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Licensing Versus Self-Produced
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Intro >> ZENware – Prod... >> ZENware Help >> Licensing Versus Self-Produced
Getting a product out to the consumer requires either a new channel be developed by the inventor, or connecting up with an existing distribution network. Connecting up with existing network increase the chance of success but may require assistance from another. The caveat is that you won’t make as much money on your product if you license versus managing it yourself. You might get 5 or 6% of the ‘take’ when licensing, but then again you won’t have to be handling the advertising, distribution and risk aspects either. Licensing versus self-venturing is a decision you will have to make.
There are different types of help that are available and these should be known about. The beginning of the first article is very educational relative to licensing, and the article end discusses the necessity to “be prepared to deliver” before hunting for distribution lines.
Read the article at www.inventionconvention.com/ncio/specialreport/009.html
Here is a very lengthy article on licensing that appears to paint a realistic picture behind licensing - www.tenonline.org/art/0402.html
Matt’s advice is at www.mattyubas.com/invention-articles/mattyubas-licensing-your-invention-for-success.html
This article by Ed Zimmer starts off talking about Provisional Patents in a fair amount of detail but then takes off into an excellent article on Licensing. This is well-worth reading if you are serious about considering licensing your product.
The full article is at www.tenonline.org/art/9603.html
In the next article Ed Zimmer lays out his low-cost approach to ‘venturing’ and producing your product without licensing commitments.
Here’s an excerpt:
… Now comes the hard part. First decision in selling is pricing -- because that determines the distribution channels that are available to you. The product's retail price (i.e., price to end-user) obviously has to be greater than your manufacturing costs. If your product must retail at or below 2x your manufacturing costs, you're stuck selling directly to the end-user -- in which case your product better be a high-ticket item (several thousand dollar price) to cover the costs of individual one-on-one selling, or a product for a very narrow niche market in which you can reach those end-users very cheaply (e.g., with a small classified in a trade magazine).
If your product can retail at 4x your manufacturing costs, you can sell through retail stores and some catalogs. You'll sell to the stores at 2x your cost and they'll sell to the end-user at 2x their cost. If your product can retail at 6x your manufacturing costs, you can sell through wholesale and all catalogs. There's enough margin there to fairly cover all intermediaries in most distribution channels.
These numbers are rules-of-thumb. They can vary considerably in different markets. To refine them, get out and talk with a few of the people you expect to sell to and find out what markups they operate on. For your own markup, project your expected operating costs (selling costs, engineering costs, general & administrative costs) and desired pre-tax profit. And be conservative -- these costs are almost always underestimated by the inexperienced.
The full article is at www.tenonline.org/art/9607.html
The next article presented here is by Dennis O'Connor, who at the time of this article (1992), was Director of New Products & Technology for the Masco Corporation.
Dennis talks about licensing to large companies at www.tenonline.org/art/9210.html
Another one on Licensing is at www.tenonline.org/art/9004.html
“Companies are interested in complete inventions, not in suggestions for ad campaigns, methods of doing business, or vague ideas.” Howard Hermann of Dow Corning to the Inventors' Council of Michigan. In this article Howard talks about licensing to large companies.
The full article by Howard Hermann - www.tenonline.org/art/8810.html
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