License To Profit

Once you know who you want to target, the next step is talking to the company or its representative and convincing them of your product's potential.

At Film Roman Inc. in North Hollywood, California, producers of the animated versions of C-Bear and Jamal, Bobby's World, Felix the Cat, The Mask, Mortal Kombat: Defenders of the Realm, Richie Rich, The Simpsons and Garfield, people interested in becoming licensees go directly to Jacqueline Blum, senior vice president of worldwide licensing and marketing.

"We're looking for someone who is going to partner with us on a project with the same creative integrity and passion for the property as we have; someone who can help get the products on retail shelves," explains Blum. "We try to decide what the product is best suited to."

Describing Film Roman as a new and smaller player in the licensing arena, Blum says her staff welcomes people calling with ideas.

While Film Roman handles its own licensing, many larger entities, such as Minor League Baseball, have turned those functions over to a licensing agent.

"We're always looking to diversify our product line--that's probably number one on our list," says Misann Ellmaker, director of licensing for the National Association of Professional Baseball Leagues. Its licensing agent is Major League Baseball Properties, which represents about 155 of the minor league teams in the United States and Canada and earned sales of $45 million last year.

"If you want to be a licensee with us, you don't necessarily need sophisticated retail distribution avenues because you could distribute only to the [ball] clubs, for instance," explains Ellmaker, who says all the clubs have gift shops and souvenir stands a licensee could sell to. Many also have mail order operations or even off-site stores; entrepreneurs could sell to a single club or an entire region.

Those looking for national retail sales, on the other hand, must have the capital to get the product out into the market and onto store shelves.

Deciding which licensor to approach means evaluating your strengths. The bigger and more popular the property is, the more it's going to cost to secure the licensing rights. That's why Altchuler suggests beginners start out small to learn the ropes.

Once you begin approaching companies, many will ask you to fill out a licensing application, and all will ask for a business plan detailing how you propose to market the product, who your target audience is and what you estimate sales could be. Most licensors will also request product samples.

The marketing plan is another critical component of your proposal that could tip the scales in your favor. Francis suggests getting booths at licensing or gift trade shows to test-market your product. He also says creative marketing arrangements such as working out low- or no-risk test programs with retailers may be another avenue to take.

Another good marketing approach is establishing a relationship with a distributor who has major retail clients. This might make it easier to target a broader base of potential sales outlets.

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