> Now they want to pay me in royalties, with nothing up-front, is this > a bad idea? I'll find it tough affordng it. Run, don't walk, for the exit. Companies that can't afford up-front money probably can't afford the marketing and sales costs either. It is also possible that they have no idea of the sales volumes they will see for the product. This means that all the development cost burden is on you. If they only sell a few, its really no big deal for them if they are paying just a royalty. It is a big deal to them if they fronted money and then it doesn't sell. The flip side is that the product is insanely popular. In this case, paying the royalty is basically a burden on each unit. If the product is successful, the company will eventually want to reduce product cost (this means you). At that point, they will hire someone that gets paid to do a new design (hopefully not a rip-off of yours) that they can then sell in place of your product. In terms of royalty payments - don't expect much. Although I hate throwing numbers around because there will be countless replies telling me they are wrong here goes nothing: Sells in shop for $250, means retailer purchased it from the manufacturer for about $125. The actual value is typically 45% to 65% of retail, depending on the track record for the product. Fast moving products demand higher compensation for the manufacturer, slower moving products require concessions from the manufacturer. The manufacturer's costs are basically 1/3 for the product, 1/3 for people and 1/3 for marketing/sales, again varying depending on the product. That leaves around $125/3 = $42 to build and test the unit. Even if you managed to be 10% of the actual product cost, that is only $4.20 per unit. And that doesn't even take into consideration the auditing costs to make sure your getting paid! Remember, you are carrying the NRE for the product, so if it doesn't sell well, its no real problem for them; if it does sell well, they can hire somewone to create an equivalent unit. Think about it. Let's say one engineer ($84,000 per year) working, let's say 6 months on the project would be $42,000. At the equivalent of the royalty payment of $4.20 per unit, the engineer will be paid for in $42,000/$4.20 = 10,000 units. You can adjust the numbers to suit local or foreign engineering costs and estimated development time (remember, they are mimicing (if not copying) your design, so development may be faster than yours). I suggest that you get paid up-front costs (at least to your breakeven point), then get a smaller royalty payment. If things go south, at least you're not in the hole. You must remember a simple point - Engineers don't get rich being engineers, they must morph into really good business people to make money. Ken klumia@adelphia.net ----- Original Message ----- From: "Edward Cooper" To: "Microcontroller discussion list - Public." Sent: Wednesday, July 19, 2006 1:47 PM Subject: [OT] Getting paid by royaltys > Dear group > > I'm doing a consumer audio appliance project, the concept, design, > and protos will be supplied by me, I'm looking around for > organisations that are want to brand and take on this product, there > will be significant costs involved in customising the product for > their requirements, and probably an exclusivity agreement. > > Now they want to pay me in royalties, with nothing up-front, is this > a bad idea? I'll find it tough affordng it. > What rate should I be asking for considering this product will sell > in the shops for $250-300 or so? > Should I ask for a up front amount, or should I bill them for my > time? Should I subtract this from the > royalties. > > I think this is a fantastic product and I hope it does well, but, I'm > not willing to 'give it away' > > Any ideas would be helpful - I'm a tad clueless :) > > Cheers all > Ed > -- > http://www.piclist.com PIC/SX FAQ & list archive > View/change your membership options at > http://mailman.mit.edu/mailman/listinfo/piclist > -- http://www.piclist.com PIC/SX FAQ & list archive View/change your membership options at http://mailman.mit.edu/mailman/listinfo/piclist