Product Licensing vs. Going-to-Market
Some tidbits of information gleaned from and retail strategy seminar we attended – forgive the bullet points – but these considerations should be made at the outset of your consumer product business. Indeed, resigning yourself to self-manufacture may require a capital investment which substantially affects your business’ bottom line (and potential investors’ enthusiasm). On the other hand, if you have nothing protect able, you have nothing to license in the first place.
When should you consider product licensing over self-manufacture?
– When your personal resources are limited;
– When industry standards are stacked against you, or you have just one item;
– When you’re working on multiple projects;
– When you don’t want to be running a company;
– When your personal creative and business strength lies elsewhere; and/or
– When are larger company can just do it better than you can.
What is Product Licensing? Basically, taking your product and marketing it through third-parties. The process roughly comprises:
– Leveraging your valuable IP;
– Establishing a fair royalty amount ($/unit);
– Negotiating exclusive vs non-exclusive licensing arrangement;
– Securing/signing an advance;
– Determining length of licensing term;
– Setting annual quantity minimums; and
– …and making a royalty on each unit sold.
How to Prepare a Product Licensing Presentation:
– Take a professional approach;
– Understand the particular industry’s regulatory and licensing guidelines;
– Include working prototype, CAD/models, photos, and a sell sheet;
– Videos (90 seconds, max) are fantastic;
– Portray version/representation of competing product to contrast yours and its differences (e.g., here is the old, this is the new);
– Focus on differentiators and their benefits;
– Be succinct; and
– Have an attorney draft a non-disclosure agreement, knowing that licensee may have its own which it demands you sign (so read it carefully!).
What are Licensees looking for?
– A unique product that fits their brand(s);
– Protection, in some form (e.g., a patent);
– A working prototype – PROOF OF FUNCTION; and
– The product being already vetted (i.e., sold) at retail.
- Invention submission companies don’t know to whom to talk anymore than you do. Do you own research.
- Look at competing products’ labels, see who makes them, and find out those manufacturers’ POCs (e.g., LifeTime Brands®)
- Go to trade shows.