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Andy Brice
Successful Software

Doug Nebeker ("Doug")

Jonathan Matthews
Creator of DeepTrawl, CloudTrawl, and LeapDoc

Nicholas Hebb
BreezeTree Software

Bob Walsh
host, Startup Success Podcast author of The Web Startup Success Guide and Micro-ISV: From Vision To Reality

Patrick McKenzie
Bingo Card Creator

Who knows how to calculate a license upgrade?


I'm looking for the best practice how to answer a quote for an existing customer that wants to upgrade from license A to license B.

This is the situation:
9 months ago, my customer purchased a perpetual node-locked license. This means he paid X for a perpetual license (he will pay and 0.2X for support & subscription starting from the 2nd year).

Now my customer wants to upgrade to a perpetual *floating* license, at the cost of 4X (one floating license = one node-locked license). Since he's already used the license for 9 months, I'm trying to think how to calculate this proportions.

I'm OK with this upgrading, yet I'm trying to figure out how to calculate this upgrading. Is there any known formula?

Thank you!
Mosh Send private email
Monday, November 10, 2014
Is it really any more complex that schoolboy maths to pro-rate?
Scorpio Send private email
Monday, November 10, 2014
Well it depends if you have a simple formula... please share your knowledge.
Mosh Send private email
Monday, November 10, 2014
It's not a calculation, it's a decision. You could calculate until you are blue in the face, taking pro rata costs of the software and the maintenance. You are going to get an answer somewhere between 3x and 4x.  I usually just pick a number on the generous side - say 3.2x. But it's your decision.
fisher Send private email
Monday, November 10, 2014
I probably miss something. How do you take prorated calculation of a perpetual license?
Mosh Send private email
Monday, November 10, 2014
Omg, i think it's be hard and i answer i dont know much a bouth this.
asyhadia Send private email
Monday, November 10, 2014
I take the difference and add an admin fee.
Scott Send private email
Monday, November 10, 2014
If you want math behind your decision, take the difference and recalculate support renewal date based on the value of support that has already been used.

In your case, assuming that support for the 4X license costs 4 * 0.2X = 0.8X/year:

 - 9 months spent on their current support plan that you value at 0.2X/year is 0.15X

 - (0.8 - 0.15) / 0.8 * 365 = 296.6 days

So the customer should pay 3X and get 297 days of support and updates instead of one year. If they pay at the 9 months mark, that is.

You can also do the above with a twist: tell the customer they'll get a full year of support if they pay quickly, say, by the end of the month or in less than 30 days. Don't forget to mention value explicitly (in the above example, 0.15X).

(Why not ask the customer to pay 3.15X and give them a year of support? Most likely, they won't pay immediately, hence invalidating your calculations.)
Dmitry Leskov Send private email
Tuesday, November 11, 2014
+1 Scott.  treat it like a simple exchange where they pat the difference. I would probably waive the admin fee if the time was less than 30 days but they clearly knew what they were doing and trying to save money.  So I would charge an admin fee as well to cover your time.
Richard J Send private email
Tuesday, November 11, 2014
Thank you all!
Mosh Send private email
Tuesday, November 11, 2014

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