New Independent Contractor, how much compensation to ask for...

[Sonata]

Going to make this as short as I can, will provide specifics if requested...


I'm an hourly wage employee making a product which my boss sells for $X. He's agreed to hire me as an independent contractor so I can work my own hours and control my own overhead (work from home) using my own resources although I will access the company's network from home. He'd like us to consider compensation after one month.

I estimate my margain as an employee over the past couple years has been 20%.

I'm going to ask my boss for 80% of each product I produce for him and he keeps the same 20% he has been earning. Is this fair? Can I reasonably expect he will agree to this or something close?

Also, if I am doing all the work using my own resources could this be considered a situation where I simply pay my boss 7-10% royalties for each product I produce?

Thanks!

[Freelancier]

If you're not providing marketing and sales help to sell the product, most resellers will demand 30-50% of the sale price of the product to resell it. So 20% seems low and who controls pricing? If him, you can find yourself squeezed.

What's your model to scale this beyond you just doing the work? Can you find a way to reduce your product cost so that your 80% means more than it does now? If not, aren't you locking yourself into a situation where you don't get a raise when you need one? What's your plan to increase sales beyond your one reseller?

[Sonata]

Thanks for the reply. Some specifics will answer those questions I think.

I'm a CAD drafter. I produce and maintain site specific "construction manuals", a minor part of the firm as opposed to the side producing permitted construction drawings. I can produce these manuals, from receiving an order to distributing the product to the buyer completely from home by myself with internet and network access, which I will have. My firm has done this for one buyer for about 15 years, me for 3. We get paid per request. I want to be an IC, work from home and have my earnings (and the firm's) tied to my effort. Overhead will be the cost of keeping my computer running and printing a ream of paper per month (and then taxes).

I hope and plan not to need more than the work from my firm to keep me busy. Also if it matters my boss and I have a good relationship, almost father/son in a sense, so we genuinely have eachother's best interests in mind. I'm about to start a family and can't help wanting to ask for the highest amount that is reasonable.

(and I am meeting with a lawyer tomorrow about IC vs. employee classification)