2017-12-18 00:00:00 Starting a Business English Find out how to secure a sports licensing deal for your company's products and attract a dedicated fanbase. https://quickbooks.intuit.com/ca/resources/ca_qrc/uploads/2017/12/Man-Woman-Discuss-Licensing-Deal.jpg How to Score a Sports Licensing Deal

How to Score a Sports Licensing Deal

4 min read

A sports licensing deal can give your business a unique advantage, especially if it’s in a crowded marketplace with numerous competitors offering similar products. Sports fans are passionate about their favourite teams, and a team logo on your product is a significant selling point that may even convince customers to pay a premium. Considering the value of sports franchises, it’s no surprise that they only approve certain licensees that meet their requirements. Here’s how to improve your odds of scoring a sports licensing deal for your business.

Decide on Your Products

The first thing to understand about sports licensing is that you need to have everything ready, including your products and your distribution plan, before you start the application process. You should build samples of your products first, because many licensing departments require these during the application process.

You can request a license for almost any type of product, but to be successful, you need a product with a good chance of approval that can also make a profit. A percentage of every licensed product sale goes to the sports team as a royalty fee, which means you must set the product price higher than you otherwise might to cover the extra cost.

Soft products, such as clothing and hats, are obviously popular choices, as fans often like wearing their team’s gear. On the other hand, this also means that applications for licensed soft goods are common, making it more difficult to get approved and resulting in more competition if you are approved. Consider hard-line products, such as key chains, toys, furniture and appliances. While demand may not be as high, you could find a niche with little competition.

Write Your Business Plan

Expect licensing departments to request a copy of your business plan when you apply. Even though the sports team isn’t putting its own money into your product, if it makes you a licensing partner, then its reputation is tied to your business. Your business plan demonstrates how prepared you are and whether your licensed product idea is likely to make a profit. Not only is a business plan important for a licensing application, it also makes your business more likely to grow.

Your business plan should include your product ideas, market research, your target audience and how you plan to distribute your product. For distribution, you can sell your product through retail outlets, online or both. Whatever distribution option you choose, set up as much as you can before applying for your license. If you plan to sell your products through retailers, contact them about it first. If you’re going to sell through your business website, make sure the site is up and running.

Contact Licensing Departments

With the groundwork complete, you can contact the licensing departments of sports teams to secure licensing agreements. College teams, minor league teams and major league teams are all options, with major league teams typically being the most difficult partners to acquire.

You can find the contact information for the licensing department of the sports team on the organization’s website. If that doesn’t work, check with the league to which the team belongs. The licensing department can explain every step of the application process to you, which varies depending on the organization. There may also be an application fee.

Negotiate the Licensing Agreement

If the sports team approves your application, you can sign a contract and begin manufacturing your licensed products. Ensure you go through every section of the licensing agreement before you sign and get clarification on items you don’t understand. The agreement explains your rights and responsibilities as the licensee. You may want to hire a lawyer to help negotiate the terms of the agreement. Remember that these terms can have a major impact on how much money you make through the deal.

Your licensing agreement may start you off with a probation period to see how your product sells. There could also be restrictions on what type of products you can sell. Once you’ve built a track record of success, you can operate with fewer restrictions.

Be Ready to Pay Royalties

Licensing agreements include the royalty rate you pay to the sports team. This is one area where you’re unlikely to have any luck negotiating, since teams tend to be firm with their royalties. If you price your products correctly, you should still have a healthy profit margin even after the royalties are considered. Just keep in mind that in addition to the royalties on each sale, there is often an advance royalty.

An advance royalty is the team’s way of guaranteeing that it makes money off the licensing agreement, regardless of the success of the product. This could be a few hundred dollars or over $1,000, which means you should save some money to cover advance royalties, especially if you’re planning to apply for licensing agreements through multiple organizations.

Just like making it to the major leagues, scoring a sports licensing deal doesn’t happen overnight. It takes time to get your product ready, go through the application process and figure out your licensing agreement. The reward is well worth it, though, as the right sports licensing deal can dramatically boost your sales.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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