Licensing-A way to grow your Business

Consider licensing as a way to grow your business, licensing means to permit or simply means to use. If you are a small business with innovative products you may use licensing as a mode to grow your business. Licensing involves two partners one is an innovative partner and other is a heavy weight organization. Many small businesses die because they are not able to attain those levels of sale or generate revenue, even if they have great products, they do not have those mass production capacity to produce those great products to become profitable. Because R&D costs involved in generating or creating great products are huge yet many products fail to create an impact in the market. The solution is licensing. Licensing is very popular in software sector and very popular example is Microsoft licensing software’s to IBM. Now if a small company really wants to become big the Microsoft IBM licensing is a perfect example. Here are some of the ways to assess whether your business is fit for licensing or not-:

Innovative and Unique products but no capacity to produce at Large scale.

You have an innovative product and is an improvement of earlier product that could lead an impact to the existing industry if it is produced at a mass scale, the solution is simple it is to license it to the big corporation and take a royalty out of the sales, when it is produced and sold at large scale. But remember the legalities involved in such cases, make sure your product complies with all the Intellectual property laws this means you must have a proper copyright or patent for the product before you may license it for mass product otherwise you will lose your proprietorship.

Ancillary products to main product

If your product is an ancillary product to the main product and you can’t match the demand in case it’s a B2B business consider the proposition of licensing it to the main product manufacturer, because they have such facility to mass produce and fulfill demand. Like in cases of automobile industry some technology like computer software are licensed. Or some equipment like safety equipment’s like air bags sensors are often licensed by electronic companies and they earn royalty on it.

 

Products that can only earn profit if mass produced.

It is for those manufacturing factories which have huge distribution channels and the price margin of the product is small that unless they are mass produced and distributed hardly the profit the product could make for those products huge amount of capital is needed to get some product, licensing with already established business is easier to mass produce and gain profits. It is for those products which are to be sold in millions to make millions and that can’t run of pennies as you would be getting pennies.

Licensing is a way to scale up the business really fast without raising any capital, but only precondition is that the product has a huge demand potential and should sell like hot cakes and the product if sold in masses could create a huge impact in the industry. These types of products are best suited for licensing.

 

Nitish Banka

Legal Consultant

www.lexspeak.in

nitish@lexspeak.in