Coming up with a winning business idea can happen in many ways. It might be a ‘lightbulb’ moment where you identify a gap in the market, something related to your passion, or an innovation born out of trying to solve a problem or find a better way. Often coming up with the idea for your startup is the easy part.
Bringing it to life by commercialising it in a way that suits your business model? That can be a daunting task. But it doesn’t have to be! In this article, we’ll focus on using a licensing agreement to commercialise your idea, then provide some other ways to bring your product to market. Let’s dive in.
Entering a Licensing Agreement
Licensing can be an excellent option if your innovation is a patented technology or intellectual property. By licensing your innovation to other companies, you can generate revenue without having to manufacture and sell the product yourself. However, you need to consider a few important factors, such as pricing strategy, revenue sharing models, duration of the agreement, territory, and intellectual property protection. Let’s go through these in more detail.
Pricing Strategy
When setting the price for your licence, think about the value of your innovation, the cost of production, and the potential market size. You'll also need to think about how your pricing will compare to similar products or technologies on the market.
Revenue Sharing Models
There are several different ways you can structure your licensing agreement in terms of revenue sharing. One option is to charge a fixed fee for the licence. Alternatively, you could agree to a percentage of sales, or a combination of the two.
Duration of the Agreement
It's also important to consider how long the licensing agreement will last. You may want to choose a shorter term if you plan to bring the product to market yourself in the future, or a longer term if you're happy for the other company to continue using your innovation for a longer period of time.
Intellectual Property Protection
Having strong IP protections in place will ensure your innovation is protected during the licensing process. This may include patents, trademarks, or copyrights.
Licensing Territory
You'll also need to decide where the licence will apply. Will it be worldwide, or just in certain regions or countries? Maybe you want to license your product in territories where you don’t know the market, but retain the rights to sell directly on home soil.
Direct Sales
If you have a product that you can manufacture and sell yourself, direct sales can be a great option. You can retail your product through online or brick-and-mortar stores, or through a sales team. This method is particularly useful if you have a unique product that is in high demand.
Partnerships
Partnering with other companies can help you bring your innovation to market. There’s a few ways you can do this such as through co-branding, joint ventures , or other types of collaboration. This method can help you reach new audiences and leverage the expertise of other companies.
Crowdfunding
Crowdfunding can be a good option if you have a prototype or a product that is ready for the market but need funding to get started. By using a crowdfunding platform like Kickstarter or Indiegogo, you can tap into your social media following or network of potential backers to raise funds for your project.
Incubators and Accelerators
When you're just starting out, getting access to experienced people and resources to help you develop your innovation can be game-changing. Consider joining an incubator or accelerator program. These programs provide mentorship, funding, and other resources to help startups get off the ground.
Get Help Commercialising a Business Idea
There are several methods of commercialising an innovation, each with unique pros and cons. By choosing the method best suited to your business model and being prepared to adapt as you learn more about the market and your customers, you can achieve amazing things and successfully bring your business idea to market.
Just remember, no matter which method you choose, it's important to have a
clear plan and to be adaptable. And if you find yourself out of your depth, growing rapidly or struggling to raise capital, our startup advisors are here to help.
