Consulting and Licensing Agreements

From WSJ.com/Entrepreneur
Consulting and Licensing Agreements

November 6, 2007
By Kelly Spors
Q: We have a start-up and we know a couple of people interested in using our model to open their own company. We don't want a partnership, nor do we think we can create a franchise. We just want to offer them use of some of our resources. What kind of agreement do we need?
— Maricar Sison, Leesburg, Va.

A: Your best bet is a consulting agreement or licensing agreement, depending on the type of start-up help you're providing the other companies, says Rich Sloan, co-founder of StartupNation.com, an online entrepreneurial advice firm.

A consulting agreement covers any transfer of knowledge or consultation you provide, whereas a licensing agreement would be most appropriate if you're letting another company use some proprietary technology or infrastructure you've developed. You can then charge the other company a flat fee or period fees for those services, as laid out in the agreement. Continuing royalties are often too onerous to administer with such hands-off relationships, Mr. Sloan says.

Such contracts can be set up in multitude of ways, so it's best to consult an attorney who can evaluate the best model for your business.

Generally speaking, however, you shouldn't let another company use your name or brand unless you're entering into an official franchise agreement. "It's not a good idea to let somebody else potentially be in control of what your brand stands for," Mr. Sloan says.

Q: I own 25 domain names and am looking to sell them. How can I do that?
— D.J., Boston

A: Start with simple steps, such as placing an ad with your contact information at each domain's Web site so anyone who lands on the site sees it's for sale and can easily reach you.

You might then look into posting the domain names in online auction sites, such as Afternic.com or Sedo.com. You can list a domain name on Sedo.com, for instance, free and set a minimum asking price or a fixed price. If it sells, you pay the site a fee — often 10% of the sales price, with a $50 minimum.

The domain name organicchickens.com recently got a $2,000 bid on Sedo.com with about six days left of bidding.

Another option: While you're waiting for a domain name to sell, you might "park" it, or put ads on the site that pay you a fee every time someone clicks on them or makes a purchase. That way, you'll make extra money when somebody stumbles on the site and clicks on the ads.

You may even discover that you can earn more money from ad revenue than from selling the domain name itself. Some of the online auctions offer domain parking for an extra fee.