I get calls and emails constantly about licensing. People ask me the same thing over and over – can’t I just license my idea/product to a company?
Unfortunately, it’s just not that easy…
I am not sure what the current statistics are for licensing success rate, but based on what I used to know and the deals I have been involved in, few products ever get licensed.
Why? Lots of reasons…and here are just a few:
- The product is simply not that exciting or capable of attracting much excitement with potential licensees
- The product has not even been developed and so there is nothing for the potential licensee to evaluate
- The inventor has unrealistic expectations about the kind of money he could earn from a licensing deal – most people seem to think they will make a ton of money and most do not make much at all
- The inventor has little or no knowledge of how licensing deals are done and of how to approach the right people at the companies with which they are interested in striking a deal
There are certainly additional reasons, but it seems the internet can be a blessing and a curse, so to speak. There is a lot of information out there, but sometimes too much info can be confusing and overwhelming to an inventor.
What really makes a difference is if someone has experience doing licensing deals, and nothing beats a real-world experience in my book. People must understand that in order to have a chance at a good licensing deal, they must first have a product that can change the retail markets as we know them or at least have a product that appeals to a broad audience that can solve everyday problems or enhance your life in a positive way (like an IPOD for example). Although licensing deals are done in many product categories, it seems that consumer electronics/gadgets, apparel, and housewares/home improvement products seem to be popular for deals from what I have seen.
Just know that very few products ever reach that level of licensing success…likely a percent or two at BEST…likely less than that based on some older stats. For those lucky few that do get a deal, there are lots of things to work out like length of deal, royalty rates, guarantees, etc. – and many of these “done deals” wind up going south quickly!
So, given all these obstacles, what are you to do if you really want a licensing deal?
My advice – take the risk out of the deal for the licensee! That is one of the most effective things that you can do. And you can do this by “proving your concept” by developing it yourself and selling it to a few retailers. Once you do that, you have proven that your product is commercially viable. In the process, you will have increased your chances of securing an actual deal.