FAQ: The Cash Flow of Art Licensing – this isn’t quick money!

Many people have asked me what expenses I could possibly have because I work from home and I ‘paint’.

Computers, printers, software and scanners aren’t free. And the ink you go through printing things to submit or show– that adds up quickly.
Websites, reference books, trade magazines, … there are expenses.

Invest in your business but don’t go into major debt if possible. Watch your cash flow and spend wisely. Investments can be in the form of training (like books, classes, seminars or personal consulting), attending or exhibiting at trade shows, upgrading a printer or computer. Grow as your business grows.

The Cash Flow Cycle of Licensing

If you haven’t licensed your art before, you may wonder how long it will take to make money. Of course, it can vary and each artist’s experience will differ. But below I have outlined the 7 basic stages that will give an idea of what to expect:

Create the art. You or your agent show it to manufacturers.
Celebrate! Someone is interested! Contract negotiation starts.
Sign the contract. (Let’s assume it is January) You will get some money now IF
you get an advance. In my experience, that happens about 50% of the time.
Prepare the art. Make any requested changes or additions to your art and get everything to the manufacturer.
Now the manufacturer needs to make sure everything is formatted and ready. Product needs to be made. It is often 6-12 months between when you give them the art and when the art is on the products, in a store.
The manufacturer ships the product with your art. Assume this happens in January– it’s now been
12 months since signing the deal.
Most companies pay quarterly – so you will be paid 4 times a year. At the end of the quarter, which would be March, they start to do royalty reports and generally have to have them in the mail within 30 days – so by April 30th. You should have your first royalty check by the first week in May.

As you can see by this example, it can take some time to get the money flowing.

Sometimes things move faster but I want you to prepare for this type of time line. If you understand it going into it, you are less likely to get frustrated and give up. Once you have things in the licensing pipeline, you start to get very excited at the end of each quarter and watch for the mail carrier!

Here’s to your creative – and dare I say realistic – success!

– Tara Reed

3 Responses to FAQ: The Cash Flow of Art Licensing – this isn’t quick money!

David says:

February 22, 2011 at 6:07 pm

This is one of the most helpful things for me to understand going into art licensing. It actually takes much of the pressure off, especially at trade shows.

Knowing that it’s going to take time means that I can work on building relationships without feeling desperate for money.

Of course, I have to figure out how to make money until the cycle starts, but knowing that is so much easier than banging my head against the wall. And less painful.
Dana Barbieri says:

March 7, 2011 at 6:43 am

Thanks for this info. Great to know.
Maria Brophy says:

March 10, 2011 at 2:40 pm

Tara, this is a great list of how it works. Very helpful for artists who are new to licensing. I would also add this:

Some products take longer to get royalties than others, especially apparel and shoes. In the case of our Converse Chuck deal, we signed it in Spring of 2009, the samples were made in summer and shown at trade shows, then it was the FOLLOWING YEAR that orders to retailers were fulfilled. That means, we got our first royalty check after 2nd Quarter of 2010, in JULY! (well over a year from the time we signed the contract). And this is why I always try to get an advance up front – so that I don’t have to wait over a year to be paid something!

All deals don’t take that long though. Coffee mugs and paper products, etc. are produced and sold much quicker.

Great article. Keep em coming!