InventorSpot

Congratulations on the great bloggers you have been getting Michelle.  This site is coming along nicely and you guys are doing a really terrific job.

Stephen and Andrew:

I am curious as to what you think are the biggest benefits to porducing and selling your own product.  Is it the potential profits?  What would be the real difference in that on average?

Stephen,

Thanks for making the business side of inventing so clear for readers. I have been through both paths during my journey of being an inventor. Sometimes you need to adapt your plan along the way to accommodate bringing your product to market. There is no right way or wrong way just a choice and you may have to change it along the way.

I started one project building a product and formed a LLC to build the prototype.  I then realized I wanted to keep inventing and not manufacturing. I licensed it instead and they handled manufacturing and distribution. A big thing for me was their product liability insurance. It fell under their umbrella. I remained being creative and that is why I started this in the fist place. I teamed up with their marketing group and this allowed me to develop my award winning commercials. To view my spot go to www.tonerbelt.org and my story section and hit the photo of Skids.

It was great meeting you on the American Inventor show and the comment to me that I knew what I was doing with my product was great for my confidence.  That piece of advice turned out to be the only thing I got from the show. I should have ripped into the ID guys for reality TV but it not my style. Thanks for help

Bobby Amore

American inventor Final 12

Hello Idi,

To answer your question about profit you can make Venturing VS. Licensing....

The question you need to ask yourself is which one is right for you, your personality and your skill set. Do you want to run a business or just sell your ideas and receive a royalty? You can be profitable with either one or both.

But, to be completely honest with you, neither path will be profitable if you aren't good at it. To be good at something, you need more motivation than just money. You have to enjoy the process that that path requires.

The point we were trying get across in the article is that you need to first understand what tasks you will be performing for each path and make the critical decision as to whether or not that path is right for you, your personality and your skill set.

I run the largest inventors association in the country. I talk to inventors every day. Most of the inventors I talk to aren't structured enough to start their own company. Having been in the field of educating inventors for ten years and having talked to thousands of inventors, I am well qualified to make that statement.

Does that mean that you are not structured enough to start your own company and sell your ideas? Absolutely not! You may have the skills and desire to start your own company and do it well. If that is the case, then "Go For It".

But if you are like most inventors and would rather be coming up with ideas as opposed to worrying about cash flow and everything else that goes into running a business, then licensing is probably a better path for you.

To answer your question directly about how much profit you would make starting your own company (Venturing) VS. Licensing.

Licensing royalties can vary tremendously. For Stephen, 5% of the wholesale value seems to be the most common royalty.

Your profit for licensing in this case is (5% of the wholesale value) x (Number of units you expect the manufacturer to sell) = Your Licensing Royalty

Your profit if you start your own company is going to depend on so many factors; I won't even attempt to calculate them here. Some people will try to simplify the calculation for profit when starting your own company, but what it comes down to is that you are responsible for ALL your cost. Every single one of them. Employee costs, transportation, cost of goods sold, paper clips and every other cost you can imagine.

All these costs for starting your own company add up to RISK. With licensing the inventRight way, your risk is limited to the $100 cost of a Provisional Patent Application, your phone calls and creating a sell sheet. All in all for most products it's only a $100 to $400 dollar investment per invention.

Kindest Regards,
Andrew Krauss
inventRight - Co-Founder
http://www.inventRight.com

Hi Andrew:

Thanks for the awesome answer.  Finally, someone who just tells it like it is.  This is really helpful.

I think your process seems to advocate what Roger Brown on this site seems to advocate.  Rather than going through a painful and long process, just work the invention through the right licensing partners, right?

I look forward to your next article.

I'd like to know what resources people should use to find licensing partners.  Lots of people talk about it but I'd like the nitty gritty on how to actually do it. JMHO.

Bobby,
Thank you for the kind words. It was a pleasure meeting you on American Inventor. I have been doing this for 20 years and have licensed a few products along the way and I could tell you have what it takes. Number one a great attitude that won't quit. Number two you have a product that people need. And Number three you know that you have to be creative and be able to adapt to any situation. 
Your website is awesome. Nice job! 
If there is anything I can do along the way for your next invention please don't hesitate to contact me. 
Sincerely,Stephen Key

You are the real deal and people should know that about you. Thanks for everything and I will be giving you a call on other inventions. It would be my pleasure to pick your brain. You take care.
Bobby Amore

Hi Stephen & Andrew 

I couldn't agree more with your explanation of Licensing over Venture. Your breakdown of the tasks involved in each is right on the money. I have several items licensed and on the market, which is the preffered method for me. I have to many ideas to go the long term route of venture. 

As you stated most of your royalties are in the 3% to 5% range. the best I have done is 12% on one item. It is more a niche market so it break down about the same. I have saved thousands of dollars licensing by skipping one step in your listing. That is patenting. I get the company licensing the product to pay the patenting costs. So far it has worked out quite well.

I look forward to future articles from you. It is great to have someone with a common sense approach to invneting and sees it as a business. Best of luck to you.

Roger

Come visit my site at http://www.RogerBrown.net

Ok i have an invention. I paid a company inventsai 900.00 to do a patent search and put a portfoli together ok call me stupid! LOL any way now they want 9000.00 to go on with my invention wich includes marketing and i believe a patent. My Question  is how do i market my idea by myself i don't have this money to put out. Any help would be so helpful. P.S can they steal my idea? Tahnk you Maria

Hi Stephen & Andrew,

Great article you guys Hmmm! where should I start. I'll start with the inventors company which is going very slow.Going on a year and a half sense I've started the invention, but they did everything they said they would do like: research portfolio,prototype,provisional patent,manufacturing and finding companies that would look at the product like SmithKline,Bayer and Boston Medical.That's all cool with me, but there's one problem these companies don't deal with my type of invention(pill reminder).Everytime the company wants to look at it, $375 is coming out my pocket for packaging and changing the package to the companies logos that fit them. That's cool with me but, if the companies keep on turning it down, that's alot of money out of my pocket for nothing. So licensing is getting kind of old for me. I'm thinking about Venturing on my own or have a partner that has alot of cash and split the profit. Venturing sounds like alot of work, but I have a strong drive to get it done and then I can say, I did it. IM NOT GIVING UP! How do you find a good Manufacturing companies?Lets say I want to hit up Walmart and show them my product, what's the best way to approach them?What's the best book keeping software out there right now?

I want to say thanks again too you guys for spending the time helping inventors out, that means alot.

God bless,

Jamesglenbrook 

James,
Hi I see you have a pill reminder . I also have an idea for medications. I am a Captain in the fire service and have been chipping away at my invention for some time now. As a firefighter we are called to overdose after overdose of medications. For the most part these were not purposeful attemps to end one's life but more or less a flaw in the way people are trying to keep track of the medications that they have taken. The kicker is that they are soppose to do this while medicated???? Never has made much sense to me! Anyhow I would love to try to bounce some ideas off you sinceyou are further down the road od "MInd to Market" then I am.
Thanks for your time......
And Yes God Bless!!!
Rob C.

Have a ideal on a product that has the potiental to be in the homes of every person in our nation and abound, up to two or three per home. Add up those numbers. What i think i need is a partner who knows the ropes or some one who will buy my ideal. Its 2 peice at least maybe 2 or 3 per unit liteweite and small. I have never seen or heard of one these on the market, and everyone will want them. help

I have a ideal that i believe will be a big hit in retail outlets such as wal mart, k-mart, walrgreens, and many others. I do not have much cash [none] too market and or produce this , as seen on tv product, so Im looking for options and answers to a around the would 2 or 3 in every home in thin nation and abroud. I could even sell my ideal to a company or individual if i knew what to do first. help

I have an idea that just uses modern pager/wireless technology for a specific purpose, but would be just ideal and invaluable in this particular application. I am following the rules and not disclosing my idea but its hard work to find the right route to take. I know it would be the answer to our prayers in my particular industry. but where now?

hi dear ,,

My name is Ibrahim Abdullah and i would like to inform you that i have an invention taken from nature that can cure people of certain illnesses. It is a type of plant that has very

beneficial chemicals to people. Even though extensive results have not been made, maybe its something you can help me with if you are interested in this idea. If your company

is interested please contact me on my email.

thank you ,,

I thought of a wonderful idea and I am going to build it soon but I cant find a company to sell it to?Have any suggestions?