In the competitive world of small business, securing a licensing agreement with a major licensor can be a game-changer. Whether you're an entrepreneur looking to expand your product line or a small business owner seeking new opportunities, understanding the intricacies of licensing is essential. This comprehensive guide will walk you through the key steps to position your business as a strong candidate for licensing deals.
Understanding What Licensors Look For
Licensors are often looking for companies with strong financials, robust manufacturing capabilities, and effective marketing strategies. For small businesses or entrepreneurs with less experience, the focus shifts to product quality and presenting a compelling proposal. Here's what you need to consider:
1. Securing Financing
First and foremost, ensure you have or can obtain the financing necessary to pay for the licensing rights and cover the costs of producing and selling the licensed products. This includes both upfront fees and ongoing royalties.
2. Manufacturing Capacity and Distribution Channels
Confirm that you have the manufacturing capacity to produce the licensed products at scale. Additionally, ensure your distribution channels are established and capable of efficiently delivering the products to your target market.
3. Establishing a Sales History
Having a proven sales history for your products can significantly boost your credibility. Licensors want to see that your business has a track record of success and can generate substantial sales.
4. Targeting the Right Licensing Products
Decide which licensing products align best with your business. Conduct market research to understand what properties interest your target customers. This may involve:
- Talking to your target customers to gauge their interest in specific properties.
- Reviewing consumer and trade publications to identify trends and potential licensing opportunities.
5. Leveraging a Licensing Consultant
Consider hiring a consultant if your company lacks the internal resources to navigate the licensing industry. A consultant helps you identify and acquire a licensed brand or character for their product line. This expertise can be invaluable in securing the right licensing deals.
Crafting a Compelling Proposal
Once you've identified the licensor you want to target, the next step is to present a convincing proposal. Here's how:
1. Initial Contact and Licensing Application
Approach the company or its representative to discuss your product's potential. You'll likely be asked to complete a licensing application and provide a detailed business plan. Your business plan should include:
- How do you propose to market the product
- Who your target audience is
- Estimated sales projections
2. Product Samples
Most licensors will request product samples to assess the quality and potential of your product. Ensure your samples are of the highest quality and represent your brand effectively.
3. Marketing Plan
A well-crafted marketing plan can tip the scales in your favor. Detail your marketing strategies, promotional activities, and how you plan to reach your target audience. Highlight any unique or innovative approaches you'll use to market the licensed product.
4. Negotiating Terms and Royalties
Most licensing agreements will require a minimum sales guarantee over the contract's life, paid upfront or in installments. Additionally, licensors typically charge royalties, a percentage of sales paid to the property owner or agent, usually based on the net wholesale selling price. Some licensors are open to negotiating these fees, so be prepared to discuss terms that work for both parties.
Propel Your Small Business
Breaking into the big leagues through licensing can propel your small business to new heights. By securing financing, ensuring manufacturing and distribution capabilities, establishing a strong sales history, targeting the right licensing products, and crafting a compelling proposal, you can position your business as a strong candidate for licensing deals.
Don't miss this opportunity to elevate your business. Contact us today to learn how your business can secure a major license and achieve great success!
About the Author
Rand Brenner is a licensing strategist, dealmaker, and founder of the IP Licensing Coach Academy. For more than 30 years, he has helped founders, startups, and operating companies turn intellectual property into scalable revenue through structured licensing campaigns, strategic partnerships, and commercialization agreements.
His work spans consumer products, medical devices, software, entertainment, and emerging technologies, with licensing programs that have generated millions in product sales and royalty income. Throughout his career, he has worked with both large brands and small innovators, showing how the right licensing strategy can open markets faster than building alone.
Rand is the founder of the IP Licensing Coach Academy, a platform that helps IP owners build deal-ready licensing campaigns step-by-step, without relying on guesswork, endless outreach, or one-off deals. His approach focuses on practical execution, real-world strategy, and turning intellectual property into long-term business assets.
