A License Business Model

Report
University of Dayton Business Plan
Competition
Ever consider licensing your
idea
UDBPC.com
www.
What is licensing?

Licensing is where you create an idea (the first step
of the Business model), then sell someone else the
right to produce and distribute your idea
What are the benefits to licensing?

Lower cost, often quicker entry to market
–

Quicker to scale growth
–

You don’t have to build a factory to produce your
product
They provide the capital for expansion
Allows you to focus on creating new ideas
When should I consider licensing?




When you have an idea that requires
manufacturing, but you have no background in
manufacturing
When a potential competitor has the
background/resources to produce your product
When you are creating a variation on an
existing product
When you are good at idea generation, but
lack follow through
What do licenses sell for?

Typically about 0.5%-2% of the gross selling
price, depending on the product
–
–
–
More complete the idea relative to the product being
sold, the higher
Patents/trademarks/copyrights increase it’s value
The closer you have it to market, the more valuable
it is (Beta is great!)
Won’t companies steal your ideas?



Very rarely happens
Goal: price it so it is cheaper to license than to
steal it!
Companies are very hesitant to look at ideas
unsolicited—for fear of being sued for stealing
–
Best to identify someone who can help you get in
What is the downside to licensing?



Less profitable than doing it yourself
Companies rarely grant “perpetuity”
contracts—generally 5-7 years
May lose control of idea
How does a Licensing Model work
in a Busines Plan Competition?

In your elevator pitch you state something like

This is a licensing model. We intend to first
provide a working prototype of this product,
and obtain the requisite IP for our concept. We
then intend to market our idea to our
competition, selling them a five year license to
produce our product, in their name.
Resources to consider

EurekaRanch.com –they provide training on
idea generation

US Department of Commerce’s NIST/MEP
network

Merwyn Business Simulation Research
An important caveat

A good IP lawyer is crucial for a successful
Licensing business. Interview attorneys with
experience in doing licensing.

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