Hey,

Everyone in your category is bidding for the same attention.

Same two platforms, same competitors, same limited pool of people.

But there's another way in.

And almost nobody in DTC uses it.

You rent a fanbase somebody else spent decades building. Decades.

It goes on your product, and you pay for it out of sales.

I recorded an episode on this with David Born.

He's worked in licensing for about twenty years. Some of that inside Warner Bros. Consumer Products, on the side of the table that picks who gets a license.

Here's what I didn't know.

A licensing deal has two costs.

One is the royalty. That's a percentage of sales, and he says it averages around 10% for an ecommerce brand.

The other is the minimum guarantee. You owe that whether you sell anything or not.

And now the part nobody expects.

The minimum guarantee comes out of your own forecast.

You tell them what you'll sell. They apply the royalty rate. That number is what you're committed to.

His example: a t-shirt brand forecasts $10M over two years. Apply 10%. They owe roughly $200,000, sales or no sales.

So the optimistic forecast you'd use to win the pitch is the thing that sets your debt.

Before you send anyone a number, make sure it's one you can commit to.

It's like talking to investors. Overpromise and you're stuck with targets you've already agreed to. Underpromise and they won't want the deal.

You gotta find the balance.

Two more things.

The hottest IP makes the worst first license.

Start smaller and build a track record. The big licensors will tell you to come back later anyway.

And (this one is super important) licensing won't rescue a struggling brand.

That's a licensing agent saying it, which is who I'd trust on it.

One of his clients sells loose leaf tea. Ten years in business, never licensed anything.

The founder told David their first licensed Christmas collection sold out in 12 days. On less ad spend than a normal launch.

Your move this week.

If you've ever sketched a licensed product on a whiteboard, build the forecast. The forecast is what becomes the contract.

We also got into the twelve months it takes before you can sell anything. And what a license does to your company's value on the day you sell it.

The whole conversation with David is here

Talk soon,
Andrej

PS: None of this is legal advice. Licensing terms swing enormously by licensor and category, so read the contract.