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Chemist Fees?
Hello, I’m currently working with a great cosmetic chemist. He’s priced my product at approx $25K for full R&D. His fees are 12.5% of total R&D plus 3% royalties. Is it standard for chemists to charge fees & royalties? Do the fee/royalty percentages seem fair/accurate? Thank you in advance for your time, comments and/or advice!
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12 Replies
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Some people get royalties but you can also find cosmetic chemists who will work for a flat fee without royalties.
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There are lots of different ways to structure fees.
If a customer is limited by a small budget, royalties are one way to reduce the up-front costs for the client, and this also ties his compensation to the success of your project - if you don’t sell much, he won’t get paid much. This kind of relationship also helps insure that the consultant will be responsive to calls for help if something goes wrong.If you are bothered by the royalty concept, you could get the same work done without the royalties, but in that case the consultant’s fee would be 2, 3 or more times what he is you charging initially - it wouldn’t surprise me to hear that he wants 50% of the total R&D figure he quoted you. Typically, once the project is completed, any further assistance you’d need from the consultant would cost extra in fees, and if he is involved in another project, he may or may not be able to help in a timely manner. -
Wait a minute. You are having one cosmetic product developed for total of $25,000 US ????
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I’ve never heard of consulting chemists obtaining royalty rights to a marketed product, even though Bob’s logic makes (some) rationale for it. Usually, JCG, formulation work is one-and-done. Also, ethical formulation consultants (like yours truly and present company, I hope) will lend advice during pilot-batch scale-up production gratis over the phone. If the process instructions and release specs are explicit and rendered in cGMP format, even this should not be necessary. Any trips to a manufacturing facility to follow up will require more fees and travel expenses of course. I’ll add my !!! to David’s too. $25K for a single formula is pretty darn high. That better be one helluva original formulation they provided you.
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Thank you all for your responses. I was referred to my chemist by a friend who had worked with him before on a product & had a great experience. My friend’s product was about 80K, so when I got the pricing of 25K on mine, I didn’t think that sounded so bad.
I tried to shop around to get an idea of what other chemists charge but they all needed to know exactly what my product was to be able to give me an estimate of their charges (except for one chemist who just said she charges $100 an hour). At that point, I backed out of those conversations because my product/idea/concept is so easily duplicated, that even though I have a trade secret, anyone could steal the idea/concept & have it on the market in months. I know people say this all the time but there isn’t a product like mine on the market yet so it’s quite secretive. I didn’t want to risk divulging this information (even with an NDA) in fear that someone would steal it anyway.Which brings me back to my current chemist. He has to RE an existing product & then alter ingredients/amounts so as not to infringe on anyone else’s patent & to make it my own (yet still make sure it works the way I need it to). We are then adding a couple other new/different ingredients. He said pricing includes the RE, R&D, safety & efficacy testing & then the final written formulation document that will be the start of a patent. He says he will source my raw materials & has all the contacts to start manufacturing right away & that from start to finish it will take approximately 2 months. He’s also been somewhat of a mentor to me through this process as I am a new entrepreneur & the business advice/help he’s given me by phone & email so far has been invaluable.I should have done my homework from the beginning but based on the recommendation of my friend, I went all in & divulged everything to my chemist pretty much right away before we even discussed cost. I got too excited & wanted to get the ball rolling with my business asap. Lesson #1 learned on my road of entrepreneurship. I suppose negotiating is a possibility at this point.Thank you all again for your comments! -
@JCG - If your chemist is going to take care of safety and efficacy testing too then the price doesn’t sound too unreasonable. It’s still high but that stuff gets expensive when done right.
But here’s something to read about your fears of someone stealing your idea.Basically, people who are formulating chemists are in the business of creating formulas. They are not in the business of marketing cosmetic products. There is a significant difference. Your fears of someone stealing your idea are holding you back and I encourage you to just tell people your idea.I personally do not waste energy on NDAs and trade secrets and patents because in the cosmetic industry they are worthless. Once your product is on the market anyone can easily copy it. If your formula is your point of differentiation then you are in trouble.When marketing a cosmetic product you should put your energy into building your brand. Yes, you want to have excellent working formulas that look and feel cool but the thing that will sell your product is your branding and marketing.Usually when there isn’t a product like yours on the market there is a good reason for that. Either the technology doesn’t exist to create a functional product or no one has figured out how to market the idea. The fact that there isn’t a product like it on the market is actually a bad thing in my opinion. That means there is no market for it. You will have to build the market. The best product ideas are unique twists on products that already exist. -
@JCG Next time call me, I’ll do it for half the price and I can manufacture and fill for you too.
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You’re beyond genius Perry. I enjoyed reading every bit.
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I just read Perry’s advice in this thread and I am VASTLY encouraged to go ahead with a business in skincare. I can market anything online (except porn), and I am in love with natural products. Just to get my formulations right is the next step now and this forum seems great for that.
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Perry said: “When marketing a cosmetic product you should put your energy into building your brand. Yes, you want to have excellent working formulas that look and feel cool but the thing that will sell your product is your branding and marketing.”
I totally agree. Recently I was approached by a national pharmacy chain that wanted us to produce products for them under their brand name. I refused because this would merely have turned our small business into a production slave and done nothing whatever to grow our brand. Brand is everything! -
@Belassi….. Bravo!!!
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While I totally agree with Perry, there is 1 segment in the cosmetic industry that can benefit from trade secrets and uniqueness and that is fragrance. Smell sells
(thus the higher development costs and royalty fees would also make sense in this segment)
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