I study computer engineering in Uruguay, currently studying 2nd-3rd year subjects.
I am about to start a java web app project with someone i know but i have no idea how much to charge him... This is a good opportunity for me since i need to learn more, i have never done something real(just projects for the university) and this is my chance, so i don't expect to charge much. Anyway, my idea was to charge a ridiculously low price when i finish the app but i also intend to own a part of the project(form a society with him), because i will need to keep working on maintenance and updates, bugs, etc. So as a salary i was expecting to own a certain % of the project.
-Is it normal or crazy to pretend to own a % of the enterprise for making the software and working on it afterwards?
-If it's normal, considering i will charge a little price when i deliver the app, how much % should i ask for(just throw me ideas, or give me examples of real cases please).
*it's a medium-large application, it will take me approximately 7 months to finish it, working maybe 4 hours a day.
*remmember i'm a student, so i am learning and maybe i'll make some mistakes and/or work slow, for that reason i can't expect to charge like an engineer does.
*he offered me a 2% of the incomes, i was expecting at least 10% but i have no idea about this.
*he will be in charge of the money, contacts, he had the idea, he will do the marketing, and he said he will hire a web designer to work on the graphical aspects of the app, so i dont have to worry about any of that, only about the application.
*the good thing about this project is that it has a good chance to work fine, he supposedly knows the right people and can make it work, i think it's a good idea that has a good chance to succeed.
So: do you think it's fair to get a 2% of the incomes in my situation, or should i ask for more?
Juan Juanita wrote:So: do you think it's fair to get a 2% of the incomes in my situation, or should i ask for more?
First: Welcome to JavaRanch Juan.
As to your question, my advice would be to get some cash as well. I don't know how badly you need money, or how much your friend has to offer; but startup companies are notoriously risky, so understand that whether you ask for 2% or 10%, you may well end up with x% of nothing.
An old friend of mine (also my ex-boss) once gave me a great piece of advice: Never expect your friends to do for free what they do for a living.
If your friend isn't actually paying you for the work you do, but simply promising "future income", he isn't actually paying you at all (and therefore isn't risking any of his own money). And furthermore, if he has his hands on all the purse strings, he could easily (and quite legally) start up another company when profits start to roll in, that has no obligation to you.
So, decide now: Are you a worker or an investor? If the latter, and you trust your friend, by all means work for a promissory note, but be sure to put a dollar figure on your contribution.
So, if you do 7 months work for 4 hours a day, that comes to about 600 hours. If you say that your time is worth $10 an hour, that's $6,000 dollars that the company (or your friend) owes you. And don't even start to think about income percentage until that debt is paid.
Remember, to pay you $6,000 if you agree to 2%, that means his company will have to have profits of $300,000. Do you think that's likely?
Isn't it funny how there's always time and money enough to do it WRONG?
Articles by Winston can be found here
And whichever option you choose - cash and/or shares in the business - talk to a lawyer and get it in writing. A verbal agreement isn't worth the paper it's written on. If your friend is serious about paying you for your work (and he will be paying you less than he'd have to pay an experienced freelance software engineer), then he shouldn't have a problem signing a contract to say so.
It also helps to get some amount of money in advance on a regular basis and deliver the project by breaking down the work into different parts accordingly.
If someone offers you only 2% of what they will make from your app, then either you should get ownership in that startup or decline to work under pay/obligation.