Reduced maintenance rate in exchange for profit sharing
I am just finishing up the first release of a fairly good sized site for a client. We estimate that the work to maintain and grow the site will go on at an intense rate for at least the next year. The contract has been paid in full and my client is offering me a combination of hourly rate (reduced) and profit sharing to stay involved. Do any of you have experience in a situation like this? If so how much did you discount your rate and what do you feel is a fair % of profits for the developer?
It really depends what type of site it is, but anywhere from 5-50% could be a fair share. Really, it depends on the amount of work you do and that amount of work in relation to the overall amount of work done.
So, for example, if you were working on Facebook, I'd say 50% would be fair because the only other work would be stuff like marketing and what-not.
However, if it is selling some retail merchandise online, I would say closer to 10% would be fair since a lot of work is being done offline.
As for a discount, it is whatever you are comfortable with. Just make sure that you are at least getting an amount equal to if you were working at the regular hourly rate with no profit sharing. I'd say somewhere between a 5-20% discount would be reasonably, depending on the share of the profits you are getting.
Really, it is all up to what you feel comfortable with though. Those are just some examples of what I would do in a similar position.
If you are 99% sure that their business will be VERY profitable, you'd be wise to accept a profit sharing deal for as much as you can get - the minimum being your real expenses. In exchange for that, you should earn at least 2 or 3 times the amount you would if you simply charged cash.
If you aren't sure about it, just take the money. Offering to accept future profit instead of money today is essentially investing into their business. So, you should ask yourself, 'would I invest CASH into this business?' - that's essentially what you'd be doing.