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Royalty Based Agreement for "Soft"Goods

PostPosted: July 14th, 2014, 10:51 am
by steppenwolf
My background lies mainly in the area of electronics and hardware products but I was recently approached to design some "soft"good products. The reason i am saying "soft"goods is because the products are about bags, briefcases and other accessories that will use "hard" materials. For this reason i think that i can better manage and realize such a project compared to traditional fabric or leather bags.

Anyway, i need to send to the client a contract and my fee and for this reason i need some advice from you as i think the field of accessories is a bit different than the one of hardware products.
I am wondering whether i should ask for a flat fee or for a (lower) fee and royalties. With royalties i had never before experience. The reason is that 10 products are a lot and the price may seem quite high for the client. Ideally I was thinking to propose both modes of payment/collaboration.

The main questions are:

1. For softgoods/accessories is there a "rule" for what % a designer is expected to ask? The products will be high-end, price range from 3 digits to 4, even close to 5, digits.

2. As i researched online, for softgoods/accessories they advise to ask for higher % than normal as these products usually have a short lifecycle and as such the time-frame to get some royalty fees is limited. Is this expected in the industry?

3. Supposing that a design is successful and the client takes the initiative to launch it in another color (that he chooses and it is not part of the colour schemes i have suggested) and extends its life-cycle. In this case, the product is considered as "new" and the client is not obliged to pay royalties or it is "obvious" that is based on my design?

These are some main questions i have. If you can share more info, you are more than welcomed! :-)


Re: Royalty Based Agreement for "Soft"Goods

PostPosted: July 21st, 2014, 9:13 am
by noahwangerin
I'm not in the soft-goods industry but I'll do my best to answer your questions-

The concern of charging too much, and fees vs royalties-
Always charge what you're worth, don't short change yourself. A freelancing friend told me "if people aren't negotiating with your first quote, you aren't charging enough." Fees are always safer than royalties, but of course royalties have that jackpot allure. Sure if you can do both and charge enough to pay the bills with the opportunity to make more down the road, that's pretty ideal. I'd say royalties depends largely on who you're working with. Do they have a successful track record of launching products, and a dedicated team to make it happen? Are they serious about it? Are you ok with putting in the work and not getting paid? Because that is a distinct possibility with royalties - other designers correct me if I'm wrong here, but I'd say getting paid on royalties is the equivalent of flipping a coin. 50% of products make it to market at best, and then their success there is a whole other story.

1. As far as I know there is no "rule" for anything. It's what your judgement is on the client.

2. That's a good point, soft goods are relatively easy to redesign and refresh. And depending on what it is it's a relatively saturated market.

3. I think this comes down to what you define in the contract. If you're working for royalties, make sure you have a solid contract before you start any work.

I'd say bottom line: charge what you're worth. Only go for royalties if you're ok not getting paid. Make sure you ask for enough royalties to make that gamble worth it. And if you love the idea behind the project and it sounds fun, you have nothing to lose, go for it!

Re: Royalty Based Agreement for "Soft"Goods

PostPosted: July 21st, 2014, 12:21 pm
by steppenwolf
noahwangerin, thanks for your insight. I 100% agree with what you say and most of your points were my main considerations. So, what i did in the end. I gave 2 options. The first one with a flat-fee and then another one with a kind of lower flat-fee and a % of royalties. In my mind i had this 2nd version as a kind of "discount" quote (if i get no royalties) with the potential though to become an even more profitable collaboration should the products sell well.
I do not think i would ever go for a 100% royalties agreement with no down-payment.
As you very correctly said, i hired a lawyer to compose a royalties agreement on top of the flat-fee agreement i already had.

Re: Royalty Based Agreement for "Soft"Goods

PostPosted: July 21st, 2014, 1:24 pm
I would have gone full rate + royalties, or full rate + X% increase. That way if you get the gig, you're at least getting what you're worth.