Friday, April 20, 2007

Week 33 – Licensing; Getting All You Can

I like to think of licensing as squeezing every last bit of juice from an orange. Earlier we learnt that getting the most leverage from your advertising can give you much greater results for the same cost. Licensing your method of doing business is the same thing. You will get maximum leverage of your efforts, meaning minimal effort to multiply your income.

Licensing is a key method for geographically constrained businesses to increase their turnover and spread their tentacles. For example, if you are a supplier of steel products, it is unlikely you can be competitive with another steel supplier 1500 miles away. The freight costs would eat any margin and ensure that the local supplier was always able to beat you on price. But what if you could license your method of doing business or method of steel production to all the competitors outside your competitive area?

For a real world example, look at world famous Rockpool Restaurant. The team runs two restaurants, a cooking consultancy business for the airline Qantas, two television programmes which the company co-produces, as well as a product line for the supermarket chain Woolworths. Now that is a great example of leverage through licensing. It all started with the restaurant. Running a top class restaurant is obviously tough but the recipes and concepts and flair can be leveraged through the other initiatives and product lines, without the founders having to work 2 or 3 or 4 times harder.

You have to think outside of your industry. At first glance a restaurant and TV show might not seem like a logical mix, but think how amazing it is that they now get paid to be filmed doing what they would have been doing anyway. You can see the leverage concept in action all around you, Starbucks leverage their core coffee product, super models leverage their beauty and professional sporting teams leverage their players.

Justin Herald, founder of the clothing brand Attitude® operates in this way but he warns that it was not as easy as it sounds. “People come up with concepts all the time, but you can’t just expect someone to offer you money for your unproven concept. You have to get out there, build your brand and sales before you can expect any level of interest in this sort of arrangement.”

How do you get started?


  1. Perform an intellectual property audit on your business. Write down all that is unique about your business. This could be your production methods or customer service technique or the selling system that works better than any competitors.
  2. How could you offer others training on your method of achieving a result? The point is that if your business is successful, it is because you have devised a system which is working, week in, week out. Parts of, or the entire system can be licensed, after all who wouldn’t want your success? You have to have your methods documented. Follow the guidelines we will discuss over the coming weeks.
  3. What other products or services can you offer? Could you add other company’s products and services to your offering but under your own name? Spend an entire day with your team brainstorming new product or service ideas that could grow out of your core offering. Put everything on the board - what looks silly now might seem like a good idea 5 hours later.

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