Rule #4

29 09 2011

Plan on 2+ years to get your art licensing business established.

Licensing is no different than other business, it will take time to create contacts, processes, and revenue. If you expect it to happen over night, you are most likely thinking about the wrong business, or perhaps entrepreneurial endeavors are not right for you.

I’m going to give you a timeline here that I know will be valuable when considering the art licensing industry and planning your time and budgets.

It would be reasonable to expect that gearing up your business will take at least a year. Six months might be spent creating your art licensing portfolio and collections, evaluating and refining them, as well as setting up your web site and establishing a rough business plan. In the next six months, you should kick-off marketing efforts targeted toward manufacturers or to prospective agents.

You may be able to close your first deal (or two) within a year, but only with active marketing efforts. Once you receive an offer, be aware, that it can still take 1 to 6- months to finalize the deal and get the signed contract completed. It certainly varies with every manufacturer.  For example, if they are pursuing something topical and hot, then it may be a matter of weeks and you are done.

Let’s say it then takes the manufacturer 3-months to 1 year to produce the product, and this is actually a relatively short timeline, as many overseas products take even longer to develop. Then you add a 3 to 6-month window before the product is ready sold to retailers, distributed to them and available in stores.

If you add up all those numbers, I can tell you the total time is approximately one year to 2½ years before you see any royalty revenues. You may have negotiated an advance on that deal, so you had some money come in when you signed the contract. However, the core of royalty revenue is generated when product is sold by the manufacturer (wholesaler) to retail stores. Then it takes even longer to hit your bank, since most manufacturers will pay you quarterly for sales generated in a prior quarter.

Now, I’m sure during this time you wouldn’t be sitting still waiting for the revenue from that one deal. Licensing is a cycle; you continue the process of creating, marketing and selling—over and over again—utilizing both new and existing art in different ways. You can really understand the huge potential of licensing when one piece of art, or a single collection, sells well on multiple products and generates revenue way beyond it’s value as “a” piece of art for the wall.

And meanwhile, you create product and keep marketing. Plan ahead, knowing that you will need funds to live on until the revenue stream from multiple deals start to come in.  So plan on 2+ years before you’ve got a solid revenue stream. Keep that in mind. It’s a great business to be in, but it does take time to build it and work to keep it going.

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