Licensee, License Do
Is your business ready for the boost that comes from licensing?
Procuring a license is a great way to power up your business,
says Antonio Sarabia II, an attorney specializing in intellectual
property and contracts. To know if you're ready, evaluate your
company's financial strength prelicense. If you're barely
making it, it's probably not a good time to become a
licensee--it's not a balm for a bad bottom line, notes Sarabia.
It can, however, help take a strong startup to another level.
Licensing works for almost any kind of manufacturing business
where brand recognition is important-apparel, housewares,
accessories and so on, notes Sarabia. Even service businesses, like
hair salons or lube and tuneup stations, can benefit from
advertising an established brand name on the door. The key is to
make sure the product you want to license makes sense within your
industry and experience. "You need to build on your
strengths," notes Sarabia.
If you're dreaming of licensing a huge name, remember that
large companies sometimes have long-term licensing agreements (15
to 20 years) with other companies. In that case, consider the
licensing opportunities with new and upcoming brands that are
growing in prominence. A licensing agent--someone who knows which
companies are looking for licensees--is a good source of
information, says Sarabia. Two other sources to check out are the
International
Licensing Industry Merchandisers' Association website,
which has listings of licensing agents and a wealth of general
licensing info, and License! magazine, which provides a marketplace
of properties available for licensing at http://tracker.licensemag.com.
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When finally negotiating the agreement, get help from a lawyer
to ensure it's fair to both parties. Pay special attention to
the minimum sales and royalty payments required by the licensor,
says Sarabia, and make sure you can realistically make those
payments. A licensor can cancel the contract immediately if
you're not meeting the terms. It's more difficult for a
licensee to get out of an agreement if things go awry, so make sure
to examine the fine print before you sign.
According to Sarabia, licensing success is definitely possible
if you get the right product hooked up with the right brand:
"If you think about the brands that make you successful [and]
will fit with your company, [that] great brand . . . pulls your
business right along with it."