Thursday, July 22, 2010

Sources of growth - Part 3

(This is part 3 of a 4-part series. If you want to view the series from the start, click here.)

Part 2 of this series dealt with maintaining and growing business from existing licensees. The next source of growth is the glamour area – recruiting new licensees.

Because of natural attrition of licensees, it will always be necessary to recruit new licensees to replace them. Recruiting new licensees refreshes and extends the scope of the business.

It is also the most visible activity in business development.

However, in contrast to maintaining and growing business from existing licensees, the results often take longer to show and are more difficult to predict.

When an established roster of licensees is built, it facilitates growth through recruitment of new licensees. In non-exclusive competed markets, existing licensees will be cheerleaders for this licensing activity – after all, they are paying a premium to be legitimate licensees. They do not want to see their competitors getting a free ride. Instead of a licensing activity being an “attack by an outsider” on an industry, it now becomes a way of protecting the legitimate players within the industry and making the others pay their fair share.


Experience also plays a part. As more licenses are created, the licensor becomes more sophisticated at identifying partners, setting pricing levels and generating effective agreements. The negotiation process can also be shortened through building experience of the key sticking points and establishing the limits of flexibility.

The graph below illustrates the effect of new-licensee recruitment as an element of growth.

If recruiting new licensees is the most visible activity, Part 4 will deal with the least visible source of growth.

(This is part 3 of a 4-part series. If you want to view the series from the start, click here.)

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