This week I had a question from a reader and it goes:
Hi Melody,
I spent 3 years developing a formula with an ingredient list that I love. Researched all the ingredients down to the last benefit of each ingredient.
I took it to a lab, they made samples, we went to market and three years later I wanted to switch labs only to find out out that they said they owned the formula and wanted ME to pay them 5K. I was shocked! The formula was all my idea and I assumed I owned the formula, please help!
~Frustrated Megan
Dear Megan,
This is such a common misconception and I am glad you asked the question.
And I am sorry that you spent all the time on the formula and found out the hard way who owns the formula. Technically, the lab owns the formula and you own the ideas.
When you present the idea to a lab and sign an NDA your ideas are yours and the concept are yours. However, the actual formula is the lab’s.
Let’s define what constitutes a formula. A formula is like a recipe and it has specific percentages of each ingredient. For example, a traditional cookie recipe is:
2 cups flour
1 cup water
1/4 tsp baking soda
1/4 salt
1 cup sugar
all equals = 100 and makes good edible cookies.
A formula is no different.
When you provide a formula with all the percentages of the ingredients then YOU own the formula. When you provide an ingredient list to the lab and/or formulator whoever puts it together owns the formula. I hope that helps!
So what to do in your situation? How do you negotiate buying the formula?
There are several options:
1. Negotiate at the beginning in writing who own the formula negotiate a dollar amount, formula’s range anywhere from 2k-10K depending on complexity, time spent formulating and if it’s OTC or cosmetic.
If you can’t afford $$$ price then you negotiate per unit.
Per unit works like this – if I buy 10K, 50K x number of units from you then you the acme lab will release the formula to me, include all percentages.
What about the mixing instructions?
Mixing instructions are very important. Knowing when to add the water, the oil phases, etc. to a formula makes all the difference on the stability of the formula and the finished product. I am not a formulator but have been in the lab enough to see the difference heat, temperature and timing make in a finished product.
That said – I would negotiate both the formula and the mixing instructions.
What you don’t need is the equipment that they use, that’s optional with one exception. If you are taking your formula to a new lab they may not have the same equipment.
This time it would be important to own the mixing instruction would be if the new lab can’t get the formula to work, then you want to look at the type of equipment it was made in. If it’s a kitchen aid vs. a hand held blender, etc. Otherwise, I wouldn’t bother buying the mixing instructions.
While I’m wrapping this up, I wanted to give you an opportunity to get YOUR biggest questions regarding private labeling, creating a formula or finding a manufacturer answered.
Just leave a comment below and let me know what stumps you most, what you’re struggling with, or what you would most like help with when it comes to getting your projects done!
Make sure you’re subscribed by email (to the right) so you get notification and have access to the answers to all of these questions.
These types of things you need to be very careful of. I would never just assume anything going into any situation. Nor can you always take someone’s word for it. Always make sure you have your back covered.
If I decide to use a private label, will they disclose their formula to me? My concern is, suppose further down the line I may decide to move to another manufacturer, what happens. May I use the same formula?
Hello Sophia, That’s a great question and here is the answer: If you decide to use private label the company owns that formula. Before you commit to private label, ask them how you could purchase either that formula or a similar formula. A private label manufacturer probably won’t sell their formula as is but would be willing to tweak it for you. Beleive it or not, formula’s are common and most chemist can recreate it for you. So you have several options: 1. Either ask them what it would take to buy both the formula and mixing directions as is and with modifications. 2. Be prepared to have the formula recreated. The first option can run anywhere from $2500-15K USD depending on the lab and a cosmetic chemist is generally about $200-400.00 per hour. Hope this helps!!