The term royalty refers to the right of the holder of a patent or property, to receive a payment from the beneficiary who benefits from licensing and exploits it for commercial purposes.
In essence, it grants the use of patents, trademarks, and manufacturing processes for the sale of products and entry into new markets, transferring the rights to exploit, market, and manufacture products.
How do royalties work?
Royalties are characterized by two factors:
- The profit: the net earnings of the company;
- The cost of production: costs that the company must bear to carry out the production of goods and services, with an interest in keeping costs as low as possible because profit arises from the difference between revenues and costs.
When we talk about royalty, we refer to a fixed percentage of earnings, which can go up to about 30%, but in exceptional cases it may vary depending on the type of contract signed. In this case, it can be apportioned.
The value of the installments can be determined by a percentage on the sales price, which can be wholesale or retail and is established on the unitary profit or production cost.
It is a form of compensation in which the company is remunerated through a percentage on the turnover related to the product. For the use of sales rights, the company that purchases the industrial use concession must conclude a commercial agreement defined as "license agreement" or also called "licensing".
You can do it too, you just need a lot of commitment and an excellent marketing and sales platform.
Free trial for 30 days. No credit card required.
