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Why business licensing is important and how to license your business

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Making the most of your brand

Disclaimer: This content should not be construed as legal advice. Always consult an attorney regarding your specific legal situation.

For small business owners, determining how to license a brand might seem like a foreign realm. How do you know who to work with and when it’s the right time? And most importantly, how do you navigate the business licensing process so you scale your business while still protecting all that you’ve built? Your brand is your baby. You’ve spent years of your life and a significant investment developing it. Once you reach success, it might be hard to give the reins over to another organization that you know nothing about.

All of these questions and feelings are completely natural and understandable. But business licensing can be a strategic step in growing your brand to new heights without putting the operational load on yourself. Read on to understand the foundation of business licensing, the benefits you can expect, and the steps to do it right.

What is a brand license?

According to the experts at UpCounsel, “This type of license usually allows a licensee to use a product, line, or certain business item. Licensing simply means the leasing or renting of an intangible asset.”

For example, as a business owner, you have a unique idea, service or product that’s specific to your brand. If you want to expand your business by creating more goods under your brand name or increasing the availability of your products through another distributor, you could license your brand.

First, you’d trademark the product, idea or item (protecting it so no other entity can illegally use or copy it or misrepresent your business). Then, you’d work with a partner organization that would create, distribute, market or sell items under your brand name.

The tricky part is that a brand license can protect trademarked tangible and intangible assets, such as a brand name (for instance, “Nike”), as well as product lines or specific business items.

Using our Nike analogy (check out their long list of trademarks here), here are commonly trademarked items:

  • Logo: the swoosh
  • Tagline:Just do it
  • Brand name(s): Nike Air, Nike Town, NikeFactoryStore
  • Brand signature: Air Force 1, Air Jordan, Flyknit, Dri-Fit

Related: Trademark vs. copyright: Which one does your business need?

Know the business licensing lingo

person signing a contract

As you embark upon this undertaking, it’s essential to understand the terminology and key definitions involved with the process. (Especially when you’re in the research phase trying to unravel the ins and outs of the process). Use this cheat sheet:

  • Licensor: You, the business and brand owner who wants to rent/lease your brand name, logo, tagline or a form of your brand signature to another business.
  • Licensee: Your future partner, the business or organization that rents/leases the rights to your brand.
  • Contractual Agreement: Formal, official document that outlines the relationship between licensor and licensee, including payment terms.
  • Royalty: Licensor’s (your) payment, often representing a percentage of all sales past a certain minimum.
  • Trademark: Legal protection for your brand to prevent others from using it. This can cover a “phrase, symbol, design, or a combination of these things that identifies your goods or services. It’s how customers recognize you in the marketplace and distinguish you from your competitors.”
  • Intellectual Property: Intangible items created by your brand that you need to legally protect. This refers to “creations of the mind, such as inventions; literary and artistic works; designs; and symbols, names, and images used in commerce.”

Understand the possibilities of business licensing

With business licensing, you can increase your brand’s reach without worrying about the manufacturing, production, and often even marketing (depending on the agreement). It’s the equivalent of outsourcing business growth, where the licensee takes on the operational duties.

The best part is that you’re not just growing your bottom line via royalties but also growing brand awareness.

In a perfect world, both parties benefit. You, the licensor, get to expand your brand to new markets, increasing reach and finding new audiences. The licensee creates and distributes a product with existing recognition and reputation. In other words, they can skip the brand development and R&D stage and forgo that initial investment. Your licensed products can also bring new business to the licensee’s organization if you already have brand loyalty with your existing audience. When sales grow, you both see a profit. It’s a symbiotic relationship.

Hire a legal expert

gavel and balance scales

gavel and balance scales

No one knows how to license a business or brand better than a licensing, trademark or intellectual property lawyer. Read articles to acquaint yourself with the process, do your initial research, talk to those in your community with experience. But, when it’s time to start the process, you need to engage a professional.

And when it comes to determining how to license a business and how to do it properly, you can’t simply consult a lawyer. Instead, you need to consistently work with one to ensure you’re taking the proper steps in brand expansion. For example, each new company you work with could likely have a different licensing contract with new terms.

To ensure you’re appropriately protecting your business interests, you should retain a lawyer you trust to review any new contract or agreement and discuss any related matters.

Do the proper research

Even with a lawyer in your corner, you still need to do your due diligence before licensing your brand. The order of research vs. hiring a lawyer can be a little bit of a “chicken or egg” scenario. Some lawyers may ask if you’ve done proper research before considering licensing opportunities. Others may be able to help with the process. Regardless, you want to do your own analysis to ensure this is a sound business decision for your specific brand, product and market. Your lawyer can then help with the nuts and bolts and guide you to make sound decisions.

Assess the landscape

When deciding if it’s time to license your brand, you need to first assess the overall market, aka your industry or niche, as well as your current business status. Do you have enough brand recognition that a third-party business would want to produce and distribute products under your name? Does your brand clearly resonate with your target demographic?

You may need to expand your initial business plan.

When approaching potential business partners for licensing opportunities, they need to understand your unique selling points. What makes your brand different from the rest? Is there enough demand within your target demographic as well as growth potential? Organizations may approach you, or vice versa, but either way, you need to position yourself as an established business to ensure the best brand licensing opportunities. Part of that is pitching your business as a good partner for them.

Moreover, you need to evaluate the competitive landscape. Is your niche already saturated with other large, well-received brands, or is there room for your brand to succeed, grow and disrupt? No matter what, you’re going to compete for shelf space (or digital space in ecommerce) and consumer attention, but competitive research will ensure your brand can stand on its own.

Develop a brand license strategy

As we’ve mentioned, your brand is your baby. You want to be protective of it and not only make sure you’re working with the right people but also using the right tactics to reach intentional outcomes. That’s why developing a strategy can help you outline your goals and make sure you stay true to your brand narrative and story.

For example, say part of your brand story includes individually made products by female creators. A reason your customers love your organization is that you focus on sustainable practices and working with these individual creatives. If that’s a hallmark of your narrative, you likely don’t want to license your brand to a big box store that will mass-produce products under your name. You’ll lose brand loyalty by not staying true to your organization’s principles and values.

Developing a foundation that outlines your short- and long-term goals will ensure that as you expand, you’re doing so on your terms, and you’re not getting sidetracked with irrelevant opportunities.

Find the right business partner

two people shaking hands at desk

two people shaking hands at desk

Another arm of being protective of your business, brand and interests is finding the right licensee. Going into business with someone is a serious decision, and you want to make sure it’s a fit for both sides.

For your purposes, you want to find a partner with experience in your market, appropriate resources and distribution channels, and financial stability. If applicable, test their merchandise and confirm its suitable quality. In addition, seek out an entity that will share and perpetuate your brand values and vision.

There’s nothing like testimonials from their other current licensors. Ask for references or to speak to their current partners to get a sense of their process. Seek the counsel of your attorney as well to vet potential partners.

There’s always risk involved in entering a new business partnership, so above all, make sure you’re comfortable with any organization and its representatives before you enter into a contract.

Take advantage of brand licensing opportunities

While we’ve already established the foundational reasons why brand licensing is beneficial, there are other more specific advantages for small business owners. Once you settle on a business licensing agreement, you can expect the following perks:

  • Test new markets: By licensing your brand to a third-party organization, you can test the success of new locations and markets without too much upfront cost.
  • Control your brand story: With a trademark and a licensing agreement in place, you retain control of your intellectual property and creations, plus how your brand is perceived to your expanded audience.
  • Outpace the competition: Once you understand the competitive landscape and secure a business licensing agreement, it’s easier to gain an advantage against your smaller competitors via expanding product availability and presence.
  • Gain new business partners and knowledge: When working with a licensee, you develop a business relationship with a well-established and successful organization. As such, you have a front-row seat to how they market and distribute your branded products, gaining invaluable new insights and expertise.

How to license your business the right way 

When licensing your brand, your business’s reputation is at stake, and there’s a lot to consider. Use this guide to perform the right research and lay the foundation of business licensing.

Remember, expansion for expansion’s sake won’t yield results.

First, you need to build your brand and create a loyal community of supporters. Then you need to dive into a fair amount of research to ensure you’re in a good position to grow your brand via licensing. Finally, before you partner with another organization, have the correct legal protections in place, a retained lawyer to help you through the journey and a clearly outlined plan for your business goals and objectives.



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How to Start a Niche Foam Party Business: Kid’s Party

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Foam parties have become popular and are great fun. If you didn’t know what a foam party is, it is a party or event where participants have fun dancing amidst foam created by a machine. The machine creates bubbles of foams that envelop the place, creating a fun environment at the party. If you are a business person, then a foam party business is a great idea.

You can get a foam machine and use it to throw foam parties and make money from it – relatively affordably.

photo credit: Roaring Foam

Can you make money through foam parties?

Yes, you can make money if you have a foam machine. Parties are common, and party-goers get bored with the usual stuff. A foam party is an innovative way of partying. It allows participants to let go, dancing in joy amidst the foam. This kind of party would be popular, and you can make money by offering a different experience to participants.

Creating a niche market

When you want to make money from a business, you will find that there are many others with the same idea. You need to do something different so you can succeed. This is where finding a niche market helps. A niche market is a specific category to which you can cater. Kids Foam Party is such a niche market. While there are many businesses catering to foam parties in general, foam parties for kids is a niche idea. This is a business idea that can help you succeed and make money.

Planning your business

Now that you have found your niche, it is important to plan your business before you get started. The first thing is to be clear with what you are offering. You are offering a foam party, which is an event where there is a dance floor filled with suds. When this party is offered for kids, they will enjoy it the most. They would not only dance but play in the foam and have a great time in general.

Taking proper safety precautions like setting the depth of the foam and insisting on face coverings ensure there are no problems.

What do you need?

It is obvious that you need a foam machine if you plan to run foam parties. A foam machine is not too expensive. However, you need not buy one immediately. Since you are starting off with a new business, you can get a foam machine for rent. This is a cheaper option allowing you to rent a machine and use it whenever you need it. This will allow you to do a pilot run of your party business.

If the response is good and you start getting many events, then you can consider buying your own foam machine. This would work out better for you.

Kid having fun in foam
photo credit: Roaring Foam

Planning and executing foam parties for kids

With these basic concepts in mind, it is time you start planning your parties. Since you have chosen the niche of foam parties for kids, you need to explore different options. You can have foam parties to celebrate birthdays. There can even be parties for no reason but just to allow kids to have fun. Explore different themes for foam parties and plan the events.

Here are a few considerations to keep in mind while planning and executing foam parties for kids:

  • You need to find a venue to host the foam party. The ideal location is outdoors, so the foam does not create a mess inside. When the weather does not permit, you need to find indoor venues with a fairly big hall to organize the event.
  • Apart from the machine, you need the foam solution to create foam. You need to have sufficient foam machine solution to last the entire party.
  • Safety is a very important issue in foam parties. This is all the more important when you are dealing with kids. You need to have a clear plan for ensuring safety in your foam party. Communicate the plan with your clients so they are assured of the safety arrangements.
  • If you are doing the party indoors, you need a tarp to cover the floor and walls. It is important to cover up all the electric and other outlets to avoid them being damaged.
  • Placing plastic furniture is better since it won’t get damaged due to bubbles.
  • Safety arrangements for the kids are very important. Wearing shoes is a must. You can insist on goggles or face coverings to prevent allergies from the suds. You need to take adequate precautions to prevent kids from skidding and falling during the party. There is always a risk of accidents at a foam party, and you need to do everything to prevent it.
  • Preferably, get a waiver from guests to protect against liabilities.

With all this planning, you are now ready to execute foam parties and make neat profits from them.

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What open source-based startups can learn from Confluent’s success story

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It’s common these days to launch an enterprise startup based on an open source project, often where one the founders was deeply involved in creating it. The beauty of this approach is that if the project begins to gain traction, you have the top of the sales funnel ready and waiting with potential customers when you move to commercialize your business.

In the past, this often meant providing help desk-style services for companies who appreciated what the open source software could do but wanted to have the so-called “throat to choke” if something went wrong. Another way that these companies have made money has been creating an on-prem version with certain enterprise features, particularly around scale or security, the kind of thing that large operations need as table stakes before using a particular product. Today, customers typically can install on-prem or in their cloud of choice.

“A key aspect of these kinds of technology-developer data products is they have to have a combination of bottom-up adoption and top-down SaaS, and you actually have to get both of those things working well to succeed.” Jay Kreps

In recent years, the model has shifted to building a SaaS product, where the startup builds a solution that handles all the back-end management and creates something that most companies can adopt without all of the fuss associated with installing yourself or trying to figure out how to use the raw open source.

One company that has flirted with these monetization approaches is Confluent, the streaming data company built on top of the open source Apache Kafka project. The founding team had helped build Kafka inside LinkedIn to move massive amounts of user data in real time. They open sourced the tool in 2011, and CEO and co-founder Jay Kreps helped launch the company in 2014.

It’s worth noting that Confluent raised $450 million as a private company with a final private valuation in April of $4.5 billion before going public in June. Today, it has a market cap of over $22 billion, not bad for less than six months as a public company.

Last month at TC Sessions: SaaS, I spoke to Kreps about how he built his open source business and the steps he took along the way to monetize his ideas. There’s certainly a lot of takeaways for open source-based startups launching today.

Going upmarket

Kreps said that when they launched the company in 2014, there were a bunch of enterprise-size companies already using the open source product, and they needed to figure out how to take the interest they had been seeing in Kafka and convert that into something that the fledgling startup could begin to make money on.

“There have been different paths for different companies in this space, and I think it’s actually very dependent on the type of product [as to] what makes sense. For us, one of the things we understood early on was that we would have to be wherever our customers had data,” Kreps said.

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5 Hobbies That Make Money and How To Get Started

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Money-making hobbies range from walking dogs to blogging to creating and selling homemade goods.

Read about these profitable hobbies, as well as what you can expect to make.

1. Driving

Enjoy cruising around town? Give others a ride and make money by becoming an Uber or Lyft driver. Uber drivers make an estimated $5 to $20 an hour, and Lyft drivers earn about $5 to $25 an hour, according to SideHusl.com, a review site for money-making platforms. Note that earnings depend in part on when, where and how often you drive.

To become an Uber or Lyft driver, you must be the minimum age to drive in your area. You must also meet specific requirements related to your driver’s license, insurance and vehicle. Learn about these exact requirements in our guide to becoming an Uber or Lyft driver.

If you enjoy driving but don’t want people in your car, look into becoming a full-service Instacart shopper, which involves shopping for and delivering groceries. Uber Eats and Amazon Flex also offer opportunities to deliver food and other products to homes. Each of these gigs has its own set of requirements, though, so do your research before signing up.

2. Caring for dogs

If your favorite hobbies involve belly rubs, smooches and long walks in the neighborhood, try Wag or Rover. These apps enable you to walk, dog-sit or board pups overnight for money.

Rover and Wag work in similar ways. They both require you to be at least 18 years old, pass a background check and meet other requirements. For both, you create a profile, set your own rates, and use the app to choose which gigs to take. (See our Rover vs. Wag comparison for more specific sign-up and payment information, as well as how the apps vary in the services they allow.)

On both apps, the amount you earn depends on what you charge, how much you receive in tips, and which types of services you provide. As you would guess, boarding typically pays more than walking a dog, for example. But both companies take a bite from your earnings. Rover charges a 20% service fee per booking, and Wag takes 40%.

3. Blogging

If you have a blog that gets decent traffic, try making money from it. Blogging for money can take a few forms. One way is to host ads on your blog through a service like Google AdSense, which is free. Here’s the gist, according to Google: If your website is approved, then you choose where on it you would like ads to appear. Then advertisers bid to place ads where you designated, with the winner’s ads appearing in that spot. (People make money on YouTube through the same service.)

You earn some money when a reader clicks on one of these ads — but determining exactly how much you’ll make is tricky. Explore our guide to Google AdSense to learn more about it.

You could also try writing sponsored content, meaning companies pay you to write about their products. Or, become an affiliate through the Amazon Associates program. That involves linking to an Amazon product from your content and earning a commission when one of your readers clicks through and buys that item. Learn more about how to make money on Amazon through your blog.

4. Posting to social media

Love posting to social media and building a following? On Instagram and TikTok, many users earn money through sponsored photos and videos. Say you regularly post about your at-home exercise regimen. You may agree to post about a retailer’s resistance bands or sweatpants in exchange for cash or free products. (Sponsorships and affiliate marketing are also ways to make money from podcasts, in case that’s one of your hobbies.)

Sponsors may reach out to you to set up this kind of arrangement; you could contact them; or, in some cases, you may consider working through a third-party agency.

The type of content you post, as well as your number of followers and their engagement, will likely impact sponsorship opportunities. Learn more about how to make money on Instagram or on TikTok.

5. Selling your wares

There’s a marketplace for just about everything. So if you’re skilled in a hobby, consider trying to profit from it. For example, if you create jewelry or have an eye for thrifting quality clothes, try selling those items at a local flea market or yard sale, or on a neighborhood website such as Nextdoor or Facebook Marketplace.

Or look into an online market that could attract a wider range of buyers. Consider Etsy for crafts or Poshmark if you want to sell clothes online.

These websites charge fees that will cut into your profits. This guide to selling stuff online will help you think through the math and determine if your hobby can become a viable business.

What to consider before making money from your hobbies

Before taking any of the routes listed above, keep in mind that this work will likely affect your taxes. See our guide to self-employment taxes, which includes expenses you can deduct, and how to avoid penalties.

And as you aim to profit from your hobbies, consider whether you will continue to enjoy them through this new business lens. Let’s say knitting helps you relax. Will it continue to do so if you’re pricing, promoting and shipping your homemade wares through an online marketplace? And that blogging hobby: Will writing still be fun or cathartic if you’re occasionally throwing in a sponsored post?

It may be hard to answer these questions until you give the money-making approach a shot. But it’s worth reflecting on the potential trade-offs as you think about turning your hobby into a job.

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