Ask HN: Tips for completing sale of side project?
I read a comment recently here mentioning a website[0] to sell side projects and decided to put an old baby of mine up there as I had no time to concentrate on it. Turns out there was a lot of interest.
Has anyone here completed a sale of a side project before?
- What was the process?
- Did you use escrow accounts?
- Any pitfalls to look out for?
The website isn't very helpful in this regard unfortunately so any advice appreciated.
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I have sold a couple of companies, not necessarily side projects, but the ideas are the same overall.
Easiest transactions are ones where you let a broker handle the details and take their commission, yes it eats some of your gain but it is well worth it to not waste time with people who will happily waste yours.
Outside of that, basic rules. You are selling essentially assets not really a company likely. So the typical transaction involves an asset purchase agreement with terms and conditions spelled out as to what you are selling, what you are promising, and what the sellers obligations and yours are. Biggest rule, nothing transfers to buyer until money is paid. You can use escrow services in two ways, first is they take the full amount of the purchase, once they have the money they tell you and you will transfer the assets to the buyer. You confirm with the escrow company you have done this and they confirm with the buyer they have received it. Again this is where it is best to have a defined asset purchase agreement and make it very detailed. Then one of two things happens, all the money is paid out to you (typical for small transactions) or 80-90% is paid out to you and the remaining % is paid at milestones over some time period, 3, 6, 12 months usually (commonly called a holdback). The holdback is usually only for larger deals though, > 500k usually. But I have heard some people wanting a hold back on smaller deals too.
Size of deal really matters as to terms. But you can find common asset purchase agreement terms online, just make sure they are enforceable in your Country/State.
Biggest pitfall IMO is a contract that isn't detailed enough and there is grey area for a seller or buyer to make unsubstantiated claims against the other party to try and gain the upper hand in the transfer of funds or assets. So always spell out all the details in the agreement. Even if the agreement is written by non-lawyers that is fine, at least in the US, plain english agreements can be enforced in courts. Just make them specific enough that it is clear what you are selling and what the buyer is getting and what they are paying for. I cannot stress this point enough, this is where almost every deal that has trouble starts.
If the deal is smaller, try and avoid any holdback and avoid any on-going services beyond getting them up to speed for 30 days or so. The more complex the asset or the higher the price tag the more you'll have to help but that should be built into the price. Don't be afraid of setting fair terms, but don't be unreasonable either. If you aren't sure what is unreasonable or fair ask a friend or someone for their opinion who isn't in the deal and see if they'd accept those terms from a stranger, and watch what their initial reaction is to the term. That'll help give you guidance.