How Much in Royalties Could You Generate Through Licensing?

How Much in Royalties Could You Generate Through Licensing?

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Like many, you may have been considering launching a brand licensing program for several months or even years. However, you have been reluctant to pull the trigger because you just don’t know how many royalties your brand could generate and if you would get enough return on investment (ROI).

Related: Should you acquire a license for your product?

However, you know you would have a good prospect if you could answer the following questions:

  • What types of royalty revenue can my brand generate?
  • How much will it cost us to get started?
  • How long does it take to reach critical mass?
  • What will be the return on investment?

To get the answers, you must first assess in which new categories your brand is allowed to expand or develop. Once you know these categories, prioritize them. Next, estimate the range of sales your brand would generate by licensing these categories. Finally, choose a low and high royalty rate to calculate the range of royalty income that you might expect to generate.

Once you know the range of fees, assess the cost of launching the program in-house or using a branded licensing agency. Knowing the cost, you can determine what your return on investment will be. If you can leverage the strength of your brand in the market at a level sufficient to generate royalty revenue for your business, while expanding the brand to new categories where your consumers and customers expect it either, the license will be a powerful tactic.

Here are the first eight steps to get started:

  1. Identify the top five to eight categories to expand your brand.
  2. prioritize these categories by potential consumer commitments, royalty revenue and customer interest.
  3. Identify two to three potential licensees (manufacturers) for each category.
  4. To define, for each licensee, a planned set of conditions of license, including the royalty rate, minimum sales, minimum guaranteed royalties, territory, channels and duration.
  5. Estimate, for each category, the total sales and projected royalty income.
  6. To give advice, based on your findings, as to the viability of the brand license as a marketing strategy.
  7. Articulate the investment required and the actions necessary to launch a brand license program.
  8. To summarize conclusions and recommendations in a summarized PowerPoint presentation that you can share with senior management

Related: do you have a lot of smart ideas? License them into the fancy gift industry.

Before you can complete these steps, you need to know the answers to the following questions:

  • What is the strength and equity of my brand?
  • What new categories can the brand enter who will benefit from its strength and its actions?
  • What is the the size of the market for each new category and growth expected over the next 5 years?
  • Which company is category head, and what is its market share?

Royalties paid to brand owners in 2014 alone were estimated to be around $ 10 billion. This equates to more than $ 200 billion in branded trade on a global basis each year.

Related: Why Licensing Is The Best Way To Get Your Product On Store Shelves

With the ubiquity of brands expanding and expanding through licensing, now is the time to determine if brand licensing can help achieve your own business growth goals. Are you ready to find out?

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