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How To Expand Your Small Business
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Article 3: Licensing & Partnerships
You have two options for setting up a new physical presence in another location without necessarily doing it yourself: licensing and partnerships.
Licensing
Compared to physically adding new outlets, this is a low-cost way to effectively reach new geographic markets. Your financial risk also is minimized compared to the costs of establishing your own new physical outlets.
If your product is well-branded, others may be interested in selling your products in new markets. In return for granting others the privilege of selling your branded commodity, you can receive cash upfront and royalties down the line.
Find licensing partners by researching companies that provide similar products and services. Don’t get too far along in negotiations, however, without consulting an intellectual property rights attorney. Your goal is to minimize risk, but not lose control of your products.
Partners And Investors
Partners and investors can provide needed capital and other resources, such as cash, assets or know-how that you may not have, to make expansion more likely.
Before searching for a partner, however, identify what you seek to gain. Also determine whether you’re willing to give up some control in return for the partner’s contribution. Talk over your goal with your accountant, banker and attorney.
If your goal is to establish a chain of clock repair shops catering to a suburban market, you may find interested partners among landlords of strip malls serving suburbia. Strip malls suffer from frequent vacancies that hurt their image and diminish foot traffic for the other businesses located there.
The landlord may feel there’s sufficient benefit in keeping shops occupied to offer a substantial break on lease payments. Or perhaps he’ll be willing to give a rental discount in return for a percentage of your clock shop’s profits. Such an onsite partner would have a direct interest in your shop’s success, while assuming some of its ongoing costs.
When evaluating partners and investors, consider their experience and familiarity with your industry. Outsiders don’t always roll with an industry’s particular punches. You want to pair up with someone who won’t panic with every normal fluctuation in the business cycle.
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