What's one of the Biggest Hurdles to building a Successful Licensing Program

What's often the biggest barrier to success in terms of starting up or expanding a Brand Licensing Program? This is a common question that I get asked a lot as a consultant in the industry. I will tell you, more often then not, it is trying to build a brand licensing program without receiving adequate resources from your company to do the job right. Typically a Licensing function in a corporation might be staffed by a Director of Licensing and maybe one support person if you are lucky. What will come along with that title is probably an aggressive royalty revenue target that you will need to achieve in your first year. Unfortunately, most licensing functions are borne out of a desire to generate additional revenues from you brand, but there is very little forethought or research that goes into staffing a successful licensing function to achieve such a goal. Very often the company setting up the function may be under headcount growth restrictions particularly for non-core activities like brand licensing. I would say the norm in the industry is that a company NEVER will give its licensing function the resources it really needs to be successful.

There also can be a chicken or the egg mentality in that management will tell you that you can have more resources once you close a few successful deals and start generating a profitable revenue stream. The problem is getting those first few licensing deals closed can be the hardest part of starting a licensing program. Often programs will languish for a year or two as one or two licensing professionals try to act as their own sales force in scouting out new licensing deals. But serving as your own sales force is more than a full time job for a Director of Licensing whose responsibilities also include legacy licensee management, licensed product quality control, cross marketing between licensees and internal business units, marketing approvals and meeting with retailers to help get licensed product wider distribution. Trying to cover new License Sales on a part-time basis is simply a recipe for very slow program development.

So what's a Corporate Licensing Director to do? My advice is to quickly tee up the analysis and discussion of what resources your licensing function truly needs to achieve its goals. If your company is unwilling or constrained from providing these resources, then it is time to consider hiring a licensing agent. Licensing Agencies can serve as your outsourced sales force, aid in licensee background due diligence, negotiate your licensing deals and assist in contract drafting. Once a deal a signed an agent can also be helpful in on-boarding your new licensee and assisting in executing on the promise of the new licensing relationship. Remember their compensation is commission based so the new licensee’s success is their success. Their interests are perfectly aligned. To me a good licensing agent can be the biggest key to success for a new licensing program.

At times, licensors have to arrive at this conclusion the hard way, they try to go-it-alone without the proper resources, experience or the network to be a successful licensor and their program will languish for a few years with very poor results. Fed up with the lackluster performance Management finally will bite the bullet and decide it can now stomach paying an agent their commission rate in return for getting the licensing program on a much faster track for success. Unfortunately, by that point they have lost time, licensing opportunities and years of royalty revenues. The reticence to bring an agent on-board quickly in the early stages of a licensing program because of the "dreaded' commission payment is the biggest hurdle to building a successful licensing program with limited resources. When I encounter this "commission" reticence, I ask my clients this simple question, which is better getting 70% of millions of dollars in agent generated royalties or getting 100% of the zero dollars or much lower royalties revenues that you may be able to generate on your own. The healthiest way to look at agents is that a good agent will typically generate royalty revenue that you would not be able to attract on your own; truly incremental revenue. I’ll pay a commission on revenue incremental to my own licensing efforts every time.

My next post will deal with successfully selling a licensing agent into senior management.

Mike Slusar

Managing Director & Owner
Brandar Consulting, LLC

“Helping Brands Reach for The Stars”
email: mike@brandar.com
http://www.brandar.com/

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