In my case I had the connections to sell direct to big sheds in the Uk . All i had to do was produce a product that was needed out there. I prototyped Protected and got manufacturers costs. Then I presented them. I got my first order from them about 5000, sets for national distribution . This meant i could produce myself. I have repeated this process with other products. It would be nice to have the resources behind me to drive more new products to market but i am moving at a pace that i can control. Latest idea is to design and produce products that are free to the customer on the surface but the cost is lost in the body the host product. This means that I do big numbers and no hard sell required . First two start up orders 80,000 units. This is not fiction and i am not giving you bull . This may help someone.

Hi Nathanial,
Thank you for making this clear again. The clearer the better for all innovators. You made it very clear for many to understand what way they should go.

Hi David,
You just passed on some information that I had been thinking on how to achive. I am going into manufacturing. We need jobs in this neck of the woods. Your information will help me in my business plan that is being reviewed by a SCOR cousler from the SBA. I need to make my first order and now I know how. Licesing was my first option and still may be possible later.

Thanks Guys
Gladys

My pleasure good look

Have self-funded manufacturing for 8 years with some success but would gladly sell or license patent. Marketing has been impossible for me and have lost thousands on marketing professionals who swore they could promote it.

I have not payed for any Marketing Professionals . Once the product is ready and selling I just got relevant magazines to do a editorial and they tested it for Free full page articles thousands of readers some magazines Fee to the trade. Joined local business association got Free article in paper Free. Now working on fee TV I want to get some products to the mass audience . I have networked well and will continue to do so helping other on my way if i can .

I really should resist the urge to get caught on detail and leave this mostly useless comment…

But its impossible to license anything without starting a business. Even in that situation where you, personally, sign a licensing agreement…you are acting as your own small business. Licensing vs manufacturing are simply two of a few go-to-market strategies which can be employed by a business.

But its at least a little more than just a technicality. Percentage-wise, its at least fairly rare that an inventor is able to strike a profitable licensing arrangement. If an inventor wants to strike that sought after licensing agreement, it at least helps for them to realize that they are running their own business operation, and should treat that operation accordingly. Of course, whether we are talking about 10s-20s of inventions versus one invention that they consider their baby, should affect how they treat the operation, as well.

Also, licensing can complement manufacturing, and vice versa. For example, even in a less complicated, less financed inventor-centric situation, selling yourself on a small scale can help you show evidence of marketability to a prospective licensee, among other possibilities.

And lastly, the decision to license versus manufacture just isn’t as black and white simple as investing/risking little to gain a lot versus investing/risking a lot to gain a lot. For one, as Nathanial notes that return on overall investment can often be served better teaming up with a large, established company (via a licensing agreement, for example), as usual there is often also at least greater poential for return on investment if you can do it yourself (you get 100% of revenue, not 1-6%). For two, in a licensing agreement, a large company and its employees (who have jobs to lose) will usually have more to lose than you do, and will be spending much more than you, and hence will be very concerned with risk.

This means that even where a good idea is recognized, there are still often hurdles to jump over in order to convince a prospective licensee that it is worth the risk…just because they pass up on the idea doesn’t mean its a bad idea – Google’s founders for example shopped their search technology to all of the players in online search back in the day and were turned down…Bill gates got laughed at back in the day…of course these are extreme, tech, examples, but the point remains. Just because you can’t find a company to bite your bait does not mean that you cannot be successful on your own.

And lastly – larger companies have much less to gain than you do (percentage wise). Especially if you consider the opportunity costs involved (if they invest in one new product idea they will not be able to invest in a second) – missing out on what is perceived to likely be a million dollar per year opportunity can be like dropping some loose change on the ground, and if they have any doubt they won’t think twice before passing up on the idea. Yet, if you could operate yourself and make just 100-300k per year, you might find that rewarding in multiple respects…

Good post Bill… REAL SMARTS exhibited…I will also be using your information about Google shopping their idea with no takers. I am sure I read that but forgot. I will consult you on my article.

LISTEN….WHY do inventors always say either 100% license or 100% manufacturer with ALL the responsibilities that come with it.

NEITHER scenario is typical in the REAL business world! Considering companies will manage the intellectual property, they will farm out or sub out all kinds of duties to marketing companies, public relations companies, packaging companies, fulfillment houses and warehouses.

Why can’t the inventor help their own cause and offer to help with some of these responsibilities????

Do you know why most licensing deal are never worth any more money than the money someone can make recycling the paper? It’s because nobody was available to take on all these duties properly at the manufacturer or they put some kid right out of college on YOUR project so they can learn the business by screwing up YOUR product launch!

Look at me. I have a partnership with my manufacturer sharing duties. We split profits 50-50. Isn’t that alot better than a licensing deal??? …And I have NO ONE to blame except myself if my invention fails as I am in charge of marketing and customer service as well as some shipping and other little things.

Everybody stop saying licensing OR manufacturing. The truth us it should be a combination of the two or can be any combination of the two.

We don’t want to give the new inventor misconceptions here. MANY MANY famous products became famous because of shared duties like I speak of or I doubt they would have ever made it “over the hump”

Ron Komorowski
Inventor of Handi-Straps
www.handi-straps.com

You never know.There should be a formula.But it seams, you just have to try and guess, and then try again. And you also need to get lucky and find the right people to help you move forward.This is very exiting,but it is not eazy.You also need some luck.

I agree it is not easy and you may find that you will get more encouragement from people that don’t know you.
Be exited life’s for living and make your own luck .

And you also need to get lucky and find the right people . Yes you do this bit is a mind field which company do i pick? If you cannot achieve a patent because of prior art. they may try and work round your idea. Just like the film

Hi David you seem to be a man in the know, Here`s my question. I have an invention that has no place on EN but I think has a strong nitch, worked on the idea in my head an on paper for almost 20 years eventualy after researching all that time and seeing it would have a market (P.S invention is in my field of work that I have done for over 20 years.) Any who I built a working prototype and ran test for fliming and video viewing I have gone and got a patent pending for the concept but now what? The invention has the potental to be a huge product and I think licensing is the way I want to go, any advice?

I’m currently confronting the question of licensing or doing my own start-up.

The current economy isn’t pro-business, especially when you’re talking about a small start-up. I’ve owned an ecommerce business for more than seven years and hired one employee a couple years ago who worked with me for 2-3 months. The time, expense, and hassle of having just one employee was crazy… worker’s comp, employee taxes, etc. I can’t imagine hiring a crew of employees!

I have to admit that the idea of venturing out on my own and building a new company is interesting. When I really think about it, though, licensing will work best for me. I’ve already built a business from the ground-up and am finally getting to enjoy the fruits of my labor.

I can only speak from some of my own experiences. And what I tell you is fact not fiction. I have sold over 200,000 of my own products and still selling this year one of my latest products may go over a million. I always wanted to licence my products but i felt that i needed to prove them first and show that they would sell. If i could produce numbers to big business this would work in my favour and help a fast track deal. I approached a big international company that i thought was a tip top highly respected brand. I Will hold back on the middle bit of the story it could be made into a book or film. But the outcome was a rip off product. That now is in legal hands. Another German Company took a product on under licence contract and owes me about £30,000 to £60,000 and is going be sued. I have no problem manufacturing and selling myself i have new products that were not on the market . I can give you more Help but a bit at a time is best. Hope this helps some one.

Susan, Sometimes a fulfillment company is a good idea if you don’t want to deal with the employee situation. And, you might pay them less than what you would earn with a licensing agreement. (hope I said that right) But, who will do the marketing – another key part of the whole package.

David, so glad that you joined EN.

? why ?

‘why’ what? The fulfillment co? the employees? the licensing? the packaging?

Hi Julie
Thanks for your post . I am Trying not to give too much info away but give some factual help. I am here to pick up as many tips as i can we never stop learning. I hope someone can benefit from my experiences and maybe i can give some valued posts at some point.

I finally got it and I’m not even dyslexic! Thanks. ;-)

you lost me again ?

I finally got it and I’m not even dyslexic! Thanks. ;-) ?

Let’s start over. You didn’t ask ‘why’ and I didn’t respond.

Ok Julie

you have my undivided attention so let me have it “Why”?

Please be gentle.

I like you Julie and wish i could be as switch on as you at your age, And take my hat of to you please don’t fall int the trap of thinking or saying that what i say is no true. I may do the white lie now and again “I am only 13”

Sorry Julie if i have offended you in any way it was not my intension. New scenario , you have a new great idea and you have product searched it and found nothing on the market. You have filed for a patent . you have big orders based on your prototype but You have no real cash to spare?. You have got a price for the product and packaging and the mould is 30,000 us dollars . What are my options ?

Hi David, No need to apologize and don’t worry about ever offending me – pretty hard to do.

Based on your scenario, I think I would get the order(s) in writing and take them all to the bank where you do business and ask for a Letter of Credit. You only get charged interest on the money you use, as you use it – different than a loan. You might pay a little higher percentage but if it helps you get money for the job and you then have cash flow, it should work out.

Or, with the success of your other products, I would think the bank would be more than happy to make a loan.

Will the mold maker make a deal with you: maybe monthly payments, backed by the bank’s letter of credit or money put in escrow. Would they like some of your product? Would they do the work in exchange for a certain percentage of sales for a stipulated period of time?

I think that I read in ID recently that you should ask family, friends and co-workers who believe in you.

Not sure how any of this would work if the patent hasn’t come through yet.

Hi Julie
That was a good post and may help other think a bit . I have commissioned eight moulds From £5,000 to £25,000 and all played off. I was having a meeting with one of my mould makers about two new mould two weeks ago.One mould the aim was to bring the unit price down . I did not want to compromise the product with a cheaper material so the other option was more parts per cycle time this wood make the parts cheaper. New mould 20k ,He suggested to amortise the mould price into the unit price and after say 100,000 the price would drop to a cheaper unit price. I said that’s ok but then the mould is mine. He replied i am happy with that as you will have played for the mould. No interest charges from the bank no loan.
This eliminates the bank in my case. This is not the first time this has been offered to me but now i think that i will take them up on the deal and get an agreement signed.

My manufactures tells me we are their best customer and the best payer. So maybe they have trust in me.

And that is what a ‘think tank’ accomplishes: throw it out there and maybe one little thing someone says will ring a bell for you. My absolute pleasure to provide whatever it was that rang your bell. ;-)

I have an agreement with my manufacturer that she will make whatever quantity I order, no matter how few – even though cutting is much more difficiult with just a few – for the same price she charged in the beginning when I ordered many thousand. (the confidence of a new inventor who was absolutely sure that EVERYONE would want a pillowcase!). There are deals to be made – we each have to find the key.

Another good post Julie .
This type of post may help others find away to achieve their goals. Or give them some other options to think about. his forum has " All the help you need "

Or am i wrong ?

Hi David, I don’t know what your last question is referring to but since you are a man, you must already know that you are ALWAYS wrong. smile….

Tell me about it. smile…

I have a big smile today and looks like a lot of hard work is starting to pay off.

Great! When you can tell us about it, please do because a success story is always inspirational and if there were any glitches, it can be educational for us who are plugging along.

I Julie
My new product is growing and i have had nothing but great feedback. I told you on another blog that i had presented my product to a company that i felt loyal too . Certain people tried to stop it but I know too many people and promoted it around the obstacles and gave away free samples to key people to test and gave away to others. Looks like i have overcome the negatives that are holding the company back.This product is very simple and inexpensive but adds great value to a big ticket product. My aim is it is free with every purchase. I am also receiving calls to buy this product from the free issue units that are rolling out as we speak.

Loyalty is so important but I am amazed how many people don’t consider it as a part of doing business. I don’t know about life in the UK, but negative gossip here can do more harm than any good press one gets.

Same in the Uk but it’s nice to overcome where there’s a will there’s a way. Nothing comes easy and life’s about challenges, It will end up being a great story one day. I hope i can inspire others a little .

Loyalty is so important but I am amazed how many people don’t consider it as a part of doing business.
Is it Wright to put all your eggs in one basket and wise ?

I have just finished my designs for a smaller version of one of my products . My local manufacture is moaning about cost rising and wanting to put up my production costs . I have decided to use another manufacture to produce the new part and this will take away some of the eggs in one basket scenario . I am very honest with my manufactures and give them a chance to be make money but i don’t like to pay for their mistakes.

Thought you might like this from last months Inventor’s Digest. http://www.inventorsdigest.com/?p=2927

Licensing vs. Manufacturing
By Roger Brown
Inventors Digest posed a seemingly simple question:
Which do you think is the better route for inventors – licensing or manufacturing?
The answer is complex because it begs more questions.
You need to decide which route to take early in the process. To do this, you have to take an honest look at your idea and yourself.
Do you have the ability, resources and business savvy to manufacture and build a company around your product? Or are you better suited to license it?
Building a business around a product reaps you a larger share of the profits, as well as greater control over sales and marketing strategies.
But you’ll also have the lion’s share of the risk, including inventory expenses, personnel hiring, quality control, returns, late shipments, contract breaches, knockoffs, patent-infringement issues, long hours and a large monetary investment. And it all could end in financial ruin if your product doesn’t sell.
Another thing to ponder: Are you willing to work your current job while getting the business off the ground or quit your job and put it all on the line? Likewise, if you have investors, you’ll have to decide what equity the investors get in the company. Investors expect to have a say in how the business is run.
Licensing means you’ll receive a smaller proportion of the profits, normally 2 percent to 8 percent. But you have the least amount of risk and monetary investment.
Licensing requires you have to find a company willing to license your product and fund it.
You’ll more than likely have to pay for a patent search, patent, prototype, presentation and legal fees. You’ll have to do this if go the manufacturing route, too.
If you hire a licensing agent, whose duties include making calls to companies and negotiating contracts, you’ll have to pay her or him a percentage of the license.
You are largely at the mercy of the licensing company’s marketing and sales practices. Companies often change the product’s design to fit their vision of what’s marketable. You have to wait 30 days after each quarter to see if your royalty will be what you hoped. All the while you may be wondering if the company is pushing your product as hard as you would if you ran the company.
Despite all the caveats with licensing, I have personally favored this route. I have more than 240 products in sell-sheet form, ranging from kitchen and eyewear to lawn and garden. Each of these categories has its own set of rules and structure for getting to market. Just learning how to navigate each industry is a challenge on its own.
Manufacturing it yourself and licensing each has its rewards and pitfalls. Regardless the route you take, be as informed as possible, set realistic expectations and minimize your risks. You may be able to fool yourself about your product’s chances. But in the end, the consumer will be the final judge.
Visit www.rogerbrown.net