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Have you ever wanted to make products with the NBA, Disney, Marvel Comics or any other brand licenses out there? I have been fortunate enough to have engaged in dozens of licensing partnerships that have built my brand into over 45 countries, resulting in consistent year-over-year revenues increases ranging from 30-60%. Here are some things to consider if you’re interested in partnering with a licensor.
Evaluate Your Brand Fit With The License
Do your values align? Look back at your brand values and those the licensor lives by. This could be one of your most crucial considerations before partnering with any licensor. If how you see the world and how you both approach problem solving and partnerships doesn’t align, chances are, it’s going to be a difficult relationship from the beginning to end. It will cause you heartache instead of being a positive experience.
Establish Why You Are Doing It
Are you doing it for new customer acquisition? Some partnerships are based around your brand gaining a new customer you wouldn’t otherwise have had an authentic way of meeting. Utilizing licensing partnerships can help you do this if you can align your storytelling in an authentic fashion by finding a common denominator of values.
Is it for brand positioning, awareness and credibility? Sometimes you just want to increase your brand’s credibility within a particular marketplace. It could be a stepping stone for a bigger partnership you need to acquire in the future. For instance, you may want to work with Disney, but they are going to want to see that you have some experience in managing licenses and that you are able to pay the royalties and guarantees.
Is it for sales revenue? Most licenses are interested in procuring major royalty dollars and that is what your brand is going to bring to the table. You need to make sure you have solidified relationships and distribution channels to produce this. Generally speaking, the licensor is going to ask you for sales revenue projections, business plans, bank statements and tax returns to verify you can deliver what you say you can.
What Value Will You Deliver To The Most Important Players?
I refer to it as the “value triad.” This is a different type of value than brand values. This is a tangible value of the partnership — revenue, new customers, emails and brand awareness. Ask yourself if you are both delivering value to the consumer, first and foremost. Then, are you delivering value to the licensor and is the licensor delivering value to you? If the answer is no for any of those questions, generally speaking, it’s not going to be a good fit. Someone is going to be unhappy with the results, making it an ineffective partnership.
Remember To Always Manage Your Margins
Be mindful of the royalty and what your bottom-line margins will be for your product. Many license deals range from 5-25% in royalties. This could mean that you make little or no bottom-line margin. This makes it even more important to know why you want to engage in the partnership.
Lastly, remember some licenses require a minimum guarantee, which means before you produce, sell the product and collect payment from your customer, that licensor is going to require a commitment of payment. This can put you in a cash-flow bind but is important to understand before proceeding.
Understand The Legalities Of The Licensing Agreement
Make sure you consult with an attorney about the deal points. Generally, the agreements are lengthy and have various points on royalty rates, acceptable distribution channels, sell-off periods, intellectual property, length of term and guarantees. Once you sign the dotted line, the licensee will hold you accountable for the terms. You don’t want to get into any hot water, so make sure you understand it and communicate it to your team members from the top down so they know how to navigate around the partnership.
When you find the right partnerships and vet them properly, it can be a game changer for you and your brand.
June 4, 2019 at 08:06AM
Forbes – Entrepreneurs