Great Business Ideas: Strike a Deal with a Giant

Great Ideas for your Small Business: Strike a Deal with a Giant

Until 1997, anyone wanting sandra Nunnerley’s elegant, custom-designed furniture for their home or office had to have deep pockets as well as good taste. Long accustomed to serving the upscale market, with a single chair tagged at up to $10,000, Nunnerley said she was pushed into the retail market by copycats. “I started to notice that copies of my custom designs were appearing in retail outlets,” said Nunnerley.

Skilled at managing a six-person boutique design firm, but unfamiliar with producing furniture for the masses, Nunnerley teamed up with furniture giant Lane Upholstery to manufacture her line. Her licensing deal for sofas, beds, chairs, and tables calls for Lane to pay Nunnerley a royalty on sales, as well as an advance against royalties to help cover her design and start-up costs. She declined to discuss the financial details of the deal, but said if the line is a hit, it would create double-digit sales increases.

Not every entrepreneur has the reputation, talent, and clout to strike a deal with a giant. Nunnerley was already established as a hot, young designer. Her furniture and interior designs, widely recognized by her peers and featured in Architectural Digest, among other publications, appealed to Lane Upholstery president Arthur Thompson. “Sandra is a designer of remarkable talents, one who has consistently responded to a discerning international clientele,” Thompson said when the line was launched. “Her simple, sophisticated designs fill a void in the marketplace for furniture that meets the demands of modern living without sacrificing elegance, style, and tradition.” Realizing that negotiating a licensing deal with a big company requires special contacts and skills, Nunnerley relied on Carl Levine, a veteran home-furnishings retailer and consultant to North Carolina–based Lane. Levine, who receives a percentage of her royalties for brokering the deal, said Lane benefits by its association with Nunnerley. “Her name is like a brand,” he said. “It’s like putting Kellogg’s on the A&P shelf rather than a generic brand. That’s why many manufacturers want a designer name attached to their product. It gives them extra clout and prestige.” Levine not only brokered the deal, but helped Nunnerley decide what kind of pieces would appeal to middle America.

In addition to designing the furniture and selecting fabrics, Nunnerley spends many hours on the Lane factory floor, teaching workers how to create her fashion-inspired upholstery details, like pleats and tucks. Creating a win-win situation between designer and manufacturer is critical to doing a successful licensing deal, Levine said. He also recommends working with a skilled contract attorney to protect your interests.

If you have a concept or invention you hope to license to a manufacturer, check out The Inventor’s Notebook, by Fred Grissom and David Pressman (Nolo Press; 2000). The work- book helps you document your idea and covers the hows and whys of licensing.

Tips for finding a powerful partner

THE FIRST STEP toward making a deal with a much bigger company is to target potential companies that are right for your business.

Here are some suggestions:

  • Scour industry trade journals and newsletters for the names of the biggest players in your industry.
  • Order annual reports and spend time on the company’s website to learn all about their divisions, marketing strategies, and other alliances.
  • Determine who would be the best person to contact to dis- cuss a possible deal; set up a face-to-face meeting and tour so you can get a feel for the company culture.
  • Have a specific short-term proposal in mind; you only get one chance to make a good impression, so come up with something great.
  • Suggest a very limited test of your marketing concept.
  • Trust your instinct, but ask colleagues what they know about the company you want to do business with.