E21: Why I Love Licensing

I. Do these every last Wednesday of the month where we talk about all sorts of issues regarding that hourly to exit journey for expertise and service based businesses. So today we will be talking about why I love licensing programs. If you're listening to the podcast version of this, I do have some slides and you can find those slides on my YouTube channel, Think Beyond Ip. Or of course, just always feel free to send me a note and we can make sure we get those to you as well.

So for those of you who are new, just very briefly, I'm Erin Austin. I'm a lawyer and consultant, and I work with expertise based firms to help them increase their income and their impact by turning their expertise into intellectual property based revenue stream. So you'll hear me use the term IP, which stands for intellectual property interchangeably through the presentation.

So my goal is to help you build a business that can scale and that has some independence from you as the deliverer or implementer of your expertise. And that is the key to building a business that you can hopefully sell someday. And so some examples of IP based revenue streams are things like courses and software and digital information products, and of course licensing. And licensing has a couple of different flavors.

I'm gonna talk about my favorite type today, but some other flavors include franchises. Franchise is basically a licensing program, and certification, which is also essentially a licensing program. So just briefly, just in case you aren't familiar with what licensing is, so what I'm not talking about is like a business license, so that would be the thing that you need, you know, from your locality in order to operate your business.

We're talking about intellectual property licenses, and so in this context, a license is an agreement to allow someone else to use your intellectual property. And so a license is an agreement. Uh, As you may know, agreements can be either oral or in writing. Huge fan of them being in writing, not just because I'm a lawyer, but because there's little chance for misunderstandings when you have something in writing.

And there are some circumstances where for something to be enforceable, it has to be in writing, including the transfer of exclusive intellectual property rights. So whenever we're dealing with intellectual property, you really want anything to be in writing. So your license is your agreement that sets forth the terms of how somebody else can use your intellectual property.

And so the licenser is the person or organization that owns the ip, and the licensee is the person who gets to use your IP in exchange for that license fee subject to the terms set forth in the license agreement. So today we're gonna talk about my favorite type of licensing program, The one that I'm kind of jamming on right now, and that is the train the trainer model. And so what that means is that's when your client becomes your licensee.

So in this circumstance, currently you are going to your client and you're providing in-person trainings, or it could be virtually, but it's you doing the training. For whatever your expertise is, and I'm going to use HR training as the example. So maybe you do DEI training for your clients and so you go in on a regular basis and provide the DEI training for your clients. So under the train the trainer model you will train someone who is the employee at the client.

So when they need that training, You've trained someone at that client's business to provide that training. And license the training program to your client so that they can deliver it without you. And so what is The perfect ca I'm gonna use Perfect for this one. The perfect candidate for a Train the trainer licensing program. It is ideal if you're providing in-person training or consulting services, and it has to be on a recurring basis and to a corporate client for two reasons.

One, that recurring basis means there's a reason for them to need to have someone internally trained to continue to deliver whatever the, the training or service is and to corporate clients because they have the staff. to handle that in house. If it's something that they can't do in house, then that would be they probably need to continue to have you externally. You have original content or methodology.

So sometimes our services are based on something that we have been certified on or something that we have licensed from a third party and typically, A license from a third party will not permit us to create sub licensees and license that material to third parties. So the ideal candidate for this type of program would have, you'd have your own original materials that you are using to train your clients and provide your service.

The other is of course you have had the clients, so they want you to come back. They're asking for more. And so that would be the client that you would approach to provide this type of train to trainer program to. You're going to train a third party, so you have to have systematized it. If you, you know, maybe you just have through force of personality and you're charming with, you keep coming back and providing training, but it's super hard to train other people to do that.

So you have to have systematized it. You have to have materials in place so that you are able to train that in-house trainer to deliver your programs and. You can't keep up with demand. And so you have happy clients with your original materials and the only way to grow is either work more. We don't wanna do that. We have to create more experts who can deliver your training. You can do that in house by adding employees.

Well, you can do it by creating experts that are external to you, and that's where the licensing program comes in. You add those external programs by training a trainer at your clients, or you can add external experts by training other service providers to provide your expertise and your services. So we're gonna talk about both. And so, the benefits of the Train the Trainer program. You don't need a big audience or a mailing list.

Your train the trainer program is being sold to the same clients that you're selling your in-person services to. So you're using the exact same process for creating leads and making sales that you're currently using, except you now have another offering. You can provide in-person services, so it's not an either or, by the way, cuz some people think like, well it's completely different model you can continue to create to, to provide in-person services.

So that same funnel, same clients, in person services if that's their preference. Or you could also train someone in house to provide your services. Well, and but so that's another offering that you're adding. You already have that know, like, and trust with your clients. Like, you've been providing those in person services. I spoke to someone who does DEI training and she works with. Very big companies, they couldn't get enough of her.

It was in person traveling all over the place and she just couldn't do it anymore. So, train the trainer was perfect option for her to help get that training to the client in person, cuz some trainings obviously more effective in person and without her having to go everywhere. But you already have that know, like and trust factor with your client. You have positive cash flow.

There is some upfront investment to formalize your licensing program, but once it's in place, licensing fees are paid up front. And because the nature of a train the trainer program is that they're going to need it on a recurring basis, you have recurring fees, which we know are excellent for scaling as well as for creating additional value in the eyes of a potential buyer. Buyers love recurring revenue because it gives them visibility on what the business would earn in their hands.

And the other benefit is that it's actually pretty simple to administer. You know, once we get your licensing program in place, it is no more complicated to administer a licensing program, a train the trainer licensing program, than it is to have a retainer deal with a client. You know, you have. Those, you're checking in with them to make sure things are going well. You may be retraining a trainer from time to time if there is some turnover in that position.

But otherwise you are a resource to them. And you are getting that monthly, quarterly, annual license fee to use your programming. So the other thing, of course, you don't need to hire employees. You can, you know, the beauty of those recurring fees is that you now have a consistent cash flow that you can feel comfortable with the payroll, but you, you don't need to because your job will be to train that in-house trainer and to collect the licensing fees. So, on the certification side.

So certification program is a licensing program, but it's not as simple as the Train the Trainer program. And, you know, I get a lot of interest in the, in the certification program. You know let's say you have some expertise, I'm gonna use seo. And it was, I thought about this. I'm, I don't know why I'm using this because I really don't know that much about seo, but I'm, I'm guessing that you do. So let's say that you have developed a process for creating great SEO results for your clients.

And there's some other providers who just aren't having the same success that you are. Hey, can you show me your process for creating this seo success? I've also heard from people who do web design and and they have other people who are having trouble with it, and they ask for help and they're like, Well, let me create this certification program. And it is not that simple for a couple of reasons.

One, you have to have a strong enough brand and a strong enough process to get other people to pay you for it. So unlike your client, they already know you, they know your process, They just wanna bring it in. This is you're asking another provider to pay you money in order to use your process. And so you, it really needs to be a very strong brand. So that means you have to create that recognition, not just currently you're, you're out in the market.

Talking to your clients, now you have a new audience that you're selling to, which is other providers, and convincing them that using your system is better than their system and that they're gonna pay you for. So that just means you have, you now have two businesses basically that you're running, unlike the other. Of course you're also creating competitors and you know, one of the first things, the second thing that they ask after, can I create a certification program?

Is how do I keep the competitors from stealing my stuff? And so when you are licensing your methodology to your clients, they're not going to become, you know, SEO experts, you know but your competitors. Are, you are creating SEO experts. And so that is a certain risk. I mean, there are absolutely ways to mitigate that risk, and that's what we do with our licensing agreements. But that is an added risk and source of anxiety that you don't have with the train the trainer model.

You need to vet those licensees. You know, you already know your clients you know, they pay their bills, and and that they have the financial resources to continue to be a a good licensee. So when you're adding other service providers as licensees, some may be, you know people that you know, but there'll also be people that you don't know.

So you do really have a process for choosing and vetting those licensees to make sure that you can trust them, that they can deliver your programs competently, and that they continue to stay up to date, and don't do anything that world tear your brand. You typically have to provide more support.

You know, a lot of times certification programs will have some sort of community around them or you know, Slack channel or group coaching around them to make sure they stay up to date and, which is a great benefit, by the way, if you're going to do a certification program, you want one. Because it is a great benefit and provides a lot of value to your, to your licensees. You might need an audit program.

You know, depending on the nature of your program and your licensing fees, you may need to like, make sure that they're calculating your license fees correctly. Let's say you're charging them, you know, by the training. You'll need to then go in and make sure that they are reporting that correctly and paying you correct.

And then all of this means that it's a more complicated licensing agreement and process to make sure that you have all these rights, that you have restrictions in place, that you can get in there and audit, that you're enforcing the way that they are delivering your services.

And I am just going to say, you know, Very quickly that certification programs are not so controlling that we flip into franchise territory, which is another LinkedIn live, but we still do wanna make sure that they're not doing things that are going to interfere with the value of our brand. So, loving on the train the trainer program, not an either or, you continue to provide in-person services if that's your desire.

But you turn those client relationships into licensee relationships so that you can just continue to grow and you can technically have an indefinite number of licensees as opposed to obviously a finite number of clients. That Train the Trainer program works best when you provide something that is required on a recurring basis. And so, and that certification program might be better for when you have one off.

Like let's say you, integrate you know, newly merged businesses and you help them, you know, integrate the two cultures. That's gonna be a one time service. That's not something that would be a train the trainer type of of program. what if my clients are too small for a train the trainer license? So if your clients are too small, then they're probably not appropriate for the train the trainer.

So they really need to have someone in house, they're large enough probably to have at least one or two in house resources that make sure there is a recurring education for their employees. Or they like, you know, they have an onboarding process, something like that, that's provided on a recurring basis as employees cycle through that they would need.

What you do on a recurring basis, and if they have something like that that they do need on a recurring basis, but they don't have the capacity to staff that in house, then that's the type of client that you'll need to continue to service in person. Can the trainer you train be another consultant? Yes. So I'm gonna make the distinction. Between a licensing program and a certification program.

Now I use a certification program just cuz I feel like people recognize that when they train another service provider as a certification program as opposed to a licensing program. But you can train another consultant to provide the same service that you do. And it doesn't have to be certification program, it can just be a licensing program. It can just be that you have a process, that you have systematized and to the point that you can train someone else to deliver it, and you can.

Have a license agreement with them that would have the restrictions and the terms on how they can use it. Maybe it says, you know, like maybe they can only use it with a certain type of client. Maybe they can only use it in a certain region. Maybe they can only use a certain part of what you do. And it would have that license fee in there. And so it doesn't have to be a certification. The certification piece comes when you want to somehow, Make sure that they're delivering it competently.

So you are requiring them to go through a certain type of training. You're requiring them to come back periodically to be retrained. You're requiring them to make sure they're using the most recent version of your training. And so that's where the certification piece comes in cuz you are asking them to come back and prove that they are delivering it the way that is good for your brand.

So a certification program can fall apart when you haven't appropriately vetted your licensees, so they are not able to effectively deliver your programming. So either they aren't professionals and therefore they can't use it with clients effectively. So you have, they have unhappy clients and that blows back on you.

Or it doesn't work because you aren't supporting them or you haven't trained them well enough, so that even though they have the potential to deliver it competently, they don't have the support that they need so that they, they're not getting clients and therefore they're not getting an roi. They're paying you a license fee. They're not gonna continue to pay it unless they can.

You can show that roi, so that's why you need to make sure that you know you have a system that is effective and that you can teach someone else to deliver effectively so that they have had the clients. So both the end client who's receiving your services through a certified licensee, as well as that licensee have to be happy in order to continue to come back to you to pay that license fee. You absolutely will wanna have a formalized process.

If you are going to have licensees that are other service providers, you absolutely will wanna have a formal process for identifying, vetting and certifying your licensees. I hope you'll join me again next month. And thank you so much for joining me today.