Those of you who have successfully negotiated contracts with clients for royalties in addition to your project fees:

1. How do you track whether you are paid accurately?

2. Any tips on how to negotiate this type of fee structure?

While I've never structured such a deal myself it would seem that if you are you need consider:

1. Is this company accurately tracking sales now? If they aren't then I doubt they're going to suddenly become "expert" trackers just because they owe you some greenbacks. This criteria probably eliminates 99% of the businesses out there.

2. Is this company profitable now? If they aren't profitable then I would have to think the temptation to dip into your "pot of gold" would be very strong-- especially considering you have no way of tracking their sales with any sort of accuracy.

I heard John Carlton speak about this topic on an old Dan Kennedy Super Conference CD from the early 90's. Basically Carlton said that he needed to have a good feeling about the company in order to strike a royalty deal and then he would have contacts inside the company whom he would call to get an idea on how sales were doing.

Gary Halbert did royalty deals, but he was in total charge of marketing in many of those, so he probably had a much better hand on what the sales figures were of promotions he was involved in.

If you're dealing with Rodale or Nightingale Conant or Boardroom I'd have some faith in the numbers they were reporting-- everyone else? Not so much.

MCC,

I've pulled a few of my contracts and I'll try to keep it brief...

I have to speak in generalites, and the reason is that all of these types of contracts that I've been involved with have two parts:

Part ONE: Non DISCLOSURE/Non Compete (usually as a separate document referred to in the royalty agreement)

Part TWO: The royalty agreement.

Part one says you'll keep your big mouth shut and mind your own damn businesses. Violate this once, and it will be the last royalty agreement you'll get from anyone.

Part TWO, the agreement is as varied as any contract can get...although, all of the ones I've signed or seen have these common elements:

1) Clearly identified parties
2) Clearly stated duties
3) Some definition of what a "sale" is
A) Some could be unit of sale minus returns in a given time period
B) Some might state the unit of sale with a price (it could be a test point)

4) Clearly stated ways of accounting for sales with access.
5) Standardidized "clauses" such as indemnification

Our resident attorney may be able to provide the legal details of any contractual agreement.

I'll stick with the Copywriter's (or Product Developmer) ageements I'm most familar with, others may have different experiences.

The first question is:

Did you have anything to do with the development or the acquistion of the product?

A NO probably eliminates most royalty situations.

Have you been given an assignment for an existing product? Is your copy to be a test against a control?

Some companies provide "finders fees", or acquistion fees...and the savvy copywriter/marketer has a "Toll Postion" on the product to start with, but most don't.

You have to have it in writing, in your agreement, about your ability to verify sales numbers and returns. I've never had a problem with this, most companies have at least a sales tracking system in place...so that gets put into the contract.

Some bigger companies have DAILY reports...others weekly. If they don't have weekly summaries, I'd probably be hesitant to deal with them.

All this is laid out in the agreement, as to access and whatever (many will let you see the MONTHLY sales figures, which is ok too). ALL of them have a sale against return...if you find a company that doesn't, let me know, I may come out of retirement for them.

90 days is not uncommon to "hold" your royalty, against returns.

In cases where you control the product, such as a book or audio/video product for example, you may get an "advance" against sales. So your royalty will not kick in until this amount has been reached.

I advise you to go googling and look for "royalty agreements" and "copywriter agreements" and you'll find a ton of stuff out there that is ready to use.

Most companies have a boilerplate contract for copywriters...they most often don't like to see some homemade (your attorney's that is) agreement that has all sorts of clauses, conditions and specifications...as Robert Ringer says, these are deal killers.

The rate is negotiable, but in my opinion, most copywriters are clueless as to the amount. IF Gary Halbert and others got 15%...it must have been based on their reputations and personal promotion.

The rate depends on how much you do as far as acquistion, development, media copy, and list finding. Sometimes you can take a smaller up front fee and a larger (we're talking a couple of points here) royalty agreement if you think the product has a long life and/or a large market.

Again, everything varies, there is nothing standard, even though many companies will present you with "this is our standard royalty agreement, sign it or forget about it"...just not true. You negotiate a WIN/WIN ageement, so you and the marketer are happy.

There will be clause of action in your agreement, if for example they do not provide you with the sales data in a timely matter as specified.

MY best advice, don't enter into any royalty agreement without having YOUR attorney (and preferably one that is business/royalty educated)...go over the agreement and makes sure you have a means of accessing the sales info needed.

I'll answer whatever questions you may have as time allows, fair enough?

gjabiz

When I write for Agora, KCI, and others of that ilk, they send me a check every month, and I don't ask any questions.

With lesser knowns, if they don't track sales I don't give them the 2 options that follow, otherwise I always do.

Option 1: flat fee

Option 2: 30-50% less on the flat fee (advance retainer) plus 5-10% on gross sales payablee on the 15th of the month following the month in which the sales occurred.

The royalty percentage is determined by 1) the price of the product and 2) the cost to produce and deliver the product or service.

How do I know they'll pay? I don't.

How can I force them to? I can't.

I therefore make sure that my advance retainer pays me at least my mininmal fee for writing the copy.

--Barry