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K M
Dec 16, 2020 at 02:58 PM

Royalties Scaled to the Margin

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Hi all,

We have a client who would like to calculate royalties on the net value of the item which is scaled to the margin. Basically, if the client makes more money, the licensing owner makes more money.

As a starting point, for any item with a margin of 30% or less, the client will have to pay a 1% royalty on the net value of the item. As the margin increases by 10%, there would be an 0.5% royalty increase.

So for example, with a margin of 40%, the client has to pay 1.5% royalties on the net value. If the margin is 50%, the client has to pay 2% royalties.

Does anyone know where I should start with this? I understand that there may be some level of customization involved. Any help or suggestions would be greatly appreciated.