When you sell a license, you sell the right to produce and market your products. What you charge the licensee for a down payment and royalty is part of profit sharing. First, find out what the product will sell for and the local manufacturing cost. Calculate the gross margin the licensee will receive. Then, decide what is reasonable as your share. That will guide the amount of the down payment and the percentage or $ value of the royalty.
Remember that in most countries you cannot just bring home the royalty. There is normally a local withholding tax. If there are tax treaties between the countries you can deduct that tax at home.
In our book “Export & Import – Winning in the Global Marketplace” ISBN 978-0-9681148-1-0 those topics are covered in depth
Copyright Export Pro Inc. Canada. www.exportpro.com
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