How to License a Product
Licensing: How it works
When a company licenses your product, they take over the manufacturing and distribution (sales) of your product.
A license agreement also gives them the right to any patents and/or trademarks you hold on your product.
The company that licenses your product is called the licensee, and they pay you royalties on any sales of your product. Typically, royalty rates are 3-10% of sales.
A license agreement is usually for a set period of time, like 5 years, and at the end of the agreement, the company may either renew the agreement or have first refusal.
Since you’re the expert about your product’s features & benefits, you will usually consult with the licensee to educate them about your product and then retain some involvement with the process throughout the agreement.
For mom entrepreneurs, a licensing agreement is a great deal–it offers the gratification of seeing your product taken to a larger “audience”, handsome royalty income and essentially, none of the work!
Pitch Your Product for a Licensing Deal in 5 Steps
1. Do your homework! - Before you even consider contacting a company to discuss licensing opportunities, make sure you do ample research on a handful of companies that seem like a good “fit” for your product. Know who their key people are, their product assortment, their target market/customer and their current distribution channels. It is also helpful to read their press releases and financials (if they are a public company) for the latest news on them you can learn a lot and sometimes even see where they are “headed” by doing this and it can work in your favor.
2. By letter or email, introduce yourself and your company in 2-3 sentences.
3. Describe your product, including any awards, press and noteworthy sales figures in 2-3 paragraphs. - As mothers who have invented products, we sometimes assume that everyone wants to hear every blessed detail about how we dreamt up our big idea - not so! Keep it short, targeted and professional.
4. State why your product would be a good “fit” for this company. - Give specific details like, “I recently read that you are expanding your line of nursing products and I believe my nursing cover could significantly increase your profits in this category.”
5. Ask for a meeting & follow up! - Let them know that you are interested in discussing licensing opportunities and that you would like to meet with them. Tell them you will follow up in a few days (by phone or email) and then DO IT!
Read the full article at: startupprincess
Patty Block, President and Founder of The Block Group, established her company to advocate for women-owned businesses, helping them position their companies for strategic growth. Charting the course for impactful, sustainable, profitable businesses, the beacon is control: of your strategic direction, your money, your time, your staffing, and your ability to bring in business. The Block Group brings together the people, resources and ideas that build results.
Small business consulting in Houston.
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