Licensing is renting or leasing of an intangible asset. Intangible asset can be patent, copyright, franchise, trademark, and trade name and software too. Licensing a product involves obtaining permission from a well-established company to manufacture and sell one or more products with their brand name, within a defined market area.

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Licensing reasons

Licensing is renting or leasing of an intangible asset, which means renting or leasing an asset that lacks physical substance. Intangible asset can be patent, copyright, franchise, trademark, and trade name and software too. Well established international company can choose to license their brand name when they believe there is strong consumer base for expanding selection of products. New products are manufactured by a separate company but together they offer the consumers quality products while both companies take part of the profit. Licensor acquires revenue from license and licensee acquires profit from selling their product to already developed consumer base. Having access to major national and global brands, and the logos and trademarks associated with those brands, licensee companies have major opportunity into succeeding in global market. 

Product licensing

Licensing a product involves obtaining permission from a well-established company to manufacture and sell one or more products with their brand name, within a defined market area. If you are new entrepreneur with limited resources, with licensed product you can minimize your costs and risks, as well as make competition easier. It is always more secure to start a new business with already established customer base. On the other hand, if you have a great idea but you lack resources and don’t want to invest years in developing customer base, you can license your product idea to an investor who will develop and manufacture the product and pay you royalty.  

Acquire profits from licensing your idea

You can either build a new company to commercialize your product, or you can license your product to an existing company that already has the resources in place to get the product out into the market. Smaller entrepreneurs with limited resources don’t always have the opportunity to manufacture their own products on a large scale, let alone deliver it to potential consumers. Starting a new company is a large investment, but if one wants to have its products on the retail shelves, licensing their product idea is the best way to do so. While licensing a third party to produce and sell your product is quite challenging, it can be done nevertheless. If you properly prepare and equip yourself for the challenge, you have a shot of landing a product licensing deal, and collecting royalties while the licensee does all the work and takes all of the risks.  

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