Intellectual Property – Selling royalties in business

In the world’s economy, the potential for creating new wealth through the definition of intellectual property and the subsequent utilisation of trademarks is enormous. Intellectual capital is very high but often remains unexploited due to the average entrepreneur’s lack of planning.
By Matteo Turi

What makes a company of exceptional value? Plan your path to success.

Let’s briefly explore the typical financial performance of company A in 3 standard cases of growth.
Growth without strategic planning: Growth is without discipline and is not controlled with the help of a finance expert. In this case revenue growth and cash flow tend to go in the opposite direction and the company’s valuation is low.
Growth with strategic planning: Growth is governed and controlled by the amount of capital needed and by careful management of the company’s resources and costs. The value of this company is average.
Growth with royalties: Growth, in addition to being disciplined, is fuelled by the exploitation of the brand that allows you to sell royalties internationally. The value of this company is high.

What are the ingredients that allow a company to become an international success?
Now we’ve established that high values can be achieved by utilising the company’s intellectual property, let’s identify the 4 ways to sell royalties:
Joint Ventures Distribution Licensing Franchising

Franchising is by far the most sophisticated way to sell royalties while licensing is also very common. Franchising alone generates $1 trillion in revenues and creates more than nine million jobs in the USA economy, to the benefit of four winning parties.

  • Banks lend more favourably to franchised businesses because they are seen as safer to lend to. Statistics in fact show that about 95% of franchisees report themselves as profitable.
  • Entrepreneurs acquire a safer business to invest their money into.
  • Clients increase the value of their business, as they generate royalties.
  • Last but not least, the entire economy which benefits from the creation of new jobs, additional tax receipts and credit expansion.

Selling royalties to become a highly successful business
I recommend starting by investing in processes to turn your business into a proven functioning system which can be replicated anywhere in the world. It’s important to note that by far the most successful businesses in the world all sell royalties. Two of the most familiar examples are McDonald’s and Microsoft. McDonald’s has built proven systems which work in such a way that all its restaurants are a copy of one successful concept. As for Microsoft, contrary to popular belief, the software giant doesn’t sell software products. Rather it sells users the right to use its software, which is intellectual property as such.

Matteo Turi offers business development mentoring through the IBA network. He will be delighted to help you scale up towards financial success and create a business with the highest possible valuation

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