When I conceived my idea for a thin, flexible wallet invention in 2002, I was very excited about the potential of my invention. But, I had no clue what I should do first. So I found a patent attorney and filed for a utility patent on my product.
Ready, fire, aim!
Fortunately it worked out for me and my product has been a big success, but it could very easily have been a complete waste of $5,000.
New Inventor Startup Kit – a Much Better Way
Over the last 15 years of my invention journey I have acquired a lot of ‘wisdom' in the form of countless costly mistakes and missteps.
Now, I know there is a better way to get off to a good, productive start with a new invention idea – a plan to mitigate risk and optimize potential reward. Sound interesting?
Here is the 3-step process:
- Decide what you want to do – what you are willing to do
- Become a fisherman: throw the ‘little ones' back
- Learn what matters most to the buyer – and give it to them
Decide What You Want to Do
This sounds so simple, doesn't it? But it's not and many inventors never do this early and only discover much later they are pursuing a course that doesn't work for them.
You need to decide if you want to build a business around your product or if you want to license it and be paid a small royalty percentage on sales.
Building a business around a product requires a huge commitment of time and capital. You should carefully consider your family circumstances and your career needs carefully before making such a commitment. Inventing is a very risky venture, you must feel comfortable with the commitments and risks you will have to take and that there is no guarantee of success. Sometimes it is just better to keep your day job and a regular paycheck. Really.
Licensing transfers the risk away from you and onto the licensee – the company that would manufacture, package, distribute and market your product. The time commitment is much less and can easily be managed while holding down a full time job. There is no guarantee that you will find someone willing to license your product, but you might come up with another invention. This course is much less taxing on families and bank accounts.
Once you have chosen your path, focus on it – in the words of entrepreneur and podcaster, John Lee Dumas – Follow One Course Until Successful.
Throw the ‘Little Ones' Back
Professional fisherman (and women) who fish for a living follow a simple creed: throw the little ones back. You can't make much of a meal or have much to sell with tiny fish.
Unfortunately, inventors tend to fall in love with every idea they have, often pursuing and spending thousands on little ones – inventions that simply have no chance for success.
Learn to cull your invention ideas. Recognize that a great product must have strong profit margins, sell to a very large segment of the population, and provide clear benefits over competitive products. Carefully assess each product idea you have against these three measures. If it is not great or even questionable – throw it back and go to the next idea.
Learn What Matters to the Buyer – and Give it To Them
Here is a simple fact: what matters most to the inventor is quite different from what matters most to the buyer – whether it is a retail buyer or a potential licensee.
What matters most to the inventor is how unique and beneficial their product will be to the end buyer, the consumer.
Guess what? The buyer assumes your product is unique and beneficial or there would be no conversation.
A retail store buyer cares most about profitability, turns, and shelf space – probably in that order. They expect their wholesale cost to be ‘keystone' – 50% or less of the retail price. If it's $20 retail price, they expect to buy for $10 – or better yet, $9.50. Higher profit margins for them mean lower risk on stocking the product. You must be able to live with your margin and offer them one that is attractive to them.
They also want a product that ‘turns' quickly – doesn't stay on shelves very long. Products sitting in inventory only make the store money when they sell. Slow sellers are quickly returned to the vendor – the inventor in this case.
An ideal product has a small ‘footprint' – it takes up very little shelf space. Retailers' shelf space is a valuable commodity. Products with small footprints are easily displayed, easily bought and restocked. Larger products hog shelf space and often are slow sellers too – a bad combination.
Talk with the retail buyer about profit margins, turns, and shelf space and you will have their undivided attention. Talk to them about how great your product is – and they will be looking at their watches or checking emails!
Licensees care about cost to manufacture (versus retail price), any special tooling required, and how it will complement their existing product line. Their focus is much more on their capital risk (which is guaranteed if they take on the product ) versus the potential reward of lucrative sales – which is an unknown and never guaranteed.
Talk to your buyers about what matters most to them.