The Difference Between Licensing and Launching Products
Sep 05, 2023
In the realm of innovation, many inventors grapple with a central question: Should they license their product idea to another company or launch it themselves?
On the surface, licensing seems to be a shortcut to success. You conceptualize, another firm produces and markets, and you sit back collecting royalties. However, a deeper dive reveals that licensing is often more of a fairytale, primarily because your product is unproven. Conversely, launching a product, i.e., taking control of its manufacturing and selling, is typically the best bet for real-world success, especially when selling online or in retail outlets.
Licensing: An Uphill Battle with Low Odds
Licensing, while theoretically appealing, often turns out to be a challenging endeavor. Here's a closer look:
- Unproven Ground: One of the most significant pitfalls of licensing is that an unproven product has little to no sales record. Brands are naturally risk-averse. They are less likely to take a chance on an unknown product without substantial evidence of its market viability.
- Loss of Control: Once you license your idea, it's no longer entirely yours. The licensing company might change its essence, affecting its original appeal. Moreover, if they don't prioritize its development or marketing, your product could become stuck in an exclusive arrangement for years.
- Overestimations and Complex Deals: Many brands underestimate a product's market potential, leading to disappointing licensing deals. Even if an offer comes through, the negotiations can be tough, often resulting in unfavorable terms for inventors if they choose to accept out of desperation.
Launching: A Calculated Leap Toward Success
While licensing battles the challenge of an unproven product, launching offers the opportunity to build and validate your product's demand.
- Establishing Proof: By launching your product, you generate sales data, customer reviews, and tangible evidence of its market fit. This information not only serves as a testament to your product's viability but can also be a compelling pitch for future partnerships or even licensing deals down the road.
- Innovative Financial Strategies: Contrary to popular belief, launching doesn't necessarily mean diving headfirst into financial risk. Inventors can get creative:
Pre-orders: This approach allows you to gauge demand before full-scale production. By offering your product for pre-order, you can secure funds upfront, minimizing inventory risks.
Factoring: This financial tool involves selling your invoices (receivables) at a discount to get immediate cash. It can be instrumental in managing cash flows, especially when waiting for large retailers to pay, which can take months.
- Building a Legacy: Launching lets you build a brand, not just a product. This journey fosters customer loyalty and sets the groundwork for prolonged business expansion.
- Direct Interaction: Selling directly, whether online or in physical stores, gives you invaluable insights into customer preferences, feedback, and buying patterns. These insights are golden for product iteration and future versions.
Mitigating the Risks of Launching
Launching a product is often viewed through a lens of inherent risks and challenges. However, much of this apprehension stems from the potential for trial and error, costly missteps, and the steep learning curve faced by many first-time entrepreneurs. The key to navigating these uncertainties lies in harnessing the power of strategic partnerships.
- Avoiding Trial and Error: One of the quickest ways to deplete resources and lose momentum is through repeated trial and error. A strategic partner, especially one with vast experience, can provide invaluable insights. They can guide you through proven strategies, helping you sidestep common pitfalls and accelerate your route to market.
- Minimizing Costly Mistakes: The saying "mistakes can be expensive" rings particularly true in product launches. An oversight in manufacturing, distribution, or marketing can lead to significant or fatal setbacks. By partnering with seasoned experts in these areas, you not only leverage their knowledge but also their established systems and processes, ensuring smoother operations and minimizing the chances of costly mistakes.
- Doing It Right the First Time: There's a vast difference between launching a product and launching it successfully. A strategic partner brings to the table a wealth of experience and industry-specific knowledge. This expertise ensures that, from product development to marketing, every step is optimized for success. Instead of navigating the challenging terrains of entrepreneurship alone, a strategic partner can offer a proven roadmap, ensuring you make the best decisions throughout the process.
While the allure of licensing is strong, it often remains just that – an alluring fairytale. The reality is that licensing rarely works unless you have sales. The real success stories emerge from those brave enough to take control of their destiny and launch their products. It might be a road with bumps and curves, but it’s a journey that promises the grandest of vistas for those willing to travel it.
For those looking to license their product as their ultimate goal, your odds become much higher launching your product first. With tangible results and market validation in hand, launching offers you the most options to go to market. With an experienced team in your corner, the steps and risks of launching can be smartly managed.
The value of a strategic partner cannot be overstated. Such partnerships offer a blend of experience, expertise, and resources, significantly mitigating risks and setting the stage for a successful launch. See What We Do to help.