James Webb is an Entrepreneurs' Organization (EO) member in Colorado, and owner of Weatherproof Roofing, a roofing and exterior home repair company. Recently, James explored how to license his marketing strategy as a new revenue stream. We asked him to explain the benefits and pitfalls of licensing. Here's what he shared.
What's the Sasquatch of your business?that elusive revenue stream you've never quite been able to grasp? Something that can scale bigger and faster with fewer employees and create monthly recurring revenue?
I briefly considered franchising, but it was more than US$250,000 just to try it, and I've been warned by colleagues who've had a negative experience and would never do it again.
After racking my brain, I realized that my next big idea could be right under my nose?or, more precisely, between my ears: the intellectual property I've already generated while running my business.
So, I researched options for growing my business through licensing out pieces of my intellectual property?my marketing strategy, specifically?which seemed to make the most sense. Compared with franchising, it's a simpler way to get to market for less cost.
But, I didn't know the first thing about it. I asked around and, like that mythical, elusive creature that everyone wants to believe exists, few have actually seen licensing done well. Then I met Cliff Cole of MoreFloods, Inc., who shared the secret for growing his company nationwide using the licensing principle.
He explained that the process is simple, but not necessarily easy.
Once I committed to the licensing route, I became extremely frustrated by how difficult it is to find a straight answer about anything, including:
- Franchising vs. licensing
- How to ensure my licensing isn't viewed as a franchise by the SEC
- Pricing best practices: monthly fee vs. percentage of revenue
- How much of the business to license: only my marketing strategy, or that and my business plan or--what?
- How much of my business to keep in-house
- Optimal licensee territory size
Cliff provided a glimpse behind the curtain as he shared his experience and insight, explaining how he has successfully licensed his business strategy for more than 10 years, with 140 licensees for his water mitigation platform.
Here are Cliff's six building blocks for licensing success:
1. Documentation is king. And revise every year! If your processes are strong and well-established, you've got a good shot; if not, it will be a disaster. Document how you complete all processes?even the simplest things. Cliff self-identifies as the "Checklist King" and explained the importance of having a flowchart checklist for each water damage job. This checklist remains in the office to make sure every single step and its corresponding paperwork is completed from the time a water damage client calls to when the check arrives to pay their invoice.
2. Onboarding new licensees is the key to a happy marriage. Set clear expectations and help licensees succeed. He has everyone who signs up travel to Kansas City for a required in-depth, two-day orientation. Genius!
3. Support licensees for as long as it takes. Most new licensees require 30 days of support, while slower adopters can take up to 90 days. However, after the initial onboarding effort, there are relatively few issues that arise other than the occasional email or 15-minute phone call.
4. Be fair and reasonable with pricing. There's enough to go around. The key is growth in multitudes. Cliff has decided on a flat monthly fee well under US$1,000. Though he could charge more, he's looking for partners who will stick around for years. Auto payment with a credit card streamlines the process.
5. Establish a core team of dedicated rockstars to work the system. His current team of five take care of the onboarding, follow-up and marketing outreach to identify potential new licensees. Don't tell anyone, but Cliff confided that he enjoys the licensing side of the business much more than being on call 24/7 with his water mitigation company ... but you didn't hear it from me!
6. Practice what you preach. Establish a "corporately owned" company using the licensing that you own and operate to showcase how well it works. This also keeps you in-the-know with relevant industry changes. Cliff owns and operates a local water mitigation company to prove that his licensing product is valuable and works well. He can show financials and stats to potential licensees that leave little doubt of the value they would gain by signing up.
By adopting these best practices, you can attain that elusive feeling of knowing that your licensing program will grow through referrals as you develop a network of satisfied licensees who encourage others to sign up! That's what being a Sasquatch entrepreneur is all about.