Software Revenue Share Agreements: How They Work and What to Include

Quick answer: in a software revenue share agreement, one party licenses software and the other sells or embeds it, and they split the revenue it earns by an agreed percentage instead of (or as well as) paying a fixed fee. It works when both sides want to share risk and upside. The agreement must define exactly what counts as revenue, the share and any minimum, how revenue is reported and checked, when payments are made, and what happens to existing customers if the deal ends.

How revenue share works

The licensee sells the software or a product that includes it. Each period, they report the revenue, calculate the owner's share and pay it. The owner gets income without selling; the licensee gets the software without a large upfront cost.

Revenue share appears in white-label deals, OEM licensing, reseller programs and marketplace listings. It's one of the models compared in licence types.

When it fits

• For the licensee: when you want to launch without a large upfront licence fee and pay as you earn.
• For the owner: when a partner can reach customers you can't, and you're willing to share the risk for a share of the upside.
• Less suitable when revenue is hard to measure, for example when the software is bundled into a large service contract with no separate price.

Define the revenue being shared

Most disputes start here. Agree:

• Gross or net: if net, list every deduction: taxes, refunds, chargebacks, payment-processing fees, and nothing else.
• Which products and features the share applies to, if the software is part of a bundle.
• Discounts and free periods: whether the share is calculated before or after them.
• Currency and the exchange rate used.

Common structures

• Flat percentage of the defined revenue.
• Tiered: the percentage changes as revenue grows.
• Minimum guarantee: a fixed amount per period, with the share paid when it's higher.
• Upfront fee plus share: a one-time licence or set-up fee and a smaller ongoing share.
• Recoupable advance: money paid upfront and deducted from future shares.

An illustration: a licensee earns $20,000 in a quarter from the software, with a 20% share of net revenue. After $1,000 of agreed deductions, net revenue is $19,000 and the owner's share is $3,800. The figures are an example, not a recommendation.

Reporting, audits and payment

• Reports: monthly or quarterly, showing customers, revenue, deductions and the share.
• Payment timing: for example, within 30 days of the end of each period.
• Audit rights: the right to check the figures, how often, and who pays if a shortfall is found.
• Late payment: interest or the right to suspend the licence.

Term, exit and existing customers

• The length of the agreement and how it renews.
• Whether the share continues on customers signed before the end (a "tail" period).
• How long existing customers can keep using the software after termination.
• Exclusivity, if any. See exclusive vs non-exclusive licences.

Checklist

• Revenue defined precisely, with listed deductions.
• Share, tiers and any minimum or advance.
• Reporting period, format and payment deadline.
• Audit rights and late-payment terms.
• Support, hosting and updates: who does what.
• Term, termination, tail period and customer transition.

For source-code royalties and other structures, see source-code deal structures and licensing agreement clauses. This is general information, not legal advice; have a lawyer review the agreement.

On LicenseSaaS

Founders list software available on licensing, white-label and revenue-share terms, and buyers negotiate directly with them. Browse software or list your product for free.

Frequently asked questions

What is a fair revenue share percentage for software?

There's no standard figure. It depends on who does the selling, support and hosting, how much the software is worth on its own, and whether there's also an upfront fee. The side doing more of the work usually takes the larger share.

Should revenue share be based on gross or net revenue?

Either can work, but net revenue needs a precise list of what's deducted, such as taxes, refunds, chargebacks and payment fees. Vague deductions are the most common source of disputes.

Can revenue share be combined with an upfront fee?

Yes. Many deals combine a one-time set-up or licence fee with a smaller ongoing revenue share, or a minimum guarantee credited against the share.

How do audits work in a revenue share agreement?

The party receiving the share can usually ask for the underlying figures to be checked, typically once a year with notice. If an audit finds an underpayment above an agreed threshold, the paying side often covers the audit cost.