Successfully selling your licensing opportunity (especially to the first licensing partner) takes more than just a great IP. It takes finding and creating the right partnership. Relationships and long-term partnerships build licensing deals. Licensees evaluating licensing opportunities look for three things: an IP owner they like and trust, an IP with a great chance to make a profit, and a win-win licensing deal.
The first secret is the most successful licensor is one who is genuine and wants the licensee to make a profit. No one is going to invest the time and money upfront working with someone they don’t like or trust (the same is true when you are evaluating a licensee). Hard selling a license to get up front license fees is not the way to build a long-term sustaining partnership (but it’s a way to potentially end up in litigation).
The second secret to selling a licensing deal is figuring out what makes your IP valuable to a licensing partner. What ever it is, make it compelling enough to convince a licensing partner it’s worth the risk licensing it. The real value of your IP is the way a licensing partner can use it to increase revenues, cut costs, or gain a competitive advantage. Nothing sells a licensing deal faster than proving that your intellectual property generates revenues and customers want it.
The third secret is that licensor’s don’t sell licenses, licensees do. If you have an IP with multiple licensing opportunities, such as a brand, character, book, or business process, your first licensee becomes your reference licensee. One of the best ways that you can do that is with a sweetheart deal. The strategy is simple – you offer your first partner a license at little or no cost up front. That doesn’t mean not getting paid…you get paid royalties from sales, plus they help sell your licensing opportunity to other licensees.
One of my clients created a new event brand for nightclubs. They wanted to license the brand to nightclubs to create events and attract new customers. When they contacted me, a night club who heard about their brand wanted to license it. We negotiated the first license using the sweatheart deal…basically no up front money…in return for the night club promoting the brand and the event . The result was a big hit and lots of publicity. This kick-started their licensing program, and it attracted several large nightclub operators who wanted to license their event brand for multiple locations.
You’ve got a lot riding on the success of your first licensee, so it’s smart for you to put a lot of time and help in getting your licensing partner started. The reason is once you have the first licensee on board, you can use that licensee as a reference to attract other licensing partners. They will want to know if the license will be successful, and speaking to an active licensee is one your strongest selling points.
Successfully selling your licensing opportunity takes more than just presenting your IP. The most imporrtant deal point is the right licensing partner, and it’s critical both you and your partner have the same vision for your IP. Second, you must show why your IP is valuable to them and worth taking the risk. And third, one of the best ways to get your first licensee is to offer a sweatheart deal, which helps make your licensing opportunity more attractive to other licensing partners.
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