I was wondering how do people actually develop proper damage formulas that scale correctly?
The first 2 things are:
- decide what you mean by 'correctly' - what is your idea of 'correct damage'?
- decide what you mean by 'scale' - what values are going to change, and what effect do you want those changes to have?
Once you know that, you have enough information to use the mathematical formulas that BlueRaja mentioned in his answerhis answer. Just remember there is no such thing as a 'proper' damage formula - just one that matches your design for the type of experience you want your players to have.