Licensing – Not Sexy?
- What is it about licensing that makes it not sexy? No big office, no staff meetings, no employee turnover, no HR, no CEO, no COO, no CFO, no marketing, no press releases, no inventory sitting on the shelf, no, no, no…
- Usually royalties are paid on a percentage of the wholesale price but when you have a product that will revolutionize and industry you set the terms. Lets take an example of licensing of one of my products for firearms including rifles, shotguns and handguns. There are approximately 270 million firearms within the US and 14 million more sold each year to the civilian population. Within the US the firearms industry generates $6 billion annually in sales which is why VC firms are now buying up mfgs and wholesalers. My item is a “must have” for military and law enforcement firearms (which are not included in the above numbers). It is a “no brainer” I want this included on my gun for civilians.
- Option A: Create a new company to sell to the aftermarket as an accessory.
- Option B: License to an existing accessory maker for say $15 for each one sold.
- Option C: License to the firearm manufactures for a flat rate of $50 per firearm which incorporates the IP. For the consumer the $50 higher price is nothing compared to the value they are getting with the new product incorporated in/on their new gun.
- Of the 14mil new firearms annually, S&W, Ruger, Bushmaster, and Glock license the product for inclusion on some of their firearms the first year for a total of 1mil units. Heck lets be conservative, 500k units.
- We have now generated first year $25mil without even adding in LE/military or option B revenues.
- No company and associated headaches meaning this is NET income. Boys and girls I call $25mil the first year SEXY!
- The revenue stream continues for the life of the patent(s) and adoption rates increase for production and don’t forget the aftermarket that takes until year 2 to get tooled up and sells 2mil to the AK/AR/M16 “black gun” market for another $30mil in royalties. I call that SUPER SEXY!