Royalties for consulting engineers
Royalties for consulting engineers
(OP)
Does any of the consultants here use royalties with clients?
There have been some product based opportunities come across my desk over the years, one of which was quite large, and I have not known how to implement a royalty based contract. Do you need to monitor your client for sales?
There have been some product based opportunities come across my desk over the years, one of which was quite large, and I have not known how to implement a royalty based contract. Do you need to monitor your client for sales?
RE: Royalties for consulting engineers
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RE: Royalties for consulting engineers
RE: Royalties for consulting engineers
If so,the "royalty" covers the incremental risk to your insurance, plus whatever additional support is provided with each build?
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RE: Royalties for consulting engineers
RE: Royalties for consulting engineers
RE: Royalties for consulting engineers
$2/unit seems extremely high, given the volume; that's $20k/yr, so is your insurance and technical support for just this product equivalent to $20k/yr?
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RE: Royalties for consulting engineers
RE: Royalties for consulting engineers
The converse is that you're suggesting increasing the technical risk, which, presumably, neither your customer nor their users would actually want. "Nicer" isn't necessarily synonymous with risk, per se.
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RE: Royalties for consulting engineers
RE: Royalties for consulting engineers
I suspect so as well. I had a client want me to create a design for a temporary welding shelter made from their scaffolding system that would be used by welders all over, in perpetuity. Turns out my insurance doesn't cover anything considered a "product". And I wasn't willing to deal with the hassle and perpetual insurance bump to address that. That said, your $2/unit sounds pretty darn attractive. And two parties can agree to pretty much anything legally if they want it badly enough.
As for policing sales volume, I can see how that might be a delicate thing to accomplish without ruffling feathers. Perhaps, at the outset, you could ask that you're clients accountant sign off on a record of annual sales each year. Frankly, I'm sure what else you would do short of hiding in the bushes and counting delivery trucks.
HELP! I'd like your help with a thread that I was forced to move to the business issues section where it will surely be seen by next to nobody that matters to me: http://www.eng-tips.com/viewthread.cfm?qid=456235
RE: Royalties for consulting engineers
No, the incentive to do your best in terms of good, efficient design is the desire to be hired again. If the client believes your design can be improved more than a tiny bit then they'll hire somebody else - happens all the time as consultants/contractors are notoriously lousy engineers. Unless a consultant owned the IP to a potential product, manufacturers would be nuts to offer royalties to a consultant as that ties their product and new IP to that specific consultant. In a nutshell, they cant fire you if your design is or becomes terrible. Even when another company/consultant owns IP a manufacturer needs, its generally considered a terrible business move to hire that company/consultant instead of simply leasing the IP and developing your product independently.
RE: Royalties for consulting engineers
1) Providing a level of design refinement consistent with what your client is willing to pay in fee and;
2) About what your competitors would be providing given the same fee.
Moreover, human nature just is what it is. Ditto for product development. "Products" always get more attention than prototypes (most every building ever).
HELP! I'd like your help with a thread that I was forced to move to the business issues section where it will surely be seen by next to nobody that matters to me: http://www.eng-tips.com/viewthread.cfm?qid=456235
RE: Royalties for consulting engineers
Its also possible to be paid a royalty without owning the IP.
RE: Royalties for consulting engineers
When expanding an existing product line, sure, the marketing folks often know exactly what they think the customer will buy. IME tho its pretty rare to get a decent scope of work when developing new product lines. Even at mega-corps, the marketing folks usually want the world with no concept of what tradeoffs will be necessary. All they typically know is what they can afford to budget and a vague description of the new product line. Ultimately, you either make them a segment leader with the first product or you get replaced and possibly blacklisted, hence the many adages about choosing your customers wisely.
Regardless, I believe you're significantly overvaluing your engineering vs their profit while underestimating the ease of improvement. Its easy to say "pull out all the stops" yet if the project was successful enough for them not to fire you then you're already going to be deep enough into diminishing returns for the project not to make fiscal sense to continue until the market changes significantly - years.
This isn't the civil world, its product design - DFMA mostly. In the CE sense of structural engineering you're dealing with very limited (mostly) local competition, your "product" is essentially a prototype with almost no opportunity for refinement or cost reduction, your safety factors are simply massive, and consequently most business models center around being the proverbial jack of all trades. In product development we don't have those luxuries nor is that a very sustainable business model.
RE: Royalties for consulting engineers
RE: Royalties for consulting engineers
If everyone is playing fairly, that can work out, but the customer can stiff you pretty badly, since it's fixed-price at the get-go, and they can scope creep to squeeze you. Then, they can simply not market your design at all to stiff you of the royalties.
TTFN (ta ta for now)
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RE: Royalties for consulting engineers
RE: Royalties for consulting engineers
THAT's why it's so rare; a bird in the hand, etc.
TTFN (ta ta for now)
I can do absolutely anything. I'm an expert! https://www.youtube.com/watch?v=BKorP55Aqvg
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RE: Royalties for consulting engineers
RE: Royalties for consulting engineers
This was something I was curious about in the real world. I kind of assumed you either need the ability to crack your clients head open if they cheat, or a good relationship so they don't. What kind of work did your dad do?
RE: Royalties for consulting engineers
TTFN (ta ta for now)
I can do absolutely anything. I'm an expert! https://www.youtube.com/watch?v=BKorP55Aqvg
FAQ731-376: Eng-Tips.com Forum Policies forum1529: Translation Assistance for Engineers Entire Forum list http://www.eng-tips.com/forumlist.cfm
RE: Royalties for consulting engineers
True, but it also both practical and fair to be paid a lump sum plus a royalty to cover the additional liability you are assuming as their production run expands. It is also possible that you hook up with a startup who is broke and unable to pay an initial fee and then the product gets big.
RE: Royalties for consulting engineers
the reticulation system. Instead of paying them to find the leaks, they took a percentage of the money saved from minimizing the leaks in the system. But this is in Africa, anything is possible.
RE: Royalties for consulting engineers
I love that. I file all of this under "value based pricing". Do you know what the percentage was and whether they made money?
We actually have similar type situations come up a lot - for example, a contractor needing to rip out say a million dollars worth of glass based on a conservative structural silicone calculation. How much is our fee worth if we can prevent them from having to rip it out? If I only charge $500k, I still saved them a half million bucks which ain't half bad.
RE: Royalties for consulting engineers
http://www.biax-fiberfilm.com/
RE: Royalties for consulting engineers
RE: Royalties for consulting engineers
Way too difficult to enforce. Everybody cheated.