Your firm typically runs three-day courses and charges the client $1,000 per attendee. Most firms send around 15 salespeople to each course. This gives the firm revenue of $15,000 for a three-day training course. The associated variable costs are $5,000 for the trainer and $1,000 for the training manuals that are provided to the participants. Of course, a proportion of the revenue needs to be allocated to fixed costs (of office rent, computers, communication, support staff, promotion, and so on).

Therefore, as a rough estimate, each three-day training session would generate around $5,000 gross profit. However, you now have a new pricing dilemma. A major firm has approached you to license (hire/rent) your training materials for one year to train their own staff. That means that they just want a copy of your training booklets/materials they would then use their own training staff and produce the training manuals themselves. The firm plans to train around 100 of their sales staff (using your training materials) over the next 12 months and they want to know what your licensing fee would be.

Questions:

1. What would be the minimum you could charge to cover costs?
2. What could be the income/profit you would receive if your firm did the full training for the client (like your firm normally does)?
3. Do you need to be concerned with what price potential competitors might charge?
4. Therefore, given your responses to the above questions, what might be an appropriate licensing fee?