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Buy Design

How to license your clothing concepts.

Q: I create beaded embroidery designs for sweaters and other garments in my home studio. I'd like to license my designs to fashion designers and manufacturers. My first approach was to contact a licensing association, but it charges $500 a year for membership and $1,500 to $2,500 to exhibit at its trade shows. Is there any way to go public with my designs without paying so much money?

Karen Marks
Detroit

A: Carole Francesca is president of Broad Street Licensing Group in Montclair, New Jersey. She has been in the licensing industry for more than 20 years and specializes in licensing corporate brand names:

The first and most important step prior to licensing anything is to protect your intellectual property rights by contacting an attorney specializing in trademark law. The attorney can advise you on the steps you need to take to accomplish this.

If you have a gift for selling, you can attempt to license your designs yourself. However, most artists and designers are not equipped or staffed to conduct a licensing program on their own. In that case, an experienced licensing agent can market your work and contact appropriate manufacturers on your behalf.

If you decide to go that route, choose an agent who specializes in the apparel and design industry. In addition to soliciting potential licensees, agents also handle contract negotiations, collect royalty payments and act as a liaison between you and the licensee. This leaves you to do what you do best: create. Contact the International Licensing Industry Merchandiser's Association for a list of agents specializing in artists and designers.

Licensing your designs takes research, an understanding of market dynamics, and a lot of energy and patience. If you decide to undertake your own licensing program, you'll need to plan, research and implement the following:

1. What types of products do you want to license your designs for? Rather than simply saying "apparel," think about the types of apparel your designs are most appropriate for. In addition to apparel, you might want to expand your list of product ideas to include other categories, such as evening bags and decorative pillows.

2. What type of retailers are you targeting? Specialty boutiques? Department stores? Mass-market discounters?

3. Who do you see as the end customer? Women? Children?

4. Contact companies that manufacture products for your type of customer. One way to do this is to read trade publications. Another way is to talk to store owners--or salespeople in the types of stores you'd like your products sold in--about who their suppliers are.

5. Attend trade shows and market weeks. This is a terrific and inexpensive way to meet potential licensees.

Once you've gotten a company interested in your designs, you'll need to negotiate and put together a licensing agreement. This agreement should spell out the exact product the company will be making, the royalty percentage they will pay you, a guaranteed royalty amount they will pay you over a period of time, the contract length, renewal periods and termination clauses.

Consulting and working with an attorney is essential as you go through the licensing process. Though this may cost you in the beginning, it's a step you can't afford to skip.

Below is a list of resources to contact for association, publication and trade show information:

International Licensing Industry Merchandiser's Association, 350 Fifth Ave., New York, NY 10118, (212) 244-1944.

Women's Wear Daily, Fairchild Publications, 7 W. 34th St., New York, NY 10001, (212) 630-4230.

The Licensing Letter (biweekly newsletter), 160 Mercer St., New York, NY 10012, (212) 941-0099.

International Fashion Boutique Show (held five times a year), The Larkin Group, (800) 869-7469.

Magic and WWD/Magic (key apparel trade show held twice a year), (818) 593-5000.

Q: I am an independent sales representative for a plastics manufacturing company. One of my big accounts went belly up after our company had designed, manufactured and shipped their product. Worse, it was a custom product that only this client could use. I thought I'd covered all my bases by researching the client company, conducting a credit check and so on, but I didn't have a clue this loss was coming. Not only did we lose the account, but we're now in litigation. What warning signs of financial instability can I look for in the future?

Name withheld
Willow Grove, Pennsylvania

A: Larry Winters is assistant vice president of Dun & Bradstreet (D&B) Small Business and Express Services, which provides information services for small businesses. Winters has worked in the financial services field for 19 years:

The early warning signs of a company's financial instability include the following:

  • An overall slowdown in paying suppliers, especially vital vendors. The best way to find this information is through a credit-reporting service such as D&B or Experian (formerly TRW).
  • The continued presence of any lawsuits, liens or judgments. If a business has been sued for nonpayment, incomplete work or failure to honor guarantees or contracts, this is a possible red flag. This is public information you can obtain from your local courthouse or by contacting your state's attorney general's office.
  • Significant revenue growth or contraction. Sudden growth might signal that a company is discounting heavily, trying to get as much cash into the business as it can. If revenue drops significantly, there could be a loss of customers. Ask a company for a financial statement for this year and last year, and do a comparison. Discrepancies should be investigated further.
  • Any ownership, address or business name changes. If you see one of these clues, ask about it. People typically don't change situations that are going well. Ask these questions: Who is the owner? Who are the principals? How long have they been the principals? If there has been a recent change, find out why.
  • Fires, burglaries or embezzlements. News-clipping services can help you keep tabs on these things. You can also be diligent by subscribing to trade publications in the industry you serve. If you have a high concentration of customers in a certain geographic area, subscribe to a local newspaper in that area.
  • Changes in legal structure. If a company changes from a corporation to a proprietorship or partnership, there may be problems.
  • Any significant acquisition or divestiture. Find out how the company financed the acquisition: Did it sell stock? Did it take out loans? Is it going into debt over this? Those are concerns. If, on the other hand, it is divesting or selling off parts of the business, there could be a threat to its financial stability. Newspapers, your state's attorney general's office, a small-business information service or any public record office that compiles this information are good places to look.

Contact Sources

Broad Street Licensing Group, fax: (973) 655-0178, 71610.3455@compuserve.com

Dun & Bradstreet, Small Business Express Services, 3 Sylvan Wy., Parsippany, NJ 07054, (800) 879-1362

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This article was originally published in the January 1998 print edition of Entrepreneur with the headline: Buy Design.

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