Hidden Treasure

Entrepreneurs may view licensing as an easy revenue source that increases market share with little additional expense. Licensing gives a person permission to use your company's name, trademark, logo or product for his or her own distribution. While it can increase the profile and distribution of your assets, licensing exposes you to the greatest risk of all: denigration of your trademark or name.

"It is very tempting to license out a great product or a great name, but most companies do it too soon and have no clear exit strategy," explains Swart. "The license agreement needs to set out exactly what the licensee is required to do to maintain the integrity of the name or trademark and what the licensor may do if this integrity is breached."

Swart also advises entrepreneurs to be sure they have an infrastructure in place to handle the support needed to license a product. "Software companies, in particular, have good products that have faltered because they put the cart before the horse. Don't oversell your product, and don't license it until you're sure you can support it."

No matter what your choice for selling assets, the experts continue to recite the entrepreneur's mantra: Investigate alternatives, negotiate the deal and reduce the risk as much as possible.

Sean P. Melvin is an author, attorney and assistant professor of business at Elizabethtown College in Elizabethtown, Pennsylvania.

Contact Sources

• Advantage Funding Corp.
  (800) 241-2274, www.advantagefunding.com
• Bell, Nunnally & Martin LLP
  (214) 740-1400, www.bellnunnally.com
• The Praedium Group LLC
  (212) 892-4924, www.praediumgroup.com
• Research Associates Inc.
  (800) 255-9693, www.raiglobal.com.

This article was originally published in the February 2002 print edition of Entrepreneur with the headline: Hidden Treasure.