and the money is not critical, why not take some risk?

However, I would try to base royalties on something more quantifiable than "final profits". Who knows what expenses they may include to come up with that figure. Try to get a deal based on a percent of the app store revenue.

 

For me its always the hourly rate.

 

Have to agree with the consensus, go for the flat rate.

Though 100hrs is only two weeks development time, that seams very lite for an application.
How complex is it?
How many challenges do you expect to face?
Assuming since you are posting on Unity forum, its going to be 3D, so who are providing the assets?
Is there a schedule in place for the assets? Will you end up tidying up the assets, messing about with shaders in Unity to make it look nice?
What about putting it up on the App store? Is that part of your contract? Have you done that before?

Obviously if you are sure its 100hrs and £2000 is acceptable for that, then take the flat rate.

Nice breakdown, always good to have some cold hard numbers, but of course it may be even worse than that since its going to be of the 'net' profits (final profits in the OP), which is another reason why percentage of profits can be risky or even worthless. To be honest you could probably spend a few thousand getting an air tight contract in place for profit share, so its just not worth it.

 

Go for the hourly rate. This app will need more work then they expect and they are new to development. So, take the work as a consultant - and hope they want it to continue to grow.

Gigi.

 

it's a no brainer: hourly rate.

 

So if Adidas asked you to create them a new logo, you would do it for 250$ or would you do it for 0.01% or whatever revenue?

Its not a no brainer, you have to take into account outcome prospects.

 

Yes it is, because of the context he gave ^^. He is not writing an app for Adidas...

 

Argument withdrawn. heh

 

Bit of a contradiction there?

 

Not really, I always choose the hourly rate, But it doesn't means its a no-brainer.

No doubt ill do some royalty work eventually but everything I have done has been payment.

 

yo Charlie, why flaming me? We know it's a no-brainer from what OP wrote in the first post.

May I dare ask you playing my LITE game and be good gossip-forum friends again??

http://itunes.apple.com/us/app/rush-breaker-free/id492109849?mt=8

 

Hahaha, Ill grab it later :') Shameless plug!