This blog is the follow on to the previous blog:
The World's Best Job – Yours for the Taking?
The world's best job is having a successful licensing agreement with a manufacturer for your product.
In licensing your product, you give a manufacturer wide latitude in manufacturing, packaging, distributing and selling your product in exchange for a quarterly royalty payment to you.
Royalty payments are an agreed upon small percentage of all gross sales (minus returns and adjustments) – typically 3 – 5% (could be more or less). Licensing can be a great deal for an inventor simply because the manufacturer or licensee takes all risk and you collect royalties without having to work – mailbox money. If total sales are large, the royalty checks may be large as well.
So, what is the catch?
It is not easy to successfully land a licensing deal.
Your product may not be appealing to manufacturers, it may cost too much to manufacture versus sales price. The manufacturer may already be developing a similar product in secret and thus, have no interest in yours. It takes great belief in yourself and your product and it may take months or even years to finally seal a deal. Put succinctly, the odds of licensing success are small.
So, what can you do to improve your odds of licensing success, below are key elements:
- Know, specifically who you wish to license to
- Understand their business – why your product could be a boon to them
- Thoroughly do your homework before presenting to them
- It is all about them, not you
Regarding 1, study the marketplace and learn who the key players (potential licensees) are. A good place to start is with the Thomas Register that provides detailed information on thousands of manufacturers. From this, create a list of 4 or 5 manufacturers who could be licensees for your product.
Next, 2, do detailed research on each potential licensee. Most are public companies who have annual and quarterly reports you can access and read. Understand the business circumstances of each. If Company A is the market leader, your presentation to them will be different than if they are a smaller player trying to increase their market share. (Both can be good licensees.) Understand their product lines and marketing focus: where are their product strengths and weaknesses. Could your product help them to grow market share or retain what they have?
3 Do your homework and have your pitch ready for each company. Set up appointments and go to see them in person. They are busy, so you will have about 15 to 30 minutes – use your time wisely.
4 Do not tell them how your product is a million dollar product – the next big thing. You may believe this and you may be right, but you insult them by suggesting that you are the expert. They are the experts, it is all about them, not you. Your approach should be humble and appreciative, but show them how your product might make a real difference for them. Give them plenty of time after the presentation, but get from your key contact a timeframe for a decision.