There are only a few other aspects of licensing another company’s property I’m going to discuss with you here. But before I do so, you might be asking yourself – is pursuing a property really worth it? Will the time, energy, and resources I will have to invest pay off?
I always knew that having a license would open new markets for my products and attract new and different customers. But I wasn’t aware that the actual company I licensed from would so earnestly help me as well. When you become a licensee, a company develops a vested interest in the sale of your product. They want to make money as much as you do. And that company has a wealth of resources of its own. Although this may not be true for all companies, the larger ones I have worked with have contacts and relationships with all major distributors. If I wanted a meeting with Toys R Us, for example, I’d simply have to call my licensor and ask for one. That kind of power and access is unparalleled.
A few final notes.
Maintain supreme accounting records. You will live or die by your financial records. So much of your licensing contract is based on sales – forecasted and actual. It’s important to keep great records, no matter how tedious the task is, because companies will ask for EVERY bit of data. Their royalty payment depends on it, after all. They want to know exactly how much you’re selling. You should too.
Read the fine print. Read your contract carefully before you sign the document. Make sure you fully understand and agree to the established channels of distribution. A company is unlikely to give you the whole world in which to sell your product – they will want to narrow your sales to a specific area, like speciality stores, convenience stores, mass market, etc. Recognize that expanding or changing this parameter in the future will be difficult and potentially frustrating.