How to accelerate your licensing

Why hire a licensing agency

How to accelerate your licensing programme: hire a licensing agency!

Most in house licensing programmes start more by luck than judgement: Prestigious brand is courted by prestigious partner and, with the help of marketing, legal and probably the CEO, the company breaks their licensing duck.  If this first licensing deal turns into something successful at retail there’s more interest, more growth and, eventually, someone is appointed to manage the whole thing. That person then needs an assistant, as does their assistant and, suddenly, what started out as a rapidly growing profit stream becomes a walking overhead dependent on continual growth to feed the team and still make a return of £60-100k per employee.

When licensing is just about breaking even, trouble usually comes in three’s:

• Some categories that seem ‘obvious’ to the frustrated CEO don’t seem easy to break into
• your biggest competitor upstages you with a new activation
• one of your existing partners seems to be running out of steam and wants to renegotiate

And, as a bonus

• Internal pressure to hit the KPI based on year 1 forecasts is growing

As a licensing agency this is typically the moment we receive the call that could spell the start of a 5-10 year relationship. Depending on chemistry we’ll meet the head of licensing who will explain why they’re looking for a licensing agency to develop the many categories that are ripe for commercial development.

The good news is that our team are experts at managing and growing licensing programmes. We have people who have spent the last 22 years reaching out to partners with well researched, exciting licensing opportunities, negotiating terms, getting products and marketing plans approved and generally putting in place the foundations for a strong, sustainable licensing programme.

The bad news is that transparency can sometimes take a back seat in the briefing process leaving us to read between the lines of an RFP that struggles to express the most important, and unwritten, rules of any company’s licensing programme such as:

Money doesn’t matter as much as positioning	Vs.	Only deals over £xxxk will be considered
We trust our agency to negotiate the best deal terms	Vs.	No deals are approved until the CEO has reviewed them
Product categories are cleared in advance	Vs.	Some categories/territories may no longer available for licensing
Product approvals are managed efficiently	Vs.	Product feedback is slow, painful and inconclusive
We are open to reasonable contract negotiations	Vs.	No amends to our standard licensing agreement are acceptable

 

Setting licensee expectations correctly is a key part of the licensing process because from these expectations flow forecasts, heads of terms and, ultimately, revenues.  Unfortunately, many companies do not know where they are on these spectrums and so they can only truly be mapped when the right opportunity (or the wrong one) comes along.

By contrast, once appointed, we can be totally transparent about how we run the licensing programme because our on-line licensing admin system (that we call BrandXL) allows our clients to see all current licensees, existing agreements, royalty reports, contracts, invoices and approvals, all in one place. This system has been a major factor in allowing us to scale up to the point where we manage over 180 licensees on our clients behalf whilst adding more without growing the administrative burden.

Hooked on the adrenaline of growth, most companies appoint a licensing agency to keep adding new partners, categories and markets. However, because the company has been doing licensing in house, we often find that the rules of engagement for the early-stage licensees have been poorly set, leading them to become either too powerful or too weak.  Where they are too powerful they extend into markets and products outside their core competency, restricting the opportunity for a new partner and start reinventing the brand in their category; where they are too weak, they suffer at the hands of the brandowner but with noone to make their case, this leads to them missing out on opportunities or building up dangerous resentment.

If you are appointing a licensing agency to manage your existing licensing programme, therefore, you would be well advised to let them manage the existing partners even if that means giving up some of the hard-earned revenue. Whilst this might seem counter-intuitive at first, the upside is that you engage an entire team to work on your account and not just one new member of staff. This dedicated, motivated team of licensing experts that have been working on licensing 24/7 for the past 20 years and really know their stuff will, if you let them, turbo charge your licensing programme, fixing problems you didn’t even know existed and lay the foundations for years of sustainable growth: short-term investment is worth the long-term gain.

Subject to negotiation, a licensing agency can work off commission only (typically 30-35%) so profit is typically 65% of royalty minus overheads which makes margins easy to calculate. Yes there are some fantastic in-house licensing teams (the V&A, Natural History Museum, RHS, Marmite, AA and Country Living spring to mind) you can bet that those that achieve significant revenue are run by people who have worked in licensing for a very long time, and they learnt what they know through working with a licensing agency.