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Formulation fees and other queries
I did attempt a search, but with little luck. So will pose my queries here, and I realise that these have been probbaly asked many times previously.I have a lot of requests for my formulation services, and now have worked for a few brands. Now at a point to determine if I am charging appropriate fees. My questioins are:(1) What is an average fee to prepare a simle formulation?(2) Is there are standard contract?(3) Who owns the formuation? How is the ownership generally handled?(4) What is the general protocol for preparing samples to be evaluated by customers? I usually allow for three re-formulations within my current fee structure.Thanks.Kind regards,Mike -
5 Replies
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I work for a CM so the situation is a little different, but I can give you my perspective
1) we charge anywhere from 1,000-3,000 for the “R&D fee”. This is just for developing the formula to the clients request and includes PET testing. In my opinion it is a little low, esp for some cases where the client requests that all raw materials be vegan or ~natural~2) right now we have an NDA available to clients and then a concept brief/project scope that outlines estimated launch dates, quantities, price point, claims, packaging.
3) Our standard practice is that we own the formula unless the client comes to us with a fully-fleshed formula that requires only minor tweaks at most or unless the client chooses to purchase the rights to the formula (we charged 7-10,000). If they request a material we can’t use for another project we also tell them the can purchase the material exclusively or just charge it as an excess material fee.
4) we also do 3 revisions before charging another fee, but sales doesn’t always keep to this (setting up a plan is one thing, but getting our sales team to follow through is a separate issue). If we have the packaging the client desired we try to do at least one sample in that but otherwise we keep to 15-30g samples. We also attach a form with the INCI deck since we inevitably get a client who says they like the sample until they read the label and ask for us to remove something integral to the base.
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1. We charge a very similar fee to what was quoted by EVchem. Not to be vague, but generally, fees are internal information.2. Contracts are crucial for the best interests of both the Formulator and the client. We did not find a standard form but rather created a Work-For-Hire agreement that was approved by an Attorney. It is significantly different for a full Formulation. It helps the client to see what they paid for and it protects the Formulator from unexpected demands (“I thought the Sunscreen Testing was part of the standard fee?”)3. We do not own the Formulation. Firstly, this is an advantage of working with a Consultant. The client wons the Formulation and gets more access to the R&D process. It also requires that the Master Record for their Formula is complete and the Formulation is validated. Lacking this due diligence will interfere with the client’s ability to retain a Contract Manufacturer.4. We also do 3 revisions. We do have some wiggle room, but it does help, especially with a client that will foolishly keep attempting to rewrite the Product Development once we are in the Lab. That happens quite a bit despite our urgings that the PD should be considered “written in stone” once we go to the next step. we average less than 2 revisions. This is a result of well-defined Product Development briefs. In our experience, many revisions are errors of omission in the Product Brief and rarely an error of commission. -
I would not be interested in paying someone to develop a formula for themselves to keep. :#
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There are advantages to both approaches. For example, oftentimes a Contract Manufacturer will deeply discount the Formulation fee and make-up their costs in manufacturing. Also, in many cases, you can have a more streamlined process by working with the Contract Manufacturer.The biggest myth is that the success of a line relies entirely upon the Formula. There is not a Formula that could be safe from being knocked off. Your real success will come from Marketing and Smart Business Decisions. This reliance on best business practices is a key reason why lines should not in most cases manufacture and sell their own products. You will not excel in any area since you will be spread far too thin. Rather than excelling in any area, you will scrape by in many.
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Thanks for the input here.,….very useful !!
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