License To Profit

Before you tackle the licensing industry, you need to have your own house in order. Make sure you have or can get financing, ensure that your manufacturing capacity is up to snuff, and establish distribution channels. It's also a good idea to try to establish a sales history for your products, suggests Francis. Once this is accomplished, then decide what licensing products you want to target.

Finding potential licensors is not difficult. LIMA sponsors an annual show in New York City, with the next one, Licensing '97, slated for June 10-12. It will feature more than 2,000 available properties.

TheLicensing Resource Directory, published annually by Expocon Management Associates, is an excellent resource. It lists properties alphabetically, then cross-references them by owner and category. The directory contains more than 3,000 listings and various how-to tips, as well as information on support organizations, consultants, attorneys, designers and other people specializing in licensing.

"I recommend going down the list of properties with a pencil and putting marks beside all those names that ring a bell," Altchuler says. "If you haven't heard of them, chances are they won't have much value to you."

Next, Altchuler advises doing a little market research by talking to your target customers to see if the property is something that might interest them. Check out consumer and trade publications to get an idea of what licensed properties might appeal to your intended customers.

For information on what's happening in the licensing industry on a monthly basis, look at the newsletter The Licensing Letter from EPM Communications. EPM also produces The Licensing Letter Resource Sourcebook, which lists the top 4,000 executives involved in the licensing industry. And Adventure Publishing puts out a weekly newsletter, The Licensing Report, as well as a monthly magazine called The Licensing Book.

A licensing consultant can be a valuable asset to a company that doesn't have the internal resources to dedicate one person to studying the licensing industry, says Stoebenau. "A consultant helps a company identify and acquire a licensed brand or character for their product line," she explains. A qualified consultant can help a manufacturer determine if a licensed property could enhance its product line and how to use it most effectively, adds Gary Caplan, a Studio City, California, marketing and licensing consultant.

When looking for a consultant, be aware that terminology is critical, stress Stoebenau and Caplan. A licensing agent represents the property being licensed, a licensing con sultant represents the manufacturer seeking the license, and a marketing company is not necessarily a licensing expert, although many include licensing as part of their services.

Most licensing consultants work by contract and on retainer, says Caplan, although arrangements can also include a retainer plus percentage of sales agreements or per-project arrangements. To find a licensing consultant, contact LIMA, check licensing resource directories or attend licensing shows.

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