what slides to use when pitching a product licensing deal

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You have a great idea – so what are your options to bring it to market? You could get the hard style and set a company with manufacturing capabilities, a business organisation program, and the works, but that can be expensive and requires significant amounts of time and resource. An alternative, even so all the same lucrative route is forming a product licensing agreement with a larger company. A pop selection for owners of intellectual property (IP), product licensing to interested companies allows inventors to bring their ideas to market while forgoing the unwieldy aspects of starting a business organisation. Past allowing an established market player to bring their idea to market place, a licensor tin greatly benefit both parties. To help inventors in understanding this process, this commodity will explore what is product licensing, how information technology works, and how to use it with your invention.

What is product licensing, and how does information technology work?

Product licensing involves an understanding between a licensor (the owner of an Intellectual Property, or IP) and a licensee (typically an established company). The licensor may or may not own the rights to their invention via a patent or through other ways, but is still the holder of the idea. (To learn more well-nigh invention protection, read our article on How to Protect Your Inventions From Theft.  They tin requite permission to a licensee to produce and sell their invention, where the licensee is required to pay the licensor royalty fees on their sales, oft in the course of a percentage of gross wholesale sales (expect something between iii-eight%). Licensors forgo full profits on their product in return for firsthand manufacturing, distribution, marketing, and sales power provided by the licensee company, too as their know-how in the further development of the product – and so information technology'due south a fair deal, considering the upsides.

Why agree to license?

Why would a visitor want to license products? Well, information technology could exist simply because the licensor has developed a great idea. But, more than that, it is expensive to expand production offerings, use backlog manufacturing capacity, and create new products while simultaneously managing an ongoing and profitable manufacturing company. By partnering with licensors, companies tin acquire proven products and bring them to market place much faster, making profits for them (and the inventor) without incurring additional development overhead expenses.

From the perspective of the inventor, licensing their products makes sense because, despite losing some profit to the licensee, they still oftentimes make a xx times return on investment in terms of time and money. Licensing is too a much lower risk option, as distribution is taken intendance of and inventors tin can leverage the established company's proper noun, market sector, and customer base to generate sales. Finally, licensing a production allows more liberty to the licensor, as they practise non have to exist concerned with any of the business aspects outside of the licensing agreement itself.

In that location are some important advantages and disadvantages to licensing a product to consider; the list below should help decide if the pros outweigh the cons for your situation.

Pros:

• Your product gains all the experience and business acumen of the licensee company
• Licensing affords a low-run a risk method of finding new markets and gaining valuable experience at a minimal cost
• Licensees tin can handle R&D, development expenses, and other costly procedures as the production gains credence and is improved
• The chance of a licensed production succeeding is higher than that of unlicensed products, as distribution and marketing are taken care of past the licensing company with expertise in these disciplines
• Companies obtaining licensed products can offer products outside of their core competencies, expanding their reach in the market
• If the product does not perform well, there is footling run a risk to the licensor

Cons:

• Licensing a production tin be difficult, and requires a lot of back-and-forth negotiations with potential licensees to determine the exact legal parameters and terms for the agreement
• License agreements, in one case signed, are non easily dissolved, and are often set for a considerable flow, which locks both parties together for an extended menstruation of time
• New engineering science tin surface which makes a licensed product obsolete, hurting both parties
• Licensors typically lose control of their invention one time licensed, equally the licensee has complete control over everything but what was defined and contained in the licensing agreement
• Licensing a product involves upfront capital, and – while non every bit much equally starting a company – tin can be costly (peculiarly considering patents and protections)

How are products licensed?

After developing a winning idea, the next step for inventors is to find a licensee who sees value in the production. This involves a pitch using a formal presentation, which will explain the core functionality, marketability, and concept(south) of the production. The listing beneath contains what should exist within a formal licensing presentation:

• A letter of introduction
• Production descriptions with pictures
• Manufacturing information (materials, processes, etc)
• Variations on the design
• The benefits as established past product/marketplace research results
• Project objective
• Other licensees (if already licensed)
• Toll breakup/royalty fees

This information should be provided to companies actively searching for licensable products, which can nearly oftentimes exist found/contacted at the below sources (note this list is non exhaustive):

• Licensing consultants
• Licensing exhibitions
• Trade associations/shows
• Banks, universities, R&D companies
• Trade directories of manufacturers
• Online directories

Afterwards reaching out to a company and in one case they have shown interest in your product, it is time to negotiate the licensing agreement. Equally a licensor, the onus is on you to provide the legal agreement, containing party responsibilities, rights, and royalty fee breakdown. It is recommended that legal advice is used here (more specifics on this are plant after in this article). Oftentimes, the company will accept a procedure to handle unsolicited licensing proposals, so your starting time response will spell out the terms and conditions of their corporate policy on submissions, simply after this intake, negotiations can offset.

Since these agreements are flexible, y'all must actively display your goals and what you expect from the relationship between licensor and licensee. Also, understand that, the more than thorough your preparations and research are prior to the negotiations, the more the company tin experience safety to agree to your royalty percentage, terms, and conditions.

Licensing tips

Below are some tips to follow when considering licensing for your product, idea, or trade. While not the only guidelines to follow, these suggestions should assistance bolster a licensing agreement and help you to determine if licensing is right for you.

Decide if licensing is the right phone call

Should you go the licensing path for your production? Seriously engage with this question, as licensing involves relinquishing near all control of your production. If you lot are heavily invested in your idea or believe it is a home-run and tin can be the beginning of a company, consider looking for seed funding/ starting your own business organization. (See our related guide on seed funding – How to Get Seed Funding for Your Production or Business Thought). Building a company will entail much more involvement on your end; if you do not wish to put in this amount of work, money, and time, licensing is a great alternative as the licensees do all the piece of work while you lot still collect a share of the profits.

Decide your marketplace & go along to your niche

Many great ideas have been squandered considering there was no 1 to purchase it. Information technology is vital to determine the specific markets where your product volition exist profitable to show your potential licensees those customers that want your idea. This style, they tin understand the telescopic of distribution and manufacturing which helps them establish a ballpark idea of sales numbers and costs. Being specific almost where your product succeeds will allow licensees more than confidence in your royalty fees as well, as they will go an idea of how much they tin can gain monetarily from the agreement in relation to your fees.

Connect with multiple companies, and vet them thoroughly

Practise not quit if the beginning companies contacted decline a licensing agreement – this does non hateful your idea is unworthy; in fact, a "no" is a safe opportunity to strengthen your idea and to also gain feedback concerning why they declined the licensing offer with you. Also, create a long listing of potential licensees and engage with each of them to see which are interested in forming an agreement. Inventors can leverage potential offers from ane company with some other visitor, allowing stronger negotiating ability on their end of the deal. Sometimes, licensors tin obtain multiple licensees for their ideas, and can even split their idea into parts, license each of them, and get a final licensing deal to assemble these parts. Multiple visitor offerings can be a huge advantage, and then find every bit many as possible.

Ensure you accept done a background check on companies and their history with licensing agreements. If they take a bad runway record or are historically stingy with their royalties, and so consider finding a fairer deal. Remember, yous are providing explicit permission for a company to create and sell your product, and bad actors can take advantage of that, and so vet as much every bit possible.

Come up prepared, and enlist professional help

Finally, do your homework, and get legal representation where needed. Knowing licensing lingo, researching your market place sectors, differentiating your idea from similar products, and determining fact-based royalty fees will all help testify your seriousness and expertise. This preparedness volition also reduce legal counsel costs; however, they will however be needed, especially when drawing up a license agreement. When forming this document, ensure the post-obit areas are clearly spelled out for potential licensees:

• Exclusive rights to your invention & exact parameters of what is licensed
• Who pays for patents (if non currently obtained)
• The licensing status of future improvements (are they considered under license)
• Procedure/resource for contingencies such as if licensees are belatedly on payments
• The ability to transfer rights under the understanding to other parties/post-agreement licensing
• Who is liable for issues/injuries resulting from the apply if the end product
• How, why, and when termination of the licensing agreement occurs

You do not want to fully rely on an attorney for the whole licensing process, but carefully using their expertise on the understanding volition provide greater benefits to you.

Summary

This commodity outlined what production licensing is and how information technology can be used with your invention. Again, this article is not exhaustive only should help inventors decide the benefits/downsides of product licensing. We promise this commodity has clarified product licensing and its capabilities; for more than information on related concepts and products, consult our other guides or visit the Thomas Supplier Discovery Platform to locate potential sources of supply or view details on specific products.

Sources:

1. https://www.infoentrepreneurs.org/en/product-licensing/
2. https://www.entrepreneur.com/article/230557
3. https://greenlightrights.com
4. https://www.upcounsel.com/license-a-production
5. https://smallbiztrends.com/2016/02/licensing-your-product-service.html

Other Inventor/Entrepreneur Manufactures

• How to Invent a Product and Take it to Market
• How to Prototype a Product
• How to Protect Your Invention From Theft When Developing or Pitching It
• How to Go Seed Funding for your Production or Business concern Idea

More than from Services

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Source: https://www.thomasnet.com/articles/services/what-is-product-licensing-and-how-to-use-it/

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