Tips to Sell Your Ideas to Manufacturers or License for Royalties

Matthew Yubas

Manufacturers Are Looking for New Ideas

Today there are many opportunities to get your product to market: retail stores, online, catalogs, TV shopping, and more. And the good news is that manufacturing companies are looking for new ideas.

Benefits of Licensing and Selling

When you sell or license to a company, you don't have the hassles and expense of manufacturing, marketing, and distribution.

The company you sell or license to, already has the connections to get products into retail stores and online stores.

When you sell your invention, you receive a lump sum payment or a series of payments. Once you sell your invention, the company has total ownership. Even if the company doesn't turn your invention into a product you keep the payout. Selling an invention is called an assignment.

When you license, you're giving a company permission to manufacture, market, and sell your invention. In turn, you receive royalties. This is like a owning a home and renting it out for a stream of income.

With the licensing deal, you may also get an Advance. An advance is a non-refundable payment you receive toward future royalties. You can also receive a License Fee. A license fee is a non-refundable payment. Think of a license fee as a signing bonus you get to keep no matter how many units are sold.

Inventors Submit Ideas the Wrong Way and Get Rejected

Inventors tell me all the time how they were rejected or just don't hear back from companies. And companies are frustrated in that inventors don't know how to properly submit and present their ideas. Inventors are constantly guilty of causing their good inventions to be rejected by companies.

The common reasons for rejection or never hearing back include:

• Inventors use the wrong method to submit and present to companies
• Inventors don't show how their idea is a fit with the company's product line and target market
• Inventors blindly send information without any market information
• The invention is too costly to manufacture and market
• Invention does not provide enough perceived profit potential for the company

*** I can't emphasize enough that you need to educate yourself about the entire process of selling or licensing an invention to a manufacturer. The sooner you discover these methods, the better chance of success. The best do-it-yourself resource is the Invention Success Kit.

Your ideas can benefit the world. But if you don't learn how to find the right companies and don't submit and present the right way, we all lose.

Why Companies Need New Ideas

Companies need new products to grow. Companies are often busy with daily tasks and have less time to be creative to come up with new product ideas.

Companies need new products to increase profit, get to market quicker, beat the competition, and provide more of a selection to their customers.

With companies cutting back on staff, many are looking to the outside for new ideas. They're looking for:

• Tools
• Housewares
• Kitchen gadgets
• Organizers
• Personal products
• Auto accessories
• Entertainment
• Sporting goods
• Home office solutions
• New innovations and technology

Examples of News Articles:

• "Firms Looking Outside for Ideas" - Boston Globe
• "Looking Outside the Company for Ideas" - Proctor & Gamble
• "Looking for Ideas from Small Business" - Dept. of Homeland Security

Industry Statistics

Every year, millions of dollars are earned by inventors and entrepreneurs who sell their ideas or license for royalties. The following are some interesting stats of U.S. and Canada retail sales of licensed products:

 $16.7 Billion corporate trademarks / brands
 $13.7 Billion sports products
 $12.2 Billion entertainment / characters
 $ 9.2 Billion fashion / apparel
 $ 6.2 Billion art
 $ 5.6 Billion toys and games
 $ 4.6 Billion video games and games

Inventor Gets Stuck with a Bad Deal

An inventor came to me asking for help. He already signed an agreement with a company to license his new heating and ventilation device. He thought they would sell hundreds of thousands of units.

Unfortunately, the company got sidetracked and they sold just under 1,000 units total. Since the inventor did not know about Guaranteed Minimums, he was locked into the contract.

Invention Deals that Fail

Do not assume that a company will just figure out your invention. Companies can be flooded with ideas and have little time to review each one unless it's presented in the proper manner.

A survey conducted by the Licensing Executives Society pointed to the following reasons for licensing deal failures. When a company reviews an invention, they most likely don't make an offer because there is:

• An absence of reliable market data
• Limited resources to analyze the opportunity
• Insufficient internal marketing experience
• Absence of any useful data on comparable deals
• Market data too expensive to obtain

Avoid the Invention Help Submission Companies

Maybe you've seen the websites, TV commercials, or radio spots for invention submission type companies saying how they will help you introduce your invention into the industry.

The first thing they do is get you to buy a market report for about $700. The report is a basic template with basic information - basically worthless. With the report in hand, they tell you that the market research indicates your idea has big potential.

Then for $10,000 to $15,000 they say they will get your invention introduced to manufacturers. They also try to hit you up for marketing programs such as videos and exhibiting your invention at tradeshows.

Manufacturers receive these submission packages all the time, and then throw them straight into the trash. The submission company is off the hook because they said they would submit your ideas to the industry.

The schemes go on and on, and so does your money, with nothing to show for it.

You Need to Follow a Successful Process to Sell and License

A big company like Kimberly-Clark that makes and sells products worldwide can afford to make mistakes. They obviously don't want to make a mistake, but if they do, the company can absorb the loss and move forward.

But inventors don't have this luxury. Inventors usually have one chance to make it to the market given the limited time and money available. That's why I created this 7-Step process from idea to market.

Next Steps

Coach You to Market

Information to Sell or License Your Invention Ideas

Best Success,

Matthew Yubas, Engineer, MBA, Owner of Product Coach