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The licensing process should be
approached methodically. Don't try to rush or skip
over a step. Carefully negotiate each step and
before you know it you will find your self with a
license agreement and royalties. Follow these
steps:
1.
Prototype:
Develop a prototype or have a fully working
product. A fully functional product that you can
put through all the paces to show how it works will be
one that is more attractive than one that is still in
the concept stage.
2.
Protect the Idea:
Get legal
protection such as Patent, Trademark or Copyright.
This is an important step. Licensees don't want to
put a product on the market that could cost them in
legal fees or competition for another source because the
product is not protected.
3.
Get Market Response:
It's even better if you already have the product on the
market with a sales record. If the product is
being received well by consumers it will be more
attractive to a potential Licensee because you've
established that there is a market for the product.
4.
Determine Licensing Direction:
There are one of three ways you can approach licensing
the product. You must decide which one to go with.
-
Use an
Agent/Consultant:
This is a middleman who will act on your behalf to do
the leg work and seek out a Licensee and get an
agreement. However, you will have to share your
royalties with the Agent/Consultant.
-
Go directly to a
Retailer and license to them:
This route would mean
more work on your part. You would probably have a
harder time getting a face-to-face meeting.
-
License
to Industry Experts:
These are licensing entities that speicalize in
the
development & distribution of products to Retails.
You can approach them directly without the help of an
Agent/Consultant and seek an agreement.
5.
Identify Potential Licensees:
Develop a list of potential Licensees that you will
approach. Find the ones that specialize in your
product area. Find the best ones regardless of
geographic location. Be willing to travel to their
locations.
6.
Approach Potential Licensees:
Send them a letter to introduct your slef and your
product and ask for a meeting.
Reach out to Potential Licensee with a letter: The
letter should short & concise and contain the following
elements.
a.
Introduction: b. Describe the Product:
c. Describe the problem it will solve:
d. Describe the target market:
e.
Ask for a meeting: |
7.
Meet with Potential Licensees: Once
you get the meeting make the pitch. Do the
following when making the pitch.
a.
Take sample/prototype:
Find
out how many people will be in the meeting and
have enough to pulace one in everyone's hand.
b.
Introduction:
Introduce yourself and the product. Be
short on background history.
c.
Pitch The Product:
Say what the product is for (what problem does
it solve); demonstrate how it work; identify the
target audience; provide sales numbers and
consumer reception feedback.
d.
Ask for A Decision:
You're
there to get a decision so, be sure to ask for
one.
e.
Ask for A Followup Meeting:
Ask for a followup meeting if necessary to
address any issues raided during the meeting or
to get a final agreement signed. Buy time
to get the agreement legally reviewed. |
8. Licensing Agreement:
The licensing agreement is crucial. Make sure that
it contain all the elements and terms before signing.
Do not sign it without getting a
legal review.
9.
Production
Phase:
Depending on the nature and complexity of the product
the Licensee may want the Licensor to be involved in
some way or the Licensor may want to be involved to
ensure that product is being manufactured to the right
specs.
10.
Collect
Royalties:
Sit back and collect royalties and monitor your
agreement.
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