Success stories circulating in the news make it common knowledge that some businesses generate billions of dollars through licensing and patent acquisitions. This is why so many big companies acquire smaller ones. It also explains why even passionate owners of small businesses are often eager to license their intellectual property.
CNBC estimates that there is roughly $200 billion to be made in licensing intellectual property or acquiring smaller businesses. Even though this is lucrative, investors struggle to find the right ones. Research shows that up to 80% of patents are low-quality and will likely not amount to much of anything. The key is sifting through the “riff-raff” to find that profitable 20%.
The key to success here is preparation. Inc. magazine has several tips to help business owners achieve exactly that. The first item on their list is cost. Royalty fees can be as high as 14% so business owners need to ensure they have a strong sales model and marketing plan to boost sales. Otherwise, they might not make enough revenue to profit from the licensing arrangement.
The second tip provided by Inc. is to consider alignment. Many people new to licensing believe that because they love a particular brand, their existing customers will too. This is not always the case. No matter how big and bold another brand is, always consider the market. In pop culture, the customer base one business serves may very well be the arch-nemesis of the other.
One final tip is to be realistic, which might just come at the cost of compromise. Not everyone can afford to license the song of a major artist or imagery from a movie that is a current big hit. It is important to aim within the budget. There might be time enough to work one’s way up to the A-list of licensing intellectual property.