Let’s say you’ve just had a million-dollar idea for a product. You know that it will solve several problems that consumers face and that it will surely appeal to your target audience. You’ve also done all the necessary market research and have concluded that your product has a high chance of succeeding.
The question now is this: how can you get your product out into the hands of your target market?
There are a couple options that you can choose from, broadly speaking. One is to start your own company, which allows you to manufacture and distribute your product at your own pace and time. The downside, of course, is that you are responsible for the whole operation. Running a business, while it can be tremendously rewarding, is a lot to take on, and the risks are high.
Both of these are excellent solutions, but they’re not the only options available. If you want to get your product out to your customers ASAP, you might want to look into product licensing. Basically, this involves selling the license of your product to an existing company, allowing them to manufacture and distribute it as they see fit. You still own the idea and the design, but the licensee has full control over how they produce and market your product. They’re basically renting your intellectual property.
What Are The Benefits Of Product Licensing?
If you’re not familiar with product licensing, you might be hesitant to give it a try. This is particularly true if you’ve spent a long time (and a lot of money) developing your product. It can be hard to relinquish control over a project that you have nurtured and developed so passionately. But, if you look closer, you can see that licensing offers several benefits to you as an inventor and product developer. It may not be right for everyone in every situation (there’s nothing wrong with launching a new business!), but it is a potentially very lucrative and realistic strategy worth considering.
It doesn’t require lots of funds
If you decide to start your own business, you’ll need a certain amount of money to get it off the ground. This is true even if you decide to sell your products online. After all, you’ll still need to hire a manufacturer to make your products, create advertising and marketing campaigns for it, and pay for website design and hosting. Running a business is expensive and time-consuming. It is an all-encompassing activity that you need to be ready to go all-in with.
This isn’t the case if you decide to license your product. Since the licensee will take care of everything — from manufacturing to distribution and even after-sales and customer service — the amount of personal investment and risk both in terms of time and money is substantially less when you decide to pursue licensing.
It doesn’t need much time and effort
Speaking of time, imagine how much time and energy you’ll need to register your business, get the necessary permits and licenses, and find the right manufacturer for your product. Don’t forget that you’ll need to work with raw material suppliers, marketing and advertising experts, web designers and developers, and potential distributors and retailers. You’ll need to handle accounting, payroll, shipping, customer service… the list is long. If this seems daunting to you, that’s because it is.
If you decide to go the product licensing route, you’ll no longer need to worry about these tasks since someone else will tackle them for you. As a result, you’ll have plenty of time and energy that you can spend on your day job, with your loved ones, or even creating a completely new product.
It comes with fewer risks
When people start their own business, they usually either use a portion of their personal savings or borrow money from a bank or any other lender. Both of these options come with risks: if the business fails, the owner can lose their own savings and may even become liable to repay the loan, depending on the loan terms. It’s also a pretty substantial risk to give up your day job in order to pursue entrepreneurialism.
This is one of the areas where product licensing shines brightly. Since there’s no need for you to invest money in the manufacturing, marketing, and distribution processes, you don’t need to face any financial risk. This can give you peace of mind and allows you to focus completely on product development.
Licensing actually offers a way for you to pursue being a professional inventor, rather than a successful businessperson. Depending on your own particular personality and life goals, one of these paths may be more appealing than the other. They both have advantages and disadvantages: which more resembles you?
It allows you to enter the market ASAP
As described above, starting a business requires you to jump through several hoops before you can start selling products and turning any kind of profit. Product licensing eliminates many of these hoops and allows you to get to the heart of the matter: getting your product into your customers’ hands. Since your licensee has all the necessary infrastructure in place, they can quickly manufacture your product, distribute it through the right channels, and place it in front of your target audience. This, in turn, allows you to earn revenues and enjoy the fruits of your labor within the shortest possible time.
It introduces your products to a large audience
One of the biggest challenges that new entrepreneurs face is gaining the trust of large retailers and supermarket chains. These national and multinational corporations often don’t work with startup businesses and SMEs because these are considered as high-risk. However, when you license to an established and reliable manufacturer or distributor, you have your foot in the door and allies to help you get your product noticed by major retailers. This means that it can have nationwide and even international exposure and that it can reach a large number of people.
It lets you leverage the expertise of the pros
Running a business is extremely difficult, especially if you don’t have any experience with it. This is why product licensing is a great choice: it gives you the chance to leverage the skills, knowledge, and experience of a well-established company that has been around for several years. This greatly increases your product’s chances of success while giving you fewer headaches to worry about.
What Are The Challenges?
With all its benefits, product licensing might sound like the ideal solution for you. However, it’s important to note that it’s not entirely perfect and that it presents challenges, too. One of these is looking for a licensee that’s attracted to your product and is willing to give it a try. And even when you do find an interested company, you still need to do your research and determine if entrusting your product to them is a sound decision. It’s often wise not to jump at the first offer you get.
The fact that you’re tied to a contract can also be a challenge. Most licensing agreements require you to stick with the company for a certain number of years, which isn’t a problem if you’re satisfied with how things are going. However, this can be an issue if you find another company that has a better offer but you can’t switch to them since you’re still in the middle of your contract.
Of course, you have to face the fact that you’ll have very little control over your product once you hand over your intellectual property rights to the licensee. You won’t have any say on how it’s manufactured or marketed, and the licensee will now call the shots. If they somehow botch things up, your idea can end up getting wasted, and you’ll lose the opportunity to introduce your product to the market and reach a wide audience. Because of these, it’s important for you to do your research and look for a licensee that’s trustworthy and reliable and knows how to stay on top of business.
Steps To Take Before Licensing Your Product
Product licensing is not just about having a great idea. If you want to attract reputable companies and convince them to license your product, you’ll need to take the following steps:
- Design the right product. Your design is one of the first things that potential licensees see, so you have to ensure that it’s well-made and results to a high-quality, high-performance product. Don’t forget to check for sustainability and cost-effectiveness — these are two of the most important factors that licensees look into.
- Test your prototypes. Once you’re happy with your product design, you’ll want to prototype it right away to see if it functions as desired. If it doesn’t, you’ll need to go back to the drawing board and improve your product. If you’re satisfied with the prototype, you can proceed to finalizing the design.
- File a patent. Your licensee only earns the right to manufacture and distribute your products — the patent for them and the ideas behind them still belong to you. So, before you decide to license your product, make sure to get the appropriate patent to protect your intellectual property rights.
- Identify the proper licensee. Find the right firm to partner with is maybe the most important aspect of the whole process. Look for companies that have had success and are experienced with products similar to yours, or that have relationships with the kinds of retailers your target consumers are likely to shop at. Don’t just bite on the first hook that passes by!
All of these tasks might seem difficult, but you can make them easier by working with Cad Crowd. We offer a complete range of product design and development services for entrepreneurs, inventors, and innovators. From industrial design to rapid prototyping, we can assist you in improving and finalizing your designs. And yes, we do help clients license their products. We can also connect you with patent attorneys for USPTO patent searches and applications
Let us help you get your product onto the shelves of major retailers! Contact us today for a free quote, and tell us how we can help you!