Product ideas with huge market potential are few and far between. That doesn’t stop inventors from dreaming about them though. How could it? What if the market is so big, we wonder, that not one but two companies will want to license our idea from us? What could be better!
In reality, this scenario doesn’t play out very often. But it is possible. Here’s what you need to know to make it happen.
1. Accept that most licensees will want an exclusive. Why wouldn’t they? Companies are always seeking to differentiate themselves from their competition. Embracing open innovation is an excellent way of doing that. So why, after committing to manufacture, market, and distribute your idea, would your licensee then agree to compete for market share? Your licensee is making a major investment. That’s why licensing is such a great business model for independent inventors. You’re tapping into your licensee’s power. However, the fact that most companies will ask you for an exclusive does not mean you need to grant them one.
2. Determine how the company distributes its goods. How can one company supply its products to every kind of retail outlet? The answer is that most companies don’t. No one does everything well! Does the company sell to big box stores? Does it supply convenience stores? What about pharmacies? Department stores? Gift shops? The list goes on. Understanding distribution is crucial to your success, so do your research.3. Don’t forget about the international market. Does the company sell its products outside of the United States? If so, where? Is it a major player there? If you want to license an idea to more than one company, you need to consider what kind of global potential it has. What other markets could it succeed in? Gather evidence that supports your claims. If your licensee doesn’t sell its products in Mexico or Canada, for example, you could ask to leave those territories out of your agreement. In that event, you’d be free to pursue a licensing agreement with a different company to market your idea in those countries.
3. Don’t forget about the international market. Does the company sell its products outside of the United States? If so, where? Is it a major player there? If you want to license an idea to more than one company, you need to consider what kind of global potential it has. What other markets could it succeed in? Gather evidence that supports your claims. If your licensee doesn’t sell its products in Mexico or Canada, for example, you could ask to leave those territories out of your agreement. In that event, you’d be free to pursue a licensing agreement with a different company to market your idea in those countries.
4. Using the information you’ve gathered, determine whether or not there’s an opportunity. How could another company sell the idea without competing with your licensee? That’s the really the crux of the issue. I was able to license my rotating label innovation to multiple companies because the products they were using Spinformation on were so different. One company produced alcoholic beverages. Another featured the label on a coffee product. A third applied it to herbal supplements. There was no crossover.
Above all else, your licensee wants to be successful. Licensing an idea to more than one company requires carving out space for each. And although it isn’t easy, it is absolutely doable. Just last year, one of my students licensed her innovation to multiple companies, in part because the first company she licensed it to did not demand an exclusive. The second company she licensed it to had distribution in an area that the first company did not play in. There wasn’t a conflict. Needless to say, she’s thrilled to be collecting twice as many royalty checks.
I saw the benefit of becoming a Disney licensee a few years after my guitar pick business got off the ground back in the day. My partner and I knew picks with images of Disney characters on them would sell like hot cakes. It was a no-brainer. Disney, as you might imagine, is very strict about how it licenses out. To our surprise, we were able to become a Disney licensee fairly easily. Then again, no one else was selling picks with Disney on them.
When you’re thinking about whether or not it’s possible to license your idea to more than one company, study up on the industry itself as well as potential licensees. How are products sold? Where? As always, it’s up to you to find the opportunity.
Originally published on Inc.com September 4th 2015.
