I know some small and medium-sized brands are struggling in the recession and are looking for help.
Some brands may opt for the licensing model, so I asked Donald “DAC” Clark, president and co-owner of C & C Partners, a few questions about what kind of financials he looks for in potential licensing and/or investment partners, how brand owners should approach the process, and what financial rewards brand owners should expect if they take the licensing route.
C & C Partners currently is the licensee for Sanuk and Liquid Force Apparel and a partner in L*Space.
What is the revenue range for companies C&C is interested in licensing?
Five million plus. Entrepreneurs develop brands. These individuals have developed a niche and suffered through the start up boot strapping of their businesses. They usually begin to encounter operating and financial problems at the $5- to $15-million volume range.
This is where the wheels start to fall off the wagon. Their organization has outgrown their capabilities in some or all of the following: operations, strategic planning, financing, marketing, management control and/or their experience. For the brand to grow these entrepreneurs need to take their business to the next level and they often lack the skills and experience necessary. This is where investors and or licensing opportunities come in to play.
What do you look for in the financials?
Strong financial profit opportunities – high initial and net gross margins and an efficient, cost effective marketing model.
What do you look for in the brand?
The brand must have exceedingly strong brand assets, including a reason for being, strong market and product differentiation, unique brand footprint, strong, viable and understandable brand DNA, and international brand name ownership.
The brand also needs to be highly visible in the marketplace: Good brand awareness, strong sales momentum and a good sales rep organization.
Also, the brand should have a strong multi-channel marketing opportunity. For example, it should be strong in one channel such as surf/skate, outdoor etc. and able to span others such as surf/skate/snow, accessories, outdoor, sports, etc.
What qualities do you like in brand owners/management?
Brand passion, skill in design, sales, marketing etc. There must be a founder that brings a lot to the brand and is willing to commit time to building the brand, like Jeff Kelly of Sanuk or Monica Wise of L*Space.
If a young company is interested in taking the brand to a licensing company, what are some key things the owners should do?
- Realize that you will be loosing some control of the brand.
- Know what you want from a licensee.
- Be ready to sign a long-term contract.
- Know the licensee’s history and brand building track record.
- Have great, market leading products.
- Try to have one category that you have ownership of or strength in.
- Document the brand assets.
- Define the brand DNA.
- Have a sales team in place.
You’ve probably looked at a lot of possibilities in this economy. Are you seeing any trends/issues among young action sports companies?
Lack of financing opportunities. Weak retail sector. Sameness in apparel. Lack of differentiation. Narrowing of resources by retailers. Retailers moving risk to vendors by buying late and more often.
What kind of financial rewards should a company expect that wants to convert to a licensing model?
Faster growth. Guaranteed royalty flow. Larger support infrastructure. On-time shipping. Lower costs and better retail pricing.
I know C&C is looking for brands. What kind of arrangements are you interested in?
With licensing, we are interested in only well-known brands that have a strong presence in the marketplace.
With an ownership position, C&C will try to find opportunities that offer ownership and control.
With a joint venture, if the brand in already in place, C&C would invest in the brand by purchasing a sizable interest in the brand and C&C would provide the future financing for the joint venture.
Â
