Imagine how you will feel when you pitch your new invention to someone, they reach into their pocket or purse and actually pay you for it. Wow! Doesn't that feel great!
You feel pride and validation – someone else loves your product enough to pay for it. You have created a new, innovative product and you can see there is actually a market for it. It is one of the greatest feelings an inventor can experience.
Suddenly, your mind races with the possibilities: “I can soon make hundreds and later thousands of these and sell them everywhere, maybe even QVC (as I did for two years).” That was exactly the mindset I had around 2004 when I first sold one of my Savvy Caddy thin wallets (today is called Wonder Wallet).
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But, what would your life really be like when you are selling thousands of your invention?
Forward to the Future – 5 Years
When I was selling my thin wallet invention in the first few years, I had a full time job to pay my bills (thank goodness) – I was a ‘weekend warrior' – selling at various shows and events on weekends. I enjoyed the process of selling to people and, best of all, I made a profit.
I brought home ‘extra money' each time I sold somewhere for a couple of days. It was quite easy for me to do the math and imagine selling, not just 50 or 100 wallets, but 1,000 or 10,000.
Does this scenario sound familiar to you? Maybe this is where you are right now with our invention and that is good.Let's flash forward 5 years into the future and see how the picture looks when your envisioned dream becomes a reality.
Now it's 2023, you quit your corporate job and now your full-time job is venturing your invention. Yay!
The good news is you are selling a lot of product. The bad news is there is never much money left at the end of each month. Yikes!
How did that happen?
Now you are working 7 days per week, 60 hours every week, sometimes more. The reality may be that you made a lot more money (certainly saved a lot more) when you had your full-time corporate job 5 years ago. You're working much longer, much harder, taking no vacations, and you're making less money.
How did that happen?
Here is precisely how it happened. You, like me, considered the obvious costs of running your business: manufacturing, packaging and warehousing your product. But you other, significant costs: paying sales taxes, income taxes, and employees or contractors who help you out. Now, you have loans you must pay each month. You may have to import your product and pay customs, shipping, etc. Who knew you needed a 5X mark up (at least) on your product to handle all of these costs and still leave you with a healthy profit margin?
Welcome to entrepreneurship! It's not fun working long hours, facing the daily stresses of running a product based business in a competitive marketplace.
The bottom line is this: it is a much different scenario to be selling our product part-time, while your day job takes care of all your living expenses. When it rains all weekend and you sell almost nothing (as happened to me many times selling at military BXs), you may shrug and say, “oh well, next time will be better.”
But, when all your income (to pay your bills) comes from your product sales, it isn't just frustrating when you have a slow month, you may be wondering how you're going to pay the mortgage. That is not fun and it happens to business owners all the time.
The Best Surprise is No Surprise – Plan for the Future Now
What should you do?
What you must do is to spend some time now and do some research and business planning. Construct what your business would look like when you are grossing $5,000 per month, then $10,000, then $20,000.
You might need to have a line of credit loan (LOC) with your bank to tide you over during slow sales or just while you are waiting for retailers to pay what they owe you (net 30 often becomes net 60 or net 90). How much warehouse space will you need to store product and how much will that cost? How many contractors or employees will you need at each of the 3 levels to keep your business running? How much must you set aside for sales and income taxes each month, plus unexpected issues (like a longshoreman's strike)?
One place where you can obtain such business planning help for free is the US Small Business Development Center (SBDC). I was a business counselor at the SBDC for 14 years and very much enjoyed helping entrepreneurs with business planning.
After you have done the above planning exercise and you have realistic projections and costs, ask yourself 3 simple, but very important questions.
- Is this what I want my life to be like in 5 years?
- Will I look forward to getting up each morning and preparing for the news – good and bad – that will come my way?
- Will I really enjoy doing this?
If the answer is yes, congratulations! You are well suited to meet the challenges of venturing your product, building a business around your invention.
If your answer is no, considering licensing your invention and letting someone else handle all of the challenges and headaches of managing and running the business so you can collect mailbox money – royalty payments.
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