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On Wed, 19 Jul 2006 22:56:50 +0100, Mike Harrison wrote:
>=A0On Wed, 19 Jul 2006 18:47:31 +0100, you wrote:
>
>>=A0Dear group
>>
>>=A0I'm doing a consumer audio appliance project, the concept, design,
>>=A0and protos will be supplied by me, I'm looking around for
>>=A0organisations that are want to brand and take on this product,
>>=A0there
>>=A0will be significant costs involved in customising the product for
>>=A0their requirements, and probably an exclusivity agreement.
>>
>>=A0Now they want to pay me in royalties, with nothing up-front, is
>>=A0this
>>=A0a bad idea? I'll find it tough affordng it.
>>=A0What rate should I be asking for considering this product will
>>=A0sell
>>=A0in the shops for $250-300 or so?
>>=A0Should I ask for a up front amount, or should I bill them for my
>>=A0time? Should I subtract this from the
>>=A0royalties.
>>
>>=A0I think this is a fantastic product and I hope it does well, but,
>>=A0I'm
>>=A0not willing to 'give it away'
>>
>=A0At the very least you should insist on an advance, i.e. royalties
>=A0on the first X units sold, and any exclusivity agreement should
>=A0have a clause that voids it if they fail to market/sell/make the
>=A0product in an agreed timescale so you are free to go elsewhere.
>
>=A0Royalty arrangements can be a pain, unless it's the sort of
>=A0situation where you can supply something like preprogrammed secure
>=A0devices to keep track of numbers.
>
>=A0A company with the most honest intentions can get behind/muddled
>=A0with paperwork, and without any independent means to track sales,
>=A0it puts you in a difficult position as you generally can't verify
>=A0that they are paying you correctly. Also, royalties are something
>=A0that don't fit well into some companies' accounting systems if
>=A0they're not set up for it, and again this can lead to confusion and
>=A0uncertainty over payment amounts etc.

I agree,
No matter what if you don't get what you agreed to in a timely manner all=
 rights have to
go back to you. NEVER NEVER compromise on this.

I made the same mistake, sort of, when I learned how by working with offs=
hore
suppliers/manufactures I could supply a product to the customer cheaper t=
han if
he contracted directly with offshore manufactures. This was Taiwan back i=
n the late 80's
I'd figure I could offer the best design and manufactured price so I
started to offer free use of my designs to tie up manufacturing rights.

However royalties or manufacturing rights, IF a customer can't afford to =
pay you AT LEAST
reasonable fee for you help. Even the equal of what would be paid to an e=
mployee, then
he can't afford to to invest in real production. He is using you to attra=
ct investors for HIS company.

IF he finds investors they will want to cut out any extra cost.
Most investors never want to pay royalties because it is too open ended.

Also unless you are manufacturing, you will never know what his sales are.

I only found one company is good as their word about  royalties. Fisher P=
rice Toys.

I have never heard of and good outcome of this type of agreement unless t=
he company
HAS money and everything is in place and is privately owned by the "hands=
 on" owner.

My 2 cents
Ray




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