I'm sure you have asked yourself, “should I venture my invention or license it?”
I'll bet you have heard a chorus of inventors insisting that, “you can make a lot more money if you venture your product, than if you license it.”
I underlined “can” in the statement above for a particular reason. I agree (with lots of caveats) that you can make a lot more money if you venture your product successfully, but that is an overly simplistic statement. Here is what you must consider very carefully:
Will I make more money venturing my product than licensing it?
My answer to the above question is short. You will almost certainly make less money venturing your product than licensing it. Really?
Make sure to grab your free PDF – 4 Inventor Stories – the red button.
The Trials and Tribulations of Building a Product-Based Business
Let me state that I have done both with my inventions: venturing and licensing. I much prefer licensing to venturing.
I have written a good number of blogs regarding why I prefer licensing, including the following recent posts:
How a Small Licensing Success – Can Change Your Life
Why Licensing Your Invention is the Best Path Forward
You Can’t Make Money Licensing Your Invention (or can you?)
I'll try not to duplicate what I have already written. Let's focus on the 2 key issues I raised above:
- You can make more money venturing your product than licensing… but
- You will probably make more money by licensing your invention than by venturing it.
A few uber-successful celebrity inventors, who have ventured their inventions, are millionaires (or even billionaires). They tend to grab the headlines and the public's attention.
Sara Blakely is a billionaire with her product line of Spanx. James Dyson is also a billionaire from his eponym – the Dyson vacuum cleaner (and other products). Lori Greiner, the ‘queen of QVC' has made millions with her over 500 products. Grab the free PDF for more details on each of these famed inventors.
These inventors have shown that 1 above can be true, but the devil is in the details.
James Dyson spent over 15 years perfecting his vacuum cleaner, during which he and his wife struggled to get by financially. At one point in time, his wife sold art to bring in extra income. Producing and refining prototypes is not a money-making activity.
Sara Blakely failed the LSAT twice, failed as a stand up comedian, and spent over 7 years selling FAX machines, often door-to-door. She worked on her Spanx invention at nights and on weekends while continuing to work at selling FAX machines. Her biggest break came when Oprah Winfrey loved the product and gushed about it on national TV.
So, unless you are willing to essentially put your life on hold, perhaps for many years, as you work obsessively to build a product-based business around your invention, you are unlikely to make a lot of money venturing your invention.
I ventured my product, then called Savvy Caddy wallets for 8 years doing it all myself – I made just enough to pay the bills each month – barely. Everything changed for me when I licensed my invention to Allstar Products and they sold over 1 million Wonder Wallets in the first year.
So, if your product has huge consumer demand in the marketplace, if you can maintain a solid profit margin for your product, if you can manage importing and customs expenses (as I did), if you can get into major retailers, and if your product sells well and the retailers re-order continually, then you may have a huge success venturing your invention.
Notice there are 5 if's in the above statement! This is why I say the devil is in the details.
On the other hand, if you can license your invention with a company that has a large “footprint” of retail stores, they can quickly get it into thousands of retailers and even a small royalty percentage for you could equate to $100,000+ in royalties each year. Then, you can spend your time however you like – perhaps traveling or inventing other products.
Notice there is only 1 if in this statement!
That is why I boldly state that you will almost certainly make more money by licensing your invention than by venturing it – and you will be able to have a life as well.
Don't forget to grab your free PDF below, 4 Inventor Stories.