Royalty Licensing Analysis Template

 Royalty licensing is a contractual arrangement where one party (the licensor) grants another party (the licensee) the right to use a certain intellectual property (IP) – such as a patent, trademark, copyrighted material, or trade secret – in exchange for compensation. This compensation is often structured as a royalty, which is typically a percentage of the revenue generated from using the IP or a fixed amount per unit sold. The specific details of royalty payments, such as the rate and payment terms, are usually outlined in the licensing agreement.

$45.00 USD

After purchase, the template will be immediately available to download. This is also included in the accounting templates bundle.

royalty licensing

This is a general comparison model where the user can input details about the future sales of the licensee in order to figure out the value (and present value) of the royalty income stream (licensing fees). You can compare percentage of sale style to fixed fee per sale style.

There is an annual output summary, a way to track actuals against the forecast, and two visualizations that summarize the present value and total fees per year.

Template Features:

  • (NEW) I added a sensitivity table to see the present value of each royalty scheme based on up to four different fee per sale and percentage of sale inputs.
  • Analyze for up to 50 years.
  • Forecast total sales based on inputs for monthly unit sales, sales growth rate, average value per sale.
  • Adjustable growth rate and average value per sale each month.
  • Adjust the fee per sale and percentage per sale inputs.
  • Calculates the present value of each licensing configuration over time.
  • Calculates the total fees per year by type and actuals.
It is important to include the present value of these cash flow streams because, depending upon the future sales forecast, one stream might be worth more in the future, but less immediately. Using this tool is a good way to determine the real difference when looking at the present value of the income streams. At first, the fixed fee per sale may make the most sense, but if the average value per sale goes up by a certain amount, the percentage per sale could surpass the value from earning fixed fees.

You could also have a sliding scale where the fixed fee earned per sale and percentage of sale change depending on the volume. It is important to analyze these streams completely in order to understand what the most rational decision is as well as what makes the most sense for both parties.

Note, for the present value, the user will enter their own discount rate. If you want help coming up with a reasonable rate to input, check out the WACC calculator and apply data based on the given risk profile of the industry of the licensee's business.

You may also like this franchisor / licensing model based on the sales performance of multiple locations over time (including opex, franchise fees, ongoing fees, and more).