I want to consign my design to a manufacture to be produced.
I want to know what percentage of the selling price I should get from the manufacture as a loyalty agreement need to be signed with the manufacture?
And how to avoid that the manufacture sell the products stealthily, which I could not get the actual loyalty fee?
Any one has that kind of experiences . pls share it out, thanks much!
Depends on the type of product. If it is a one off, or low volume product it is significantly different from a high volume product.
If you are talking 100K units or more, I would imagine you won’t be able to get more than 3% Gross. If your product will change the world, I am sure you have more room for negotiation.
FYI, it’s called a “royalty”. As mentioned, the rate just depends, both on industry and volume. Could be as low as 1%, or even 0.5% for some things. As for the manufacturer being dishonest, you just have to work with people you can trust. There’s really not much you can do to verify actual sales data. Most companies have a lot of people working on some kind of percentage (designers, agents, sales people), and most companies pay them honestly. Life’s too short to be working with thieves.
thank you two.
I thinkwe designers at least get 10-20% Royalty fee.
we do lots work on designs and get little payback? let others make big $$$
10-20% royalty fee? % of what? where can i sign up for a deal like that?
I dont youll ever see % royalty of sales at such a high number more like 2% +/-1 as others have mentioned, I would venture.
In general, outside of special industries and famous brand name designers, I do believe that however, in general, royalty schemes are not often the case. Design work is really not that expensive and most companies would much rather throw some cash out up front than deal with the hassle and accounting of paying later. Design is usally just part of the overhead top line, like tooling investment (which is though sometimes amortized) or marketing.
R
Do the math for a second…
If you designed the next best selling widget that sells 1,000,000 units. You get a 3% royalty fee and the product sells at $100…that’s $3M dollars!
The more likely scenario is that you patent a good idea, a corporation will buy the patent off of you for a lump sum (I have seen ~$100K USD). Then you will get a 0.1% - 3% royalty on top of that.
Pretty damn good ROI.
Besides, if its so easy to make money selling products everyone would do it. There is a HUGE up front investment to produce any product. Don’t get ahead of yourself with the importance of the “designer”.
If you think your work is worth 10-20%, you’re not going to be designing products professionally. 20% is quite a bit more than most companies’ net profit. You’re not putting up any capital or taking any of the risk, and you’re not paying the interest on loans. You’re not building and operating a factory, you don’t have a warehouse, you’re not handling distribution, support, or marketing. You’re not paying the sales commissions. You’re probably not going to Asia and getting the factory up to speed, and you’re not paying for the QC people. You don’t carry the product liability or receivables insurance.
And like it or not, there are a lot of people with good ideas, and a lot of those ideas are going to be better than yours, no matter who you are.
A modestly successful furniture group with a mid-sized manufacturer/importer can easily sell $2-3 million in a year. Get a few of those and even at 1.5% you’ve got a nice income. And the best part is, the royalty keeps coming as long as long as the stuff keeps selling.
Exactly.
10%-20% is the ross, not the net…
see it this way,
selling price : $100(usually the manufacturers get 30-40% ross margins after paying off all costs)
SO designer just share the 1/3-1/2
So does thee designer invest 1/3-1/2 of the mold costs. How about handling 1/2 to 1/3 of the sales and distribution issues. Or better yet, paying 1/3- 1/2 of that class action law suit if something does go terribly wrong.
I’m not downplaying design’s contribution, and the importance of great design. I would just rather be paid up front (that way if it is a sales failure, or doesn’t make it to market, you still get paid by the way, you can’t eat future royalties) and focus on being a great designer. If the client did make a ton of doe off you, they will be back to hire you again and you will have the number to justify raising your rates.
If the client did make a ton of > doe > off you, they will be back to hire you again and you will have the number to justify raising your rates.
Ya, and when they come back and you raise your rates you will make some bucks!<badabing>
hahahaha…thank you folks, I will be here all night!
If you think that’s how it works, you’re not going to be very busy. You also might want to read up on the difference between gross and net. What you have left over “after paying off all costs” is net. Gross = sales - COGS.