What are normal industry standard royalities to charge for a product design? I designed a small foldable product and a company is interested in producing it (first 3000 pieces aftwards maybe more)? Howmuch should I charge?
depends upon the merchant and expected numbers Could be 2 percent of cost to retailer or could be as high as 4 percent. Get it on cost to retailer because that is a more finite number one might gain with accounting.
i think the GENERAL product royalties ranges from 5-7% of net gained from retailer.
How do you calculate what the net gain to the retailer is?
Aren’t royalties normally paid by the manufacturer?
I mean unless you are Graves and the retailer is target that doesn’t sound normal to me.
I bleave 5% is average if they do all the work, fabrication, packaging, shipping etc. If you plan to make it yourself it should be much much more because you would be considered the manufacture and it would not be considered a royalty.
Just another tip.
Try to get paid in advance. Try to make them pay you a percentage of your royalties from projected annual sales of the product. This will ensure you’re not getting ripped off by doing a design and never get paid for it because you signed up for royalties but the design never goes into production. Put this in the contract! This way you at least will get paid something instead of a big zero.
Sometimes product will be held from production and finally manufactured five years later but they conviniently will forget to call you… there go your royalties. The good thing is that you have a good lawyer and your eyes open when you see your stuff out there.
Royalties can be a blessing. They keep designers honest, if you make a good design you will be paid for it. Unfortunately it’s also in the hands of your client and their marketing department. They can turn your design to gold or crap if they don’t understand what you did for them.
Base it on a percentage of net sales possibly minus taxes and freight.
Net ssales is what they invoice their clients.
Negotiate and define the terms. Some have stipulations like royalties after the first 10000 units for example…they recoup their investment first that way.
Or a back end guarantee like at least a certain number as minimum per year no matter how many they sell. Or they must do something with it in a certain period of time of they loose their license to sell it.
There are so many ways…it is what you can get in your negotiating.
thanks a lot for all the replies, this gives me a good idea!
for a novice, who and how do you find someone that can represent you in negotiating royalties and licenses?
are they called lawyers? agents? brokers?
Also, what do THEY charge for negotiating services? Is it an hourly or flat rate or they they take a percentage of the profits as well?
look in the yellow pages!