Recently a company with natural health products (insect repellent products for humans and horses, pigs, and poultry) announced a licensing deal with a global consumer products company. Although its products were selling in major retailers in the US, the company wanted to expand its business but didn’t have the financial resources to support its growth plans. So the company split its product IP into two separate companies and licensed rights to its human health products. In return, the company received an upfront payment of $500,000 plus ongoing royalties and generated cash flow to fund its growth plans for its animal health products.
This is one example of how your business can leverage its intellectual property assets. In this case, the company focuses on expanding the market for its animal products by letting another company make and sell its human products. The market segments, animal and human, are very different, making it an ideal licensing situation. They license their technology exclusively to one market while continuing to market and sell their other core market. The company generates licensing revenues, makes them more attractive to investors, and will help them secure more funding for their animal products business.
Licensing is not a mutually exclusive strategy, and using it to support your core markets is a great way to expand your business without the risks and costs of doing it yourself. For example, licensing a more prominent company gets your IP into other markets and access to their manufacturing efficiencies. Not only do you generate new revenues, but you also lower your production costs.
Licensing is a flexible tool that can be used in many ways. The challenge is making sure you use the right licensing strategy. When evaluating your business or startup plan, here are some of the top situations where licensing is an ideal strategy to use:
- Reduce the investment needed to reach the marketplace
- Accelerate market introduction
- Increase investor return and lower potential liability
- Acquire resources such as manufacturing, sales, distribution, or business management
- Access foreign markets that are not inaccessible due to shipping restrictions or lack of a distribution system
Your IP’s real value is how you use it as part of your business strategies. It impacts every business area – marketing, capital raising, research and development, and business development. Your IP is a flexible asset that can quickly adapt to a changing market through licensing. Licensing turns competitors into customers. It enables you to grow your business by allowing others to use your IP in different markets. Most importantly, licensing is one of the fastest and most powerful ways to grow and expand your business for little or no cost in today’s highly competitive innovation economy.
Rand Brenner is an IP professional whose passion is helping inventors, startups, and businesses of all sizes use licensing to turn their IP into income-producing products, services, and technologies. His decades of experience run the gamut from medical devices to food technology to consumer products. He’s licensed some of the biggest Hollywood entertainment blockbusters including the Batman Movies (1 and 2), and the number one kid’s action TV show, the Mighty Morphin Power Rangers. Rand speaks about licensing and is a featured speaker at investment conferences, trade shows, colleges, and startup events. His first book, Hidden Wealth: The Money Making Power of Licensing was released in 2019 and is available on Amazon.com. He’s also a published writer with articles appearing in several prestigious trade magazine including The Licensing Journal, Intellectual Property Magazine, and License India. Rand also mentors at the Cal State Fullerton School of Business and Economics and is a judge for their startup business plan competitions.