You’ve invented a product. Your family, your neighbors and everyone and their brother said your product is sure to be the next big thing. So you patent your product, consider production, think about distribution and making sales, carrying inventory and insurance, hiring employees…and suddenly your big idea has become a great big ball of anxiety.
Taking a product from idea to market can be expensive and time consuming. And it’s not for everyone. Many product inventors instead decide to offer their product for licensing. Essentially, an inventor hands over the reins of product development, manufacturing, marketing, and sales to someone else. In return, the inventor collects royalties every time the product is sold.
The world of product licensing can be confusing. Taking baby-steps and gathering as much information as you can before you begin will help make the process a little clearer.
1. Make sure your idea is protected
If you can protect your invention with a patent, consider doing so. A patent prevents someone else from copying your idea and profiting from it. When you make a licensing deal, the company buying the license also gets access to your patent. If your invention or product is not patentable, such as with artwork or written material, be sure to have clearly stated copyright authority of your work. If seeking a patent, meet with a patent attorney to be sure you have all your ducks in a row—seek a copyright attorney if that better fits your product.
2. Know what you want
You don’t want to go into a licensing deal without knowing what’s going on. Have an idea of what you want out of the deal, but be flexible. Speak with your attorney about reasonable royalty expectations, length of time you’ll allow your product to be licensed, and other details.
3. Drum up some business
Doing your own market research and initiating sales is a good way to discover how marketable your product is and if it will sell.
If you’ve already been selling your product, be sure to compile all of your current and past sales data to reflect units sold and sales income. If you haven’t been selling yet, consider getting your product in front of your target market and start garnering sales. Companies may be more interested in your product if you have proven sales to back it up.
4. Research your dream partners
Knowing companies that may be a good fit for licensing your product is crucial to making a good deal.
Research companies who would pair well with your product and make a list of your top ten. Then, visit each company’s website and get familiar with their product lines, what stores they distribute to and who to contact for more information. You can also try finding representatives for each company on Facebook or LinkedIn, which may offer additional key information.
If you can’t find the information you’re looking for online, call the company and ask for a representative. Let them know you’re looking for information on licensing as companies sometimes have designated representatives just for that purpose.
5. Perfect your pitch
Once you’ve decided on the best companies, it’s time to make contact. Craft an introduction letter, also called a pitch letter, to let the company know more about your product. You’ll want to include information on your product’s uses, your target market, sales data, why you think your product is a good fit, and other key points.
Keep your pitch letter short and sweet—no more than three to four short paragraphs. Be sure your letter is addressed to the correct person and not “to whom it may concern.” You may choose to send your letter by mail or e-mail—be sure to read the company’s contact policies if available.
6. Be persistent and follow-up
Staying on top of the letters you’ve sent is imperative to keeping the ball rolling.
Consider purchasing a blank calendar simply for the purpose of writing down when you’ve sent an inquiry letter and when you followed up. Consider following up one week after you’ve initially contacted a company. Include a specific date and time for a phone or email meeting if possible. Bottom line: Be sure to follow-up until you get a “yes” or a “no”, and don’t give up. Once you’ve scored a licensing meeting, you’ll know your hard work was worth it.
Justine Grey is a Web entrepreneur who writes Work Life Joy for frazzled business builders who long to work vibrantly and live beautifully. You can find her on Twitter at @JustineGrey chatting about life, work and her pop culture obsession.