Deal or no deal – it’s up to you!

Two Inventor Attitude Mistakes

Mistake #1 – Expecting a ‘home run'

Here is what happened with both of my recent licensing deals: the deal I got was less than I had expected – or hoped – to receive. Actually, I am fine with that outcome.

Why? Because my two-fold goal was to:

1. Achieve a license agreement with a manufacturer for my invention
2. Achieve the best possible license deal for my invention

The order of the two elements above is not a nuance, it is a critical attitude for success.

A huge mistake too many inventors make is to focus on a ‘home run' deal – the best possible license deal – first. There are a host of issues with approaching licensing your invention from this perspective or attitude.

What exactly is “the best possible deal”? Every deal has different circumstances so there is no simple definition of the best deal – it truly depends upon the product and the manufacturer.

Unfortunately, inventors look to ” the expert” (Google search) and they find articles suggesting that they may get a 5% royalty. Of course, they translate “may” to equal “should” in their minds.

They think they should get a 5% royalty.

When they are offered a 4% royalty, they feel “cheated” out of what they should get. When they become argumentative over the royalty offered, the manufacturer sees nothing but trouble ahead with the inventor – they withdraw the offer entirely and wish the inventor the best of success – somewhere else. The inventor is left in shock – wondering what just happened.

Mistake #2 – Viewing a licensing deal as a transaction you are entitled to have

Are you an employee or contractor working full time?

Most inventors have a full-time job to pay the bills while they seek to monetize their invention as a side-hustle. That is a wise choice as inventing is very risky – less than 5% of inventors ever profit from their inventions. I'm one of the fortunate 5%.

But here's the challenge: as an employee you tend to focus on obtaining a job at an annual salary of $70,000, for example.

In your mind, the job offer of $70,000 or more is a transaction. They offer, you accept, then deal is done – transaction complete.

Based upon your skills and experience, you feel “entitled” to earn at least that amount. Also, like most people, you probably need that amount of salary to pay your bills every month – so a lower salary is not a good deal for or you. Such transactional thinking, tied to a perceived entitlement works fine in the employment world.

But, it works very poorly in the entrepreneurial/inventing world.

The company – your potential licensee – views the license agreement as the foundation for a multi-year relationship with you, not a transaction. There is no “entitlement” beyond a negotiated deal that can work for both parties – you and the licensee.

Here's the good news. The product may evolve over time. The licensee may choose to add product extensions including other colors, materials or features based upon what buyers want. That is good for you and them – more sales for the licensee means bigger royalties for you. It must be approached and viewed as a long-term relationship – not a transaction. That base hit is looking pretty good now, isn't it?

Stay tuned.

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