One Simple Idea

1. Simple Ideas Can Lead to Successful Licensing Deals

All it takes is one simple idea—one that's ripe for the marketplace.

Simple ideas sell. Often, the most successful product ideas are small improvements or enhancements to existing products. These ideas are easier to license because companies can quickly understand their value and integrate them into existing product lines. For example, Stephen Key's Michael Jordan Wall Ball was a simple twist on existing indoor basketball games that sold over a million units in its first year.

Focus on solving problems. Look for common issues consumers face and create simple solutions. Gene Luoma's Zip-It Clean, a flexible plastic tool for unclogging drains, is a perfect example of a simple idea that addressed a widespread problem. By focusing on simplicity and marketability, inventors can increase their chances of licensing success.

2. Open Innovation Creates Opportunities for Independent Inventors

Companies of all sizes and in all industries have realized that to stay in the game, in some cases just to stay alive, they must innovate continually and quickly.

Companies need outside ideas. The fast-paced global market demands constant innovation, and many companies can't keep up using only internal resources. This has led to the rise of open innovation, where companies actively seek ideas from external sources, including independent inventors.

Leverage open innovation. To take advantage of this trend:

• Research companies with open innovation programs
• Understand their product lines and market needs
• Tailor your ideas to fit their specific requirements
• Present your ideas professionally, emphasizing marketability and ease of implementation

By positioning yourself as a valuable external source of innovation, you can increase your chances of licensing success in today's open innovation landscape.

3. Market Research is Crucial for Developing Marketable Ideas

Study the marketplace. Compare and contrast your idea with similar products out there. How is it similar and different?

Know your market. Thorough market research is essential for developing ideas that companies will want to license. This includes:

• Identifying existing products and their features
• Understanding consumer needs and preferences
• Analyzing market trends and emerging opportunities
• Studying potential competitors and their strategies

Use various research methods:

• Visit stores and observe products and shoppers
• Analyze online marketplaces and product reviews
• Attend trade shows and industry events
• Read trade publications and market reports
• Conduct surveys or focus groups if possible

By deeply understanding the market, you can refine your ideas to better meet consumer needs and stand out from existing products, making them more attractive to potential licensees.

4. Prototypes and Patents Aren't Always Necessary

I have licensed more than 20 of my ideas using only a benefit statement, a sell sheet, an inexpensive prototype, and a PPA.

Focus on benefits, not features. Companies are more interested in how your idea will benefit consumers and generate profit than in detailed technical specifications. Instead of investing heavily in prototypes and patents, prioritize:

• Developing a clear, compelling benefit statement
• Creating an eye-catching sell sheet
• Making a simple, low-cost visual representation of your idea

Protect your idea affordably. Use a Provisional Patent Application (PPA) instead of a full patent. A PPA:

• Costs only $110
• Provides "Patent Pending" status for one year
• Allows time to test market interest before investing in a full patent

This approach saves time and money while still protecting your idea and demonstrating its value to potential licensees.

5. Powerful Benefit Statements and Sell Sheets Open Doors

Your one-line benefit statement is the most important thing you'll say to a potential licensee for the first time.

Craft a compelling benefit statement. Your benefit statement should:

• Be concise (25 words or less)
• Clearly state the primary benefit of your idea
• Use specific, easy-to-understand language

Example: "1,000 songs in your pocket" (iPod)

Create an effective sell sheet. A good sell sheet:

• Is a single page
• Features your benefit statement prominently
• Includes a visual representation of your idea
• Lists additional benefits concisely
• Contains your contact information and patent status

These tools quickly communicate your idea's value to potential licensees, increasing your chances of getting their attention and interest.

6. Cold Calling is the Most Effective Way to Reach Potential Licensees

Prototypes and patents don't open doors, and they don't sell ideas. Preparation and persistence open doors. And benefits kick them wide open.

Embrace cold calling. Despite fears and misconceptions, cold calling remains the most effective way to reach decision-makers at potential licensee companies. To make successful cold calls:

• Research companies and identify the right contacts (usually in marketing or sales)
• Prepare a script and practice it thoroughly
• Start with your benefit statement to grab attention
• Keep the call brief and focused on benefits
• Ask permission to send additional information

Be persistent and professional. It may take multiple attempts to reach the right person. Keep calling, vary your timing, and always maintain a positive, professional demeanor. Remember, your confidence and enthusiasm can be conveyed through your voice and help open doors.

7. Negotiate Win-Win Licensing Agreements

Cutting a great deal is all about knowing what a potential licensee wants and what you want, and then working together as a team to hammer out a win-win agreement.

Understand key contract terms. Important elements to negotiate include:

• Exclusivity (product categories, territories)
• Royalty rates (typically 5-7% for most products)
• Advances against royalties
• Minimum guarantees
• Improvements clause
• Audit rights

Approach negotiations as a partnership. Aim for a deal that benefits both parties. Be willing to compromise on some points to gain advantages on others. For example, you might accept a lower royalty rate in exchange for higher minimum guarantees or broader market exclusivity.

Do your homework. Research the company's sales figures, product lines, and market position to inform your negotiation strategy. This knowledge helps you propose realistic terms and demonstrate your professionalism.

8. Stay Involved After Licensing to Ensure Success

Contrary to popular belief, your responsibility for the success of your idea doesn't end after you've signed a licensing contract.

Offer ongoing support. While the licensee now controls the product, your involvement can contribute to its success:

• Provide design or manufacturing advice
• Assist with marketing and promotional efforts
• Share industry contacts or knowledge
• Offer to participate in media opportunities

Monitor your license. Stay informed about your product's progress and sales:

• Maintain regular communication with your contact at the company
• Review royalty statements carefully
• Stay aware of the product's market presence and performance
• Be prepared to address any issues or discrepancies professionally

By staying involved and vigilant, you can help ensure your product's success and protect your interests, while also building a positive relationship with the licensee for potential future opportunities.

Last updated: August 11, 2024