Licensing Agreements: How To License Products In 3 Easy Steps

licensing agreementsWhen you use licensing agreements, you can get others to sell your products for you, deal with the related sales taxes and paperwork, and pay you a percentage of each sale made (sometimes called a “royalty” or “licensing fee”).

Here are three simple steps to setting up a licensing program for your products.

Step 1 – Identify the markets where your products already sell and potential markets you haven’t tapped.

Step 2 – Approach key players in those markets about becoming licensees. If you don’t have a pre-existing relationship with these prospective licensees, you may want to consider sending a personalized snail mail letter and make a follow-up telephone call instead of sending a blind email that could be treated by recipients as spam.

Step 3 – Have your business contracts lawyer prepare a licensing agreement that covers all of the key terms, including what’s being sold (e.g. private labeling rights), what you get paid on each sale, etc.

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If you’re offering the same terms to all licensees, you can have a licensing contract template prepared to use with multiple licensees. For unique licensing arrangements, your Internet attorney can customize the template as-needed.

What about using an affiliate program instead of licensing agreements?

You can actually do both.

Nothing prevents you from having an Internet affiliate program and also licensing your products to others to sell.

However, it’s a time-consuming pain in the butt to run an online affiliate program where you pay commissions on sales driven by your affiliates. Even if you can afford to pay an affiliate manager, chances are Internet sales taxes and other paperwork associated with operating such a program is a major time suck.

Related Article: How To Grow Your Online Business By Licensing Offline Brands

You can even let your licensees run affiliate programs for your products and pay a cut of their own profits to their affiliates rather than having your own affiliate program.

What if you don’t have any products to license?

Find an ecommerce business that has products you want to sell and approach the owner about becoming a licensee. Have your Internet lawyer prepare a license agreement that favors you as the licensee.

Author Mike Young, Esq.

Mike Young has been practicing business and technology law since 1994 and is an angel investor in startups. He's been an entrepreneur since 1988. To get legal help from Attorney Young, click here now or call 214-546-4247 to schedule a phone consultation.

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