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Self-Distribution vs Licensing Your Product

To self-distribute or to license that is the question for almost every entrepreneur. There are pros and cons to both options, but ultimately the decision rests in the mind of the inventor. Licensing offers security, with the caveat that your product may not be completely yours, while self-distribution can mean relying on focus and passion, despite setbacks and without any outside security.

What does it mean to license your product?

Licensing is when you rent out your product to a larger distributor, which can range from supermarkets to the big boys like Walmart and Target. Licensing on a high level can be a dream come true and can provide passive income.

Licensing gives your product exposure.

Licensing can be a great opportunity for your product. The distributor most likely has a wide customer base, which will bring your product a higher level of exposure. You won’t have to avidly pursue clients because they are more likely to come to you. All business risk is assumed by the licensor, and as the licensee, you, can enjoy the reward of royalty checks.

Getting licensed can feel like playing the lottery for small winnings

Your chances of successfully being licensed are quite slim. Conversely, a product out of your control, vulnerable to subpar marketing and execution will perish on the shelves. According to a study by Ed Zimmer and Ron Westrum, only thirteen percent of inventors obtain licenses. While that may be enough to give confident inventors hope, it is not a large enough percentage to feel secure. Yet, there are still opportunities. To improve your odds, research your options and protect yourself.

Self-distribution: the long slow road roller coaster to “maybe” success

While licensing can push your product light years ahead, it may take decades to reach the same level of exposure through self-distribution. Earning only 3-12% in royalties may not be enough for inventors who have stronger entrepreneurial aspirations, but self-manufacturing and marketing a product means all risk is assumed by the entrepreneur. Drive and focus is needed to be successful that may ultimately sacrifice your social and personal life. The process is overwhelming. The skills necessary to accomplish self-distribution success include stellar salesmanship and competent multi-tasking. Initially you’ll need to wear multiple business hats, from selling to copywriting to social media marketing.

Choosing your best option

Well that depends on you, your personality, your motivation, your passion and your skills. The one quality all successful entrepreneurs have is the ability to remain confident during lulls and dead times. If you are unable to maintain self-assurance, it may be better to license your product rather than go it alone.

The best way to decide between licensing and self-distribution is by researching your options. Be realistic in your business expectations and the level of risk you are willing to bear. Both routes have pros and cons, and you must decide between control and security. Many factors will be out of your control, but the decision is yours to make.