Discussion
After years of developmnet and months of fine tuning it looks like I am about to sign contracts to licence my web based invention.
The publishers sent me a 'standard' contract which gives me 12.5% of net receipts, a £5k signing fee and a lump sum of £25k when they have sold £150K, which I have politely rejected as I want 50% of all net receipts since all they are doing is sales and marketing ( I produce and maintain the web site which does the work).
Thing is, they have asked to meet at a neutral venue in a few weeks time to thrash out the deal. I am hardly an experienced negotiator but I think 50% is a generous position on my part but at the moment I have just said that I wanted a strategic partnership rather than a simple licence fee. One of their staff told me quietly that they had met with potential customers who were frothing at the mouth at the prospect to getting their hands on the product and the board were excited to have the product. Makes me feel I am in a prety strong position as I have a product they really like and want and for which they think they have waiting customers.
Any tips on negatition appreciated (already paranoid thinking that my 'friendly employee' giving me the inside track might be a set up to get me to want the product with them raher than a competitor).
1. Take along an experienced negotiator. Many solicitors offer this service, but it needn't be a lawyer.
or
2. Go in, say that you have no experience in negotiating, so you are going to make your 'best and final offer' upfront. Let them respond to this pitch (in case what they say affects proceedings) and then lay it down.
or
3. Have a go at negotiating. Laugh at their offer and say that you'll let THEM have a 25% cut of income; you're the inventor, the ongoing manager and brains behind the outfit. They are simply a distribution pipeline and are ten-a-penny.
ETA
In all scenarios, be prepared to 'walk'. It is ALWAYS an option, though you should consider the impact it will have on your business and have a 'Plan B' ready.
or
2. Go in, say that you have no experience in negotiating, so you are going to make your 'best and final offer' upfront. Let them respond to this pitch (in case what they say affects proceedings) and then lay it down.
or
3. Have a go at negotiating. Laugh at their offer and say that you'll let THEM have a 25% cut of income; you're the inventor, the ongoing manager and brains behind the outfit. They are simply a distribution pipeline and are ten-a-penny.
ETA
In all scenarios, be prepared to 'walk'. It is ALWAYS an option, though you should consider the impact it will have on your business and have a 'Plan B' ready.
Edited by V8mate on Thursday 9th October 22:04
Is it a exclusive deal that you are signing? Or can you approach other marketing channels? If is it an exclusive make sure they have exacting reveune targets, within very specific timescales (and geographies)... with very clear break clauses involved. And of course with an exclusive, you should get a higher percentage of revenues/bounties/one-off payments/licence fees than a non-exclusive deal.
(If it is a non-exclusive, then would be interested to hear more on your invention/product.....!)
Cheers
D
(If it is a non-exclusive, then would be interested to hear more on your invention/product.....!)
Cheers
D
Minnsy said:
Is it a exclusive deal that you are signing? Or can you approach other marketing channels? If is it an exclusive make sure they have exacting reveune targets, within very specific timescales (and geographies)... with very clear break clauses involved. And of course with an exclusive, you should get a higher percentage of revenues/bounties/one-off payments/licence fees than a non-exclusive deal.
(If it is a non-exclusive, then would be interested to hear more on your invention/product.....!)
Cheers
D
Quite hard to sell 'rights' to overseas territories with a web product (which by its nature is global), unless you set up completely different sub-domains which can differentiate between user access locations and payments styles , e.g. in the way iTunes does.(If it is a non-exclusive, then would be interested to hear more on your invention/product.....!)
Cheers
D
V8mate said:
Minnsy said:
Is it a exclusive deal that you are signing? Or can you approach other marketing channels? If is it an exclusive make sure they have exacting reveune targets, within very specific timescales (and geographies)... with very clear break clauses involved. And of course with an exclusive, you should get a higher percentage of revenues/bounties/one-off payments/licence fees than a non-exclusive deal.
(If it is a non-exclusive, then would be interested to hear more on your invention/product.....!)
Cheers
D
Quite hard to sell 'rights' to overseas territories with a web product (which by its nature is global), unless you set up completely different sub-domains which can differentiate between user access locations and payments styles , e.g. in the way iTunes does.(If it is a non-exclusive, then would be interested to hear more on your invention/product.....!)
Cheers
D
it's much easier to do this now. The site can recognise where an IP is geographically and present the visitor with the site which is appropriate, Reseller 1, 2, 3 etc., there will be a percentage of vistors whose IP location is unknown, usually far less than 20%, these can be equally spread between all the sites.
This is how Google gives you the UK version whn you go to .com or french when in France etc.
Anyhooo, what is this online product? if it's already built and done no harm in showing us.
Brown and Boris said:
After years of developmnet and months of fine tuning it looks like I am about to sign contracts to licence my web based invention.
The publishers sent me a 'standard' contract which gives me 12.5% of net receipts, a £5k signing fee and a lump sum of £25k when they have sold £150K, which I have politely rejected as I want 50% of all net receipts since all they are doing is sales and marketing ( I produce and maintain the web site which does the work).
Thing is, they have asked to meet at a neutral venue in a few weeks time to thrash out the deal. I am hardly an experienced negotiator but I think 50% is a generous position on my part but at the moment I have just said that I wanted a strategic partnership rather than a simple licence fee. One of their staff told me quietly that they had met with potential customers who were frothing at the mouth at the prospect to getting their hands on the product and the board were excited to have the product. Makes me feel I am in a prety strong position as I have a product they really like and want and for which they think they have waiting customers.
Any tips on negatition appreciated (already paranoid thinking that my 'friendly employee' giving me the inside track might be a set up to get me to want the product with them raher than a competitor).
From what you have mentioned about your product on previous threads, I'd get my company to do the sales and marketing job at 50%!The publishers sent me a 'standard' contract which gives me 12.5% of net receipts, a £5k signing fee and a lump sum of £25k when they have sold £150K, which I have politely rejected as I want 50% of all net receipts since all they are doing is sales and marketing ( I produce and maintain the web site which does the work).
Thing is, they have asked to meet at a neutral venue in a few weeks time to thrash out the deal. I am hardly an experienced negotiator but I think 50% is a generous position on my part but at the moment I have just said that I wanted a strategic partnership rather than a simple licence fee. One of their staff told me quietly that they had met with potential customers who were frothing at the mouth at the prospect to getting their hands on the product and the board were excited to have the product. Makes me feel I am in a prety strong position as I have a product they really like and want and for which they think they have waiting customers.
Any tips on negatition appreciated (already paranoid thinking that my 'friendly employee' giving me the inside track might be a set up to get me to want the product with them raher than a competitor).
What you are offering is more than fair.
My tip? Talk to someone else.
Edited by JustinP1 on Friday 10th October 00:37
JustinP1 said:
Brown and Boris said:
After years of developmnet and months of fine tuning it looks like I am about to sign contracts to licence my web based invention.
The publishers sent me a 'standard' contract which gives me 12.5% of net receipts, a £5k signing fee and a lump sum of £25k when they have sold £150K, which I have politely rejected as I want 50% of all net receipts since all they are doing is sales and marketing ( I produce and maintain the web site which does the work).
Thing is, they have asked to meet at a neutral venue in a few weeks time to thrash out the deal. I am hardly an experienced negotiator but I think 50% is a generous position on my part but at the moment I have just said that I wanted a strategic partnership rather than a simple licence fee. One of their staff told me quietly that they had met with potential customers who were frothing at the mouth at the prospect to getting their hands on the product and the board were excited to have the product. Makes me feel I am in a prety strong position as I have a product they really like and want and for which they think they have waiting customers.
Any tips on negatition appreciated (already paranoid thinking that my 'friendly employee' giving me the inside track might be a set up to get me to want the product with them raher than a competitor).
From what you have mentioned about your product on previous threads, I'd get my company to do the sales and marketing job at 50%!The publishers sent me a 'standard' contract which gives me 12.5% of net receipts, a £5k signing fee and a lump sum of £25k when they have sold £150K, which I have politely rejected as I want 50% of all net receipts since all they are doing is sales and marketing ( I produce and maintain the web site which does the work).
Thing is, they have asked to meet at a neutral venue in a few weeks time to thrash out the deal. I am hardly an experienced negotiator but I think 50% is a generous position on my part but at the moment I have just said that I wanted a strategic partnership rather than a simple licence fee. One of their staff told me quietly that they had met with potential customers who were frothing at the mouth at the prospect to getting their hands on the product and the board were excited to have the product. Makes me feel I am in a prety strong position as I have a product they really like and want and for which they think they have waiting customers.
Any tips on negatition appreciated (already paranoid thinking that my 'friendly employee' giving me the inside track might be a set up to get me to want the product with them raher than a competitor).
What you are offering is more than fair.
My tip? Talk to someone else.
Edited by JustinP1 on Friday 10th October 00:37
It is a very, very niche market place. They already sell to the target audiences, certainly more widely than their competitors and are part of a EU wide company expanding in Eastern Europe (they already have offices in German, France, Hungary, CZ, Switzerland) and they opned in the Uk by buying up a successful UK company and then expanding it. There are probably only 2 or 3 companies in their specific market in the UK and they have outlets into sectors other competitors cannot reach because they already sell into researchers, academics, public institutions etc whereas the competitors are mainly selling private sector. These are all things no doubt they will remind me of.
I have told them I want a marketing plan drawn up and sales targets with a break point if they fail to meet targets. I had already done some of this, they seemed surprised until I told them it was a safety net in case we couldn't reach agreement. I think that told them they wee not the only fish in the sea, alebit they are probablythe bigest fish. They rang late yesterday apologising if the standard 12.5% contract had insulted me!
As for taking someone with me to negotiate? I think they may see that as unusual in the sector as the product owners and the publishers are 'professional' rather than business types. I already have a product with them on a simple royalty basis, so we do have an existing relationship and they seem honorable people (the contract includes the rights to inspect their books every quarter when royalties are due). I met their European CEO a few months ago and there was nothing flash or worrying about him; solid, successful, clear about hat he wanted. All good signs for me.
I have reserved the wider rights (this deal is UK and EU) because we have issues selling in the US as our legal advice was that selling there without a detailed US legal advice would be risky as there is a similar product. They know this.
I'll be honest and say that they have a better position than our company in your niche. Mine is more sales and marketing to public and educational sectors rather than private. Thats not to say we couldn't do it though.
If you are set on working with them, I wouldn't meet face to face at all at this stage. When you do that, you are psychologically agreeing and confirming to both parties that agreement is most likely going to be made - and there is a pressure to do so.
The company are experienced and put their cards on the table to set down a psychological and bargaining point 'anchor'. At the moment, you think that they value a 12.5% stake as a decent offer. Therefore when you come to the meeting table and they haggle from that point but eventually agree to double their offer you think you have got a great deal.
In effect their valuation might be that they would be happy to go to 40%. Compare the tactics of the above to if they had just offered you 25% straight off - you still would have wanted to go for more, and would most likely have got it.
My advice would be to not agree to meet. Also, if you think of the 'game theory', even if they have sent a decent negotiator, there is no way they will have the authorisation to quadruple their current offer over coffee somewhere. It is going to have to be referred back to another meeting - however if they have psychologically set themselves up for a 'result' it can make you look difficult.
I would keep everything in a letter. Let them get back to you with a higher offer. Then wait, think, and you write back with what you are looking for - a partnership at 50%.
If you are set on working with them, I wouldn't meet face to face at all at this stage. When you do that, you are psychologically agreeing and confirming to both parties that agreement is most likely going to be made - and there is a pressure to do so.
The company are experienced and put their cards on the table to set down a psychological and bargaining point 'anchor'. At the moment, you think that they value a 12.5% stake as a decent offer. Therefore when you come to the meeting table and they haggle from that point but eventually agree to double their offer you think you have got a great deal.
In effect their valuation might be that they would be happy to go to 40%. Compare the tactics of the above to if they had just offered you 25% straight off - you still would have wanted to go for more, and would most likely have got it.
My advice would be to not agree to meet. Also, if you think of the 'game theory', even if they have sent a decent negotiator, there is no way they will have the authorisation to quadruple their current offer over coffee somewhere. It is going to have to be referred back to another meeting - however if they have psychologically set themselves up for a 'result' it can make you look difficult.
I would keep everything in a letter. Let them get back to you with a higher offer. Then wait, think, and you write back with what you are looking for - a partnership at 50%.
I cannot help on the technical front but have been involved in quite a few very tough negotiations with some big companies.
All I would say is:
Be clear what you want in your own mind, know your break point and start higher than this. This allows you to move. No movement at all can frustrate the other party and you'll end up with nothing to negotiate with. If you are starting right at your break point (which I have seen people do) then you may as well send a proposal and invite a yes/no as you cannot move on any of the points.
As has been said, always have 'no-deal' as an option
Be prepared to be flexible and listen to proposals
Be prepared to be creative and offer want the other party wants / needs, but on your terms
If one area of the negotiation 'locks up' ie price, try and look at other ways areas of the negotiation, ie service levels, timings, exclusivity etc etc
I try to say 'no' only as a very last resort. If I am made an unreasonable demand, I'll put an unreasonable price on it.
And I guess the most important thing I'd say is understand EVERYTHING. Take nothing for granted. Even if it boils down to not fully understanding the wording of something being said - ask. Summarise and clarify things to ensure both parties agree on what is being proposed / agreed. Feel free to ask for times-outs if you need to get things sorted in your own mind and leave the room.
Experienced negotiators can use pressure to their advantage - it can cloud judgements and create tunnel vision - I'm sure many deal didn't look so good in the cold light of the next day due to making decisions under pressure.
To avoid this consider taking someone with you. Even if they are not a negotiator, just someone to make notes and not talk - that way they don't get drawn into the pressure of it. It's also good to have someone with notes so you can check your understanding on things.
Also, with your language always think <conditions before offers> “If you… then I…”
Good luck.
All I would say is:
Be clear what you want in your own mind, know your break point and start higher than this. This allows you to move. No movement at all can frustrate the other party and you'll end up with nothing to negotiate with. If you are starting right at your break point (which I have seen people do) then you may as well send a proposal and invite a yes/no as you cannot move on any of the points.
As has been said, always have 'no-deal' as an option
Be prepared to be flexible and listen to proposals
Be prepared to be creative and offer want the other party wants / needs, but on your terms
If one area of the negotiation 'locks up' ie price, try and look at other ways areas of the negotiation, ie service levels, timings, exclusivity etc etc
I try to say 'no' only as a very last resort. If I am made an unreasonable demand, I'll put an unreasonable price on it.
And I guess the most important thing I'd say is understand EVERYTHING. Take nothing for granted. Even if it boils down to not fully understanding the wording of something being said - ask. Summarise and clarify things to ensure both parties agree on what is being proposed / agreed. Feel free to ask for times-outs if you need to get things sorted in your own mind and leave the room.
Experienced negotiators can use pressure to their advantage - it can cloud judgements and create tunnel vision - I'm sure many deal didn't look so good in the cold light of the next day due to making decisions under pressure.
To avoid this consider taking someone with you. Even if they are not a negotiator, just someone to make notes and not talk - that way they don't get drawn into the pressure of it. It's also good to have someone with notes so you can check your understanding on things.
Also, with your language always think <conditions before offers> “If you… then I…”
Good luck.
JustinP1 said:
I'll be honest and say that they have a better position than our company in your niche. Mine is more sales and marketing to public and educational sectors rather than private. Thats not to say we couldn't do it though.
If you are set on working with them, I wouldn't meet face to face at all at this stage. When you do that, you are psychologically agreeing and confirming to both parties that agreement is most likely going to be made - and there is a pressure to do so.
The company are experienced and put their cards on the table to set down a psychological and bargaining point 'anchor'. At the moment, you think that they value a 12.5% stake as a decent offer. Therefore when you come to the meeting table and they haggle from that point but eventually agree to double their offer you think you have got a great deal.
In effect their valuation might be that they would be happy to go to 40%. Compare the tactics of the above to if they had just offered you 25% straight off - you still would have wanted to go for more, and would most likely have got it.
My advice would be to not agree to meet. Also, if you think of the 'game theory', even if they have sent a decent negotiator, there is no way they will have the authorisation to quadruple their current offer over coffee somewhere. It is going to have to be referred back to another meeting - however if they have psychologically set themselves up for a 'result' it can make you look difficult.
I would keep everything in a letter. Let them get back to you with a higher offer. Then wait, think, and you write back with what you are looking for - a partnership at 50%.
They are sending the two people they need to be able to authorise a deal, their head UK person and their business manager who has the contractual portfolio. I know that there is a precdent for a 50/50 split so I am not the first to ask for it and get it.If you are set on working with them, I wouldn't meet face to face at all at this stage. When you do that, you are psychologically agreeing and confirming to both parties that agreement is most likely going to be made - and there is a pressure to do so.
The company are experienced and put their cards on the table to set down a psychological and bargaining point 'anchor'. At the moment, you think that they value a 12.5% stake as a decent offer. Therefore when you come to the meeting table and they haggle from that point but eventually agree to double their offer you think you have got a great deal.
In effect their valuation might be that they would be happy to go to 40%. Compare the tactics of the above to if they had just offered you 25% straight off - you still would have wanted to go for more, and would most likely have got it.
My advice would be to not agree to meet. Also, if you think of the 'game theory', even if they have sent a decent negotiator, there is no way they will have the authorisation to quadruple their current offer over coffee somewhere. It is going to have to be referred back to another meeting - however if they have psychologically set themselves up for a 'result' it can make you look difficult.
I would keep everything in a letter. Let them get back to you with a higher offer. Then wait, think, and you write back with what you are looking for - a partnership at 50%.
We did have had an exchange of emails on the contractual detail and I think they accept that the 12.5% is the standard position when the developer basically hands over the idea for them to make operational, market and sell. They would normally have al the costs of developing the new web site, and all the hard copy printing if it wasn't a web based product. We met earlier this year and agreed that practically, for them to simply replicate the web site we already had up was a waste, and their EU platform couldn't cope with the new product anyway. Therefore effectively I have developed the complete product, and their task will be to market and sell it. I will still have all of the web site management and maintenance to look after.
I would obviously prefer to work with these people, but bottom line is I keep 50% or walk. I have spent about £40k in hard cash and spent all the time between other work on this product for the past 2 or 3 years and they know that. The points I can give a bit on was that I wanted also to be able to generate additional commission in just the way their sales staff do as I have a wealth of contacts within new sectors which they don't have (including getting senior advisor to one organisation who could potentially buy 50,000 units a year at £6.40 to let me demonstarte the product and agree to carry out an evaluation). I know they pay re-sellers 10-15% commission so, if I can sell them bulk in markets they would struggle to get into, I think I deserve part or all of the commission they would normally pay to others.
They expect me to support the product with a continuing research programme, go to the right conferences and present/defend the technical issues, show up at meetings with major buyers to wave my qualifications and experience at them as needed etc.
The goal of the discussion has to be an outcome where everyone makes money, if by sticking to 50% it makes it economically unattractive to the other player, they won't do the deal.
If you understand them correctly and know the industry you should have some assumptions about what is really reasonable.
But, if you make it too difficult for them to buy your service then they can make it (as you said for a relatively small fee @£40K and probably in a short space of time).
They'll take a risk that you might sue them if they infringe any intellectual property rights you may have, but if they're bigger than you they'll just keep you tied up with lawyers until you run out of money. I'm not saying drop your pants for them, but understand the risks and alternatives that are open to them - very rarely is something that's useful truely unreplicatable.
If you understand them correctly and know the industry you should have some assumptions about what is really reasonable.
But, if you make it too difficult for them to buy your service then they can make it (as you said for a relatively small fee @£40K and probably in a short space of time).
They'll take a risk that you might sue them if they infringe any intellectual property rights you may have, but if they're bigger than you they'll just keep you tied up with lawyers until you run out of money. I'm not saying drop your pants for them, but understand the risks and alternatives that are open to them - very rarely is something that's useful truely unreplicatable.
Windsorphil said:
The goal of the discussion has to be an outcome where everyone makes money, if by sticking to 50% it makes it economically unattractive to the other player, they won't do the deal.
If you understand them correctly and know the industry you should have some assumptions about what is really reasonable.
But, if you make it too difficult for them to buy your service then they can make it (as you said for a relatively small fee @£40K and probably in a short space of time).
They'll take a risk that you might sue them if they infringe any intellectual property rights you may have, but if they're bigger than you they'll just keep you tied up with lawyers until you run out of money. I'm not saying drop your pants for them, but understand the risks and alternatives that are open to them - very rarely is something that's useful truely unreplicatable.
They won't try the copyright route because I have the scoring algorithim! Alos they have seen the legal advice I got which clearly shows anyone in the UK following would have to strat from scratch (I hope).If you understand them correctly and know the industry you should have some assumptions about what is really reasonable.
But, if you make it too difficult for them to buy your service then they can make it (as you said for a relatively small fee @£40K and probably in a short space of time).
They'll take a risk that you might sue them if they infringe any intellectual property rights you may have, but if they're bigger than you they'll just keep you tied up with lawyers until you run out of money. I'm not saying drop your pants for them, but understand the risks and alternatives that are open to them - very rarely is something that's useful truely unreplicatable.
There's been some good and bad advice on this thread. I think every negotiation is different and having someone on your side who is experienced can make a massive difference.
I know someone who would be able to assist you getting a good deal, if you want to get in touch I can put you in contact with him.
I know someone who would be able to assist you getting a good deal, if you want to get in touch I can put you in contact with him.
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