Why should a business license the products and services it produces rather than sell them?

There are several reasons why a business may choose to license its products rather than sell them outright:

  1. Increased revenue potential: By licensing a product, a business can potentially earn ongoing royalties or licensing fees, which can be more profitable in the long run than a one-time sale.
  2. Reduced risk: Licensing a product can reduce the risk for the licensor (the business that owns the product), as they are not responsible for manufacturing, distribution, or marketing. This allows them to focus on their core competencies and reduce their exposure to risks such as inventory management and supply chain disruptions.
  3. Access to new markets: Licensing a product can provide access to new markets and customers, particularly in foreign countries where local expertise is needed to navigate cultural and legal barriers.
  4. Brand building: Licensing a product can help to build brand recognition and increase visibility for the product, which can ultimately drive sales and revenue growth.
  5. Flexibility: Licensing agreements can be tailored to the needs of the licensor and licensee, allowing for greater flexibility in terms of pricing, distribution, and marketing strategies.

Businesses often strive for double-digit growth in revenue for several reasons:

  1. To remain competitive: In many industries, businesses are competing with other companies for market share. Double-digit revenue growth can help a company stay ahead of its competitors and maintain or improve its position in the market.
  2. To attract investors: Investors often look for companies with strong revenue growth potential, as they want to invest in companies that can provide a good return on their investment. Double-digit revenue growth can make a company more attractive to potential investors.
  3. To fund expansion: Businesses often need capital to fund expansion plans, such as opening new locations or launching new products. Double-digit revenue growth can provide the cash flow needed to fund these initiatives.
  4. To increase profits: Increasing revenue is one way for businesses to increase profits. Double-digit revenue growth can help a company achieve higher profits, which can be used to fund future growth or pay dividends to shareholders.
  5. To improve employee morale: When a business is growing rapidly, it can create a sense of excitement and energy among employees. This can improve morale and help retain top talent.

However, it’s important to note that double-digit revenue growth isn’t always necessary or even possible for every business. It depends on the industry, market conditions, and the company’s goals and resources.