License To Profit

To many, it seems to be the key to a gold mine. Putting a Notre Dame logo, a Lion King character or a Jurassic Park graphic on your product means guaranteed success, right?

For a sure thing, prepare for a frustrating search. But if you're willing to put some time and effort into making your product work, buying the licensing rights to a well-known product or name can substantially increase your chances for success.

Licensing is a $100 billion retail market worldwide, with $70 billion in business in North America alone, says Murray Altchuler, executive director of the International Licensing Industry Merchandisers' Association (LIMA). But "a license is not a [prescription] for instant success," he cautions. "It gives you the borrowed interest of a name that is either unique or has some consumer acceptance, but it still takes good selling and marketing to succeed. A license is, in essence, a tool, and when used well, it's an extremely cost-effective marketing tool."

Licensing offers three major advantages. "First of all," Altchuler explains, "it may mean you have something unique your competitors don't. Second, it may mean getting a little better margin because it is unique. And third, it may mean that 10 percent of the retailers you call on that you have never been able to sell to will finally take a look because you have something different. And when that happens, you can sell the rest of your line." Another benefit, Altchuler adds, is that licensing positions you as a leader.

This article was originally published in the January 1997 print edition of Entrepreneur with the headline: License To Profit.