Licensing offers three major advantages. First, it may mean you have something unique your competitors don't. Second, it may mean getting a little better margin because it's unique. And third, it may mean that 10 percent of the retailers you call on that you've never been able to sell to will finally take a look because you have something different.
And when that happens, you can sell the rest of your line. Who can obtain a licensing agreement? The list runs the gamut from a multinational conglomerate to a one-person operation.
But in general, a licensor looks for the strongest company in terms of finances, manufacturing and marketing. The good news for small business is that strength is not necessarily measured in dollars or longevity. Before you tackle the licensing industry, you need to have your own house in order.
Make sure you have or can get financing, ensure that your manufacturing capacity is up to snuff, and establish distribution channels. Christian, Glynna K. October Frost, Charles. May Truesdell, Mark. April Wilcox, Deborah A.
January Top Stories. Top Videos. The Chinese firm can then manufacture and sell Baubles in China. Licensing Licensing is a business arrangement in which one company gives another company permission to manufacture its product for a specified payment. The price paid for obtaining, or price received for providing, money or goods in a credit transaction, calculated as a fraction of the amount or value of what was borrowed. The price paid for obtaining, or price received for providing, money or goods in a credit transaction, calculated as a fraction of the amount of value of what was borrowed.
The price paid for obtaining or price received for providing money or goods in a credit transaction, calculated as a fraction of the amount or value of what was borrowed. A great attention and concern from someone or something; intellectual curiosity. One of the many varieties of systems, institutions, procedures, social relations and infrastructures whereby parties engage in exchange.
A trademark, trade mark, or trade-mark is a distinctive sign or indicator used by an individual, business organization, or other legal entity to identify for consumers that the products or services on or with which the trademark appears originate from a unique source, designated for a specific market. It also distinguishes its products or services from those of other entities. Money and wealth. The means to acquire goods and services, especially in a non-barter system. The uppermost part of a column.
Money and wealth; the means to acquire goods and services, especially in a non-barter system. Already-produced durable goods available for use as a factor of production, such as steam shovels equipment and office buildings structures. This term export is derived from the conceptual meaning to ship the goods and services out of the port of a country.
For instance, a licensor can dictate how their property is marketed. And it allows them to enter new markets—through the licensee—without actually having to set up shop there.
One of the drawbacks of having a license agreement is drawing up a contract with the wrong party. In some cases, licensors may want to get into a market so desperately that it doesn't do its research. This means a licensor may be stuck in a lengthy contract with a company whose ideals don't align with its own. The same principle applies to the licensee, especially when it thinks a new product or brand may work well in a certain market without doing its research.
For example, if one company commits a marketing faux-pas or is embroiled in a scandal, it can put the other party at risk as well. This means that both the licensor and licensee must conduct their business effectively. Entering into an agreement increases competition for the licensor. Although the licensee acts on behalf of the licensor, it is, in fact, in direct competition with their partner.
The licensee also loses out, too. Entertainment companies like Netflix enter into licensing agreements all the time. For instance, the company behind a major television series may enter into a licensing agreement, allowing Netflix to include the show among its titles for a certain number of years.
In exchange, Netflix would agree to provide royalties to the content owner from fees it collects from its subscribers. Licensing agreements are legal contracts that are written between two parties—a licensor and licensee. The contract stipulates the type of agreement, the length of the relationship, payments and royalties that are due and when, and the extent to which licensing is allowed. Licensing also allows both parties to retain control over certain facets of the deal, including exclusivity and how a product or service is marketed.
In essence, the contract lays out the expectations of what is required of both parties. The best way to create a licensing agreement is through a lawyer. By getting professional help, you lay out the proper foundation for a relationship with the other party. If you don't do so, you open yourself up to a lot of financial and legal hurdles. The cost to draw up a licensing agreement can cost anywhere from a few hundred to a few thousand dollars.
Going through a lawyer means you'll have to pay an hourly fee. A simple contract may only be a few hours, while a more hefty deal between parties means more details and revisions. If you want to use someone else's property—especially intellectual property—you'll have to ask that party to enter into a licensing agreement with you.
You'll probably have to go through a lawyer to ensure that your interests and those of the property holder are safeguarded. You may have to spend some money to get the agreement drawn up, but by doing so, your financial assets and business will be well taken care of and you're guaranteeing that the relationship with the licensor will be smooth.
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