Making Better Licensees & Superior Licensors

By design, we are a relatively small firm so we can be selective in working with Licensor Clients truly interested in Best Practices/Continuous Improvement Principles in which we can aid them due to our different perspective in working closely, over the years, with a number of Licensor Clients and many Licensees. Done right, Licensing is a cooperative effort between Licensors (for whom we are engaged) and Licensees – we can, therefore, be an integral part in helping make superior Licensors by making Better Licensees because being Better, at any level, is always a never finished/never-ending goal!

Better Licensees

Our “bread and butter,” over the past 35 years, has been in completing progressively better, more up-to-date, Licensee audits for a number of Licensors based on an understanding that, done right, audits make both Licensors and Licensees better.

The typically “good” Licensee audit is not the “traditional” audit, and it certainly is not a forensic audit, but it is a practical and cost-effective royalty reporting review – exposure-directed in nature – seeking to identify, isolate and correct the most common reporting errors and issues. Successful licensing of any Property is best achieved in a cooperative atmosphere.

Key Benefits

  1. Identify the unknowns in a largely self-reporting paradigm - For example, simple issues like improper reporting or serious issues like Sublicensee relationships are noted in which the Licensor is not receiving a full royalty (and in some cases no royalty at all), placing the Licensor in jeopardy as Licensees effectively “license” other parties with the resulting potential issues and problems, etc. This is the most effective way to identify and deal with issues in a timely manner (before they grow into HUGE or contentious issues). Our objective is to develop and execute a robust audit program that is both educational and fully cooperative in its mission – in an environment of self-reporting this is important not only for Licensors, but for Licensees so they understand “fellow” Licensees are properly reporting and following key guidelines normally only highlighted in audits.
  2. Develop and execute an Audit Program vs. “One-off” audits (the almost universal approach to auditing by most Licensors) - One-off audits are counter-intuitively far more time-consuming for Licensors with much less exposure coverage and correction. There is no effective way to determine which Licensees should/should not be audited. Those you think are “trouble” very often don’t have many issues while those you think are “clean” can be a disaster.
  3. Increase ongoing royalties - Once Licensees understand it is not if but when they WILL be audited, reporting “magically” gets better just as audit recoveries are the “tip of the iceberg” – audits provide on-going additional royalties as problems and issues are resolved going forward.

Better & Superior Licensors

From our vantage point of having worked with 40 or so Licensor clients (and literally thousands of Licensees), over the last 40+ years, we are able to help Licensor clients, on a consulting basis, in several ways:

  1. Understanding the hurdles of “on boarding” new Licensees - we have developed a New Licensee On-Boarding Process for heading off most major new Licensee issues early by sending, with new Agreements, “side” narratives or, better yet, a video outlining the most significant and common operating and reporting issues. Licensee personnel will more likely listen to and understand this than they will a License Agreement (one of the major benefits being to highlight key provisions, expectations and common errors most especially the Net Sales definition).
  2. Making easy and useful suggestions for Licensors, in the development and modification of Licensing Agreements to (as just two important examples)
    1. Ensure “Net Sales” is clearly defined to head-off common reporting errors and misunderstandings.
    2. Make audits better, easier and much less subject to friction at the time of audits since the basic audit needs are documented in “boilerplate” License Agreements.
    3. Coordinating with Licensor Clients the development of the most important audit program of all: having an in-house royalty report processing system in-place for quality and timely processing of royalty reports (and timely administration of Advances, Minimum Guarantee Shortfalls, etc).
    4. Consulting on any significant change to Licensee reporting system to make sure
      • All objectives are properly noted early on.
      • Make sure requests for data (royalty reporting requirements) are clear and easy so Licensees are not “jacked around” with subsequent change requests.
      • Consider audit needs so as much as possible they can be handled routinely and electronically on an on-going basis making future audits easier for everyone.

Contact us today Find out how we can help you!

See, RMA's companion site–Suggestions for Licensees to make royalty reporting (and, often, other Accounting tasks) easier and better–to take less time and be more accurate.