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DEC Author: Michael Neuvirth | Comments(0) | Recommend

IP Deal Making Tip (7 of 101)

In our quest to provide you with 101 deal making tips, here is tip #7:

Make Sure You Have An Industry Comparable!

In licensing your selling your IP, a critical determinatiion will be the valuation and/or the potential royalty rate.

Most entrepreneurs try to create all kinds of spread sheets, sensitivity analysis and forecasts to try to get the highest valuation or royalty for their IP. This is a waste of time.

The best way to get the royalty or valuation that you want is to find an industry comparable.  What company just licensed some IP and what royalty or valuation did it utlize? There is no guarantee that you will get the same number - but by using a comparable you have more or less set the foundations for a fair negotiation.

Once again, you need to do your homework. Search the Internet and if you put in enough effort you should be able to find comparables. 

You can buy books and reports that will give you comparable royalty rates - but these are expensive. Moreover, the books and reports most likely gleaned their information from Quarterly or Annual Reports of publicly traded companies.

You can get access to Quarterly and Annual Reports for free here.


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