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I'm New: Is it possible to pay an employee based on profit percentage?

by Scuderia
15 replies
I want to make an app. I can give all of the plan and algorithm to the software engineer.
The thing is, that software engineer are extremely expensive. Developing an app can cost at least $10,000.
Is it possible to give the software engineer 49% of the profit I make instead of paying him per hour?
#based #employee #pay #percentage #profit
  • Profile picture of the author kawizx62003
    Thats up to him and you. But not if you hire him as an employee. Then you need to make sure to follow min wage rules and all other rules.
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    • Profile picture of the author vansy
      Exactly! That's the main thing that you should follow, the minimum wage rule and all other rules related to the employee.
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  • Profile picture of the author RogozRazvan
    It depends on your reputation.

    If you have a reputation of making money in a field, then you can work something out. However, if instead you never published anything and never showed any amazing results, few people will accept. After all, he's taking all the risks - doing the work for what may pay or not.

    Plus, the potential for pay needs to be a lot higher than the flat fee. After all, he's taking a risk to earn more, not just as much as he would by working in a freelancer mode.

    It comes down to you, to how you negotiate and to how trustworthy you are.
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  • Profile picture of the author agmccall
    You can offer whatever you want. It is what the developer accepts that matters.

    al
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  • Profile picture of the author tomham
    if you hire him as "employee" you'll be liable for FICA, FUTA, and others.
    Hire him as an independent contractor, then co-sign whatever agreement you both come to.
    You might want to set up a joint account for the proceeds, too.
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  • Profile picture of the author Sid Hale
    What do YOU bring to the table?


    Originally Posted by Scuderia View Post

    I want to make an app. I can give all of the plan and algorithm to the software engineer.
    The thing is, that software engineer are extremely expensive. Developing an app can cost at least $10,000.
    Is it possible to give the software engineer 49% of the profit I make instead of paying him per hour?
    You want someone else to invest their time/effort to the tune of ~$10,000, and then to give you 51% of any profits.

    Why would anyone with the skillset needed to create that product want to give you anything at all? He/she doesn't need you.
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    • Profile picture of the author JohnMcCabe
      Originally Posted by Sid Hale View Post

      What do YOU bring to the table?

      You want someone else to invest their time/effort to the tune of ~$10,000, and then to give you 51% of any profits.
      Legitimate question, and one which you'd best have a darn good answer for if you want to do a joint venture like this.

      Originally Posted by Sid Hale View Post

      Why would anyone with the skillset needed to create that product want to give you anything at all? He/she doesn't need you.
      I've met many competent coders who would need someone who could conceive and outline a profitable app, as well as provide the "front of the house" functions like sales and marketing.

      What the OP is proposing isn't unreasonable, assuming that he can keep up his end of the bargain. It does sound like a mighty big assumption, though, based on the way he worded the question.
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      • Profile picture of the author Sid Hale
        This is true enough,

        Originally Posted by JohnMcCabe View Post

        I've met many competent coders who would need someone who could conceive and outline a profitable app, as well as provide the "front of the house" functions like sales and marketing.
        but...

        just as there is a very broad range of "internet marketers" (adsense marketers, affiliate marketers, product creators), there is also a very broad range of "coders".

        Typically, the level of person you are talking about develops code to "spec". Someone else (i.e. the OP) decides what the product will be... what features will be included, what interfaces are needed, etc.

        In other words, the developer is expected to "code to spec", and will typically expect to be paid for delivering a solution that meets that spec.

        Someone else has already decided the product features, identified the target market, and (hopefully) estimated the market potential of the product they have defined.

        The problem is that the developer (especially one who just considers themselves a "coder") isn't someone who would be prepared to incur that level of cost, with no guarantees. Especially when someone else ultimately owns the product.

        Maybe I read the OP wrong, but it sounds to me like he has an idea... and not much else.
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    • Profile picture of the author Splatterfox
      Originally Posted by Sid Hale View Post

      What do YOU bring to the table?




      You want someone else to invest their time/effort to the tune of ~$10,000, and then to give you 51% of any profits.

      Why would anyone with the skillset needed to create that product want to give you anything at all? He/she doesn't need you.
      Exactly that.

      The sad truth is that many many people rely solely on people willing to do hardwork on a commission basis.

      As long as you cannot put anything significant (!) to the table, I can guarantee you will NEVER find a capable programmer doing what you expect. Just an example: a friend of mine recently paid $30,000 for a website script to a Russian programmer who is a true expert. Even though they knew each other and worked together before, he would never be able to convince him of a 100% profit based payment. Why? Because the risk of failing and investing weeks or months of hard work is just too high. Besides the fact that the other person has to pay his bills as well.

      The whole thing looks different if you can show proof of significant results or skills yourself. Maybe you came up with a successful app in the past that recently sold for a few hundred k. Maybe you are an excellent marketer being able to rank a brand new app in the toplists quite rapidly because both your app idea and marketing strategy are great.

      As long as this is not true for you, don't try to find someone doing this kind of work for you on a profit share basis.
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  • Profile picture of the author Tesslady
    How can you assure the software engineer that the amount he can get from the 49% deal is bigger and better than if you pay him on an hourly basis?...

    For sure, that's what he's gonna think... But if you are looking for ways to pay lower without being unfair to the other party, then hear what he has in mind.

    Good luck.
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  • Profile picture of the author Pinkysoll
    Banned
    It's possible to pay your employee based on profit sharing, but how can you assure him that he's going to get more than opting for the hourly pay?...

    Make some arrangements with him, maybe he has something in mind that is fair for both of you.
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  • Profile picture of the author BradVert2013
    To make the software engineer an employee you'd need to pay the applicable minimum wage and taxes. You could hire the software engineer on as an independent contractor. But honestly, no one in their right mind would accept these terms. If I'm going to do work for a client, there's a minimum amount that they'll have to pay for my services. Waiting for a client to turn a profit just to get paid doesnt pay my bills or put food on the table.
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  • Profile picture of the author EPoltrack77
    Id say you answered your own question in the same sentence that you asked it in. Why not? That is the key is outsourcing or hiring a staff to do the work for you that will free you up to do more important tasks or just to go play golf for the day.
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  • Profile picture of the author rudi
    You can advertise the position as paid by percentage. The chances are though to get anyone of any real skill that just will not cut it.
    You get what you pay for, everyone has to make a living and developing a half decent app will take a long time which they wont give any real effort for if they have no income
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  • Profile picture of the author Marx Vergel Melencio
    Originally Posted by Scuderia View Post

    I'm New ... Is it possible to give the software engineer 49% of the profit I make instead of paying him per hour?
    You said you're new. I'm assuming you meant you haven't made anything work in terms of marketing on the Web, since we're on an Internet marketing forum. So:

    >> How can you convince anyone to partner up with you just with the promise of 49% profits from whatever sales your concept app generates, when you don't have anything to back up your claims?

    Anyway, here's a realistic, no-guarantee option for you:

    >> Idea Stage Seed Funding <<

    Ask a competent software architect to review your specs and give you a quote. Test out your marketing skills by putting up your concept app for crowdfunding. Promote your crowdfunding campaign across user groups that would want to use the app. Tell them your pitch, enough to convince them to contribute to your project, such as giving them free copies and X% of whatever your app generates in sales for a year or so if they help you create the app and promote your crowdfunding campaign across their own professional and social networks; and

    >> Once you have enough funds, have the app created, then ask project contributors to test the app out. Once there aren't any bugs, release it to the general public, and also ask contributors to help you spread the word, since they'd also earn profits based on your mutually agreed revenue sharing percentages ...

    That way, you won't just have a chance to raise money for creating your app, testing it out and having others promote it once you release it to the general public -- You'd also get the chance to prove to yourself and to anyone that you can indeed drive interest to your app, enough for users to give you money for your ideas; and

    >> You could also get the chance to reach business angels who could most likely help you with idea stage seed funding for your other concepts ...
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