I don't have much cash to work with and I am working on developing a mobile app. However, I want to find a good designer to work with. I don't want to give them equity but I do want to pay people for their work. Would you recommend promising (in writing) a profit percentage? If so, how much would this be?
Hi,
Yes, this is something that is fairly common.
Calculation: in order to calculate the % you should give, you need to understand how much is due to the designer for all their work, and how much your projected profits will be in the first 6 months/year. Then, you offer a % which should give the designer a little bit more than the value of their work during that 6 or 12 month period.
It is important that you define in the agreement/email, what the amount is - meaning that when the designer gets that amount, you stop giving them a % of profits.
I would also add a section in the agreement that states that should you decide to do so, you can pay them off the entire amount and stop making the monthly payments.
Lastly, make sure it is clear that they are only getting a % of the profits (not the income) and that they don't have any voting/decision rights.
Good luck
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Answered 4 years ago
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