Tightening Up Your Operations

When the times get tough, are you tough enough to keep growing?

Most of our generation has never seen the level of economic crisis and business doldrums we’re experiencing today. And forecasters are telling us the recession will be with us for a while. On the bright side, however, these economic times are presenting some dynamic opportunities that would not have come about if our licensing operations were sailing along as usual.

In the past, big guarantees and advances may have hidden some flaws in your system, allowing you to get away with loosely monitoring your brand licensing company.

Going forward, licensing will be based more upon straight-forward royalties. Therefore, those licensing companies who closely monitor every facet of their licensing programs will be well positioned for the future.

Maybe it’s time to finally put in some automated processes to help you reconcile the royalties each period and gain greater insight into your licensing operations. Even in the short term, you’ll be amazed to see the positive bottom-line effect a few simple steps can have.

Paying Attention to the Details

Do you measure each licensee sale against the original contract terms?

Are your licensees abiding by the allowances, discounts, product penalties and returns caps dictated by the contract?

You may be surprised to learn that monitoring these details can increase your revenues retroactively by 5% to 15%. At the same time, measuring your business against contract parameters, as well as against past period sales and forecasts, can keep your operations running efficiently and help you follow the cycles of your business.

The more details you have, the better. Go ahead and ask for data from your licensees.

In the past, many licensors did not reach out to their licensee and agency partners to ask for more detailed information on markets, price points and sell-through.

Today, licensees recognize that retailers are demanding and getting product-specific sales information and are becoming more open to passing this information along to licensors (although they may ask for guarantee and common marketing fund reductions). Manufacturers recognize that providing this information will help keep the relationship moving along and help measure the success of any licensing program.

In addition, asking for more details can immediately result in found revenue if you are prepared to work a little harder. Once you have contract and sales details at hand, you can begin to more stringently enforce those contracts—a necessity in tough economic times.

For instance, while many licensors have interest penalty clauses on overdue payments, less than 50% of licensors enforce them, leaving thousands of dollars on the table.

Similarly, licensors who take the time to load product sales information into the system and check whether the products have been approved may see immediate revenues by enforcing the unapproved-product clause. By doing this, they can recoup penalties as high as 200% of the amount owed.

Tying it All Together

What would it mean to your business if you had access to all the information about pending, new and existing deals, all in one place?

For one thing, you could immediately determine which potential licensees offer similar products to those already on board, helping you negotiate a better deal or find a better manufacturer.

Utilizing an automated licensing system helps you aggregate all the diverse information you need and access it anytime, anywhere.

Maximizing Return on Limited Resources

All of us are trying to position ourselves for future profitability by cutting operational expenses and discretionary spending. As little as a year ago, eliminating some inefficiency may have been taboo. Having redundant resources across multiple departments was a staple of yesterday’s chaos management.

Today, you need to get more done with fewer people. Automation can help by coordinating all the functions for product approvals, contracts and finances, without anyone leaving the confines of their offices.

Many businesses are running distributed operations to cut down on expenses, with employees working from home, and automation can help those operations thrive as well.

Third-party Validation of Manufacturing

Another detail often overlooked is how to keep track of overseas manufacturing in order to remain as efficient as possible.

How do you measure how many products are being produced overseas?

One potential solution is to integrate a third- party label or component into your manufacturing process that can validate the quantities. A solid security label or component also can help you with enforcement of your trademark rights at the border or with local law enforcement.

The Right to Audit

You can have all the automation in the world, but it still only helps you manage your own internal operations. In licensing, you also need to check on your licensing partners.

To do so properly, you need a consistent field audit team, consisting of outside auditors or internal audit resources. By supplying your auditor with empirical data related to reported sales activities, the auditor will have the tools to make sure licensees are complying with the contract.

But most audits in fact help to clarify the contract and give the licensee a better understanding of the contractual obligations, resulting in stronger relationships with licensors. Besides, audits by licensors are almost as common and routine as the gas company taking the meter reading at your residence.

All of these tactics can help your business in both the short and long term. Keeping a tight rein on your licensing operations during tough economic times will allow you survive and thrive, and it can position you for success when the economy comes back to life in the years ahead.

Dependable Solutions, Inc. offers web-based licensing-management software. Whether you are a licensee, agent or brand owner, we can show you how managing your licensing operations within a cloud based system streamlines your licensing processes and help you focus on growing your business.

If you have any further questions about setting up a brand licensing software to integrate your contracts, royalties, and brand licensing assets, please reach out to our team at Dependable Solutions at +1 877-289-8431, +1 424-213-6663 and +44 203 882 3370 (UK) or Email us sales@dependablesolutions.com.

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