The important thing to constructing a sustainable floor design enterprise is to have a large assortment of shoppers who’re paying you frequently sufficient that you simply’ll ultimately earn a good artist wage over the course of the yr.
Once I say “common funds,” I believe many artists assume I’m simply speaking about royalties. Nevertheless, I’ve discovered it a lot simpler to earn a gentle revenue over the course of my profession by being open to different cost prospects too, like flat-fee licensing, freelance floor design tasks, and even buyouts the place I promote designs outright to an organization.
Nonetheless, royalties are sometimes seen because the “gold commonplace” in artist licensing.
And I completely perceive why. I imply who wouldn’t wish to see month-to-month or quarterly checks arrive within the mail?!? For instance, I obtained virtually $7,500 in royalties in 2021 alone and that averages out to over $600 per 30 days. Not unhealthy contemplating the design work for these funds was performed 1–4 years in the past.
However I additionally see some misconceptions amongst artists, so I’d wish to take a couple of minutes to debate artwork licensing royalties to provide you a greater understanding of how they work and most significantly, how to make sure you receives a commission effectively.
What are royalties?
While you license your floor sample designs or illustrations to an organization, you’re giving them permission to make use of your artwork on merchandise that they’ll manufacture and promote, and in return, they’ll compensate you for having the ability to use your artwork.
The compensation may both be a one-time flat-fee cost or royalties. If it’s royalties, you’ll obtain a share of the worth for every product bought. They’re despatched to you in common funds, normally month-to-month or quarterly, for a particular time period (the precise period ought to be included in your licensing contract).
What’s the typical share for artwork licensing royalties?
The royalty share you’ll obtain from an organization varies broadly as a result of the quantity relies on various elements distinctive to every consumer. In my expertise although, you’ll most definitely earn between 3–10%. However I’ve additionally seen royalties charges as little as 1.5% and as excessive as 25%. And this illustrates the most important mistake I see floor designers make:
Pondering that the proportion is the ONLY factor that issues and you may know whether or not a royalty deal is nice or not by the % alone.
However that’s utterly FALSE. You’ll be able to by no means inform by simply the proportion whether or not a royalty license will likely be good or unhealthy and it’s since you merely don’t have sufficient info.
Associated Article: Streams of Earnings & How Artists Get It Fallacious
What info do it’s good to calculate your potential royalties?
The reality is there’s really three various things it’s good to know in an effort to calculate your royalties correctly. Let’s stroll by each…
1. Royalty Proportion
The % you’ll obtain is the primary quantity you want for any artwork licensing deal and by chance it’s virtually all the time supplied up by the consumer. One factor to bear in mind although is that if the licensing settlement is for an assortment of merchandise (like rolled present wrap, greeting playing cards, and present baggage for instance), you’ll must know what the royalty % is for every product, as merchandise may have totally different percentages.
2. Product Value
The second quantity you’ll want is the worth the product will likely be bought at, and once more, if there are a number of merchandise, you’ll want the costs/value vary of every. In most situations, a royalty relies on the wholesale value, which is the worth an organization sells its items to retailers for.
Nevertheless, there might be uncommon situations the place the royalty relies on the retail value of a product — it’s vital for the consumer to specify what value the royalty relies on and it must also be included within the licensing contract. On that observe, corporations don’t sometimes share their product costs upfront, so that you’ll must ask them.
And the rationale this quantity is so vital is that the product value impacts the quantity you earn on every particular person product.
For instance, let’s say you’ve been supplied a 3% royalty from two totally different shoppers. Shopper A is a stationery model that sells greeting playing cards at a wholesale value of $1.00, which implies you’d earn 3 cents for every card bought (as a result of 3% of $1 is $0.03).
Then there’s consumer B, a luxurious kitchen model that sells tea towels at a wholesale value of $24. With that value, you’d earn 72 cents for every tea towel bought (3% of $24 is $0.72). So between these two presents, there’s a distinction of 69 cents you’ll earn and it’s as a result of the product value is totally different.
Studying this, you is likely to be considering that the no-brainer choice is to go along with consumer B as a result of incomes 72 cents per product is loads higher than 3 cents. However we nonetheless want one other quantity earlier than you may know for sure which provide is best.
3. Variety of Items Offered
The final part that’s essential to know is the variety of merchandise they count on to promote over the period of the license (or throughout a 1-year interval if that’s simpler for them to share). And similar to product value, you’ll most definitely must ask for this info.
Now clearly artwork administrators aren’t wizards who’ve the power to see into the longer term and know the precise quantity of merchandise that will likely be bought, however they need to at the least be capable of provide you with an approximation. In case you get resistance while you ask concerning the variety of items, you may all the time ask for previous gross sales figures on related merchandise as an alternative.
Understanding the variety of items they count on to promote is significant as a result of it considerably influences the entire quantity you’ll earn in royalties.
Let’s revisit the earlier instance with the 2 shoppers. Shopper A sells its greeting playing cards to a number of big-box retailers, which implies they produce a excessive quantity of greeting playing cards and sometimes promote between 25,000–30,000 playing cards per design. Alternatively, consumer B focuses on high quality over amount they usually usually produce 500 towels per design.
So how do you calculate your potential royalty earnings?
After you have all 3 numbers from a consumer, it’s straightforward! You simply must multiply them collectively to calculate your potential earnings. In case you don’t wish to do the maths by yourself, I’ve a easy Royalty Offers worksheet that features an precise royalties calculator — you’ll discover the worksheet inside our free useful resource library.
However let’s use the 2 mock shoppers for example right here for instance issues:
Shopper A: Greeting Playing cards
- Royalty: 3%
- Value: $1.00
- # of Items: 25,000–30,000
= 0.03 × 1 × 25,000 (& once more w/ 30k)
Potential Royalties: $750–900
Shopper B: Luxurious Tea Towels
- Royalty: 3%
- Value: $24.00
- # of Items: 500
= 0.03 × 24 × 500
Potential Royalties: $360
these two licensing alternatives, it’s now clear that the greeting card royalty deal is the higher of the 2.
If I used to be coping with each of those shoppers, I’d be completely satisfied to just accept the greeting card deal so long as the remaining contract phrases had been good. Nevertheless, I’d in all probability ask consumer B if they might improve the royalty share to at the least 6% and/or considerably lower the territory or period of the license, as these two contract phrases play an important function in impacting the licensing price.
How correct are the royalty estimates in comparison with how a lot you’ll earn?
As a result of nobody can predict the longer term, it’s unimaginable to foretell whether or not the royalty quantity you calculate will likely be what you really earn over the course of the license. Typically you’ll earn lower than estimated and generally extra. The excellent news is that the extra royalty offers you make, the higher you’ll get at deciding whether or not an artist licensing royalty deal is best for you or not.
The large takeaway right here is to all the time get the data you want from every consumer earlier than you say sure as a result of with out understanding these 3 numbers, you can find yourself signing a royalty license settlement that solely pays you a couple of dollars.
Nonetheless, I do know as artists, most of us don’t really feel comfy pricing our paintings or negotiating higher offers (together with asking for larger royalty percentages) — it’s taken me 6 years, negotiating 50+ contracts on my own to be taught the ins and outs of pricing for artwork licensing and floor design shoppers.
It’s why I created my Suave Pricing & Negotiation course that will help you be taught pricing and contract fundamentals in a method that gained’t make you go to sleep or wish to rip your hair out. Inside I present you not solely tips on how to pretty value your artwork for buyouts, licensing, and freelance tasks, but in addition tips on how to learn contracts and negotiate higher phrases for your self. In case you’re , click on right here to be taught extra.