{"id":791,"date":"2016-03-04T10:00:02","date_gmt":"2016-03-04T16:00:02","guid":{"rendered":"https:\/\/www.cadcrowd.com\/blog\/?p=791"},"modified":"2019-10-15T16:28:54","modified_gmt":"2019-10-15T22:28:54","slug":"the-route-to-selling-your-invention-marketing-or-licensing","status":"publish","type":"post","link":"https:\/\/www.cadcrowd.com\/blog\/the-route-to-selling-your-invention-marketing-or-licensing\/","title":{"rendered":"Manufacturing or Product Licensing? The Route to Selling Your Invention"},"content":{"rendered":"\n

The ultimate goal of any invention or new product design<\/a> is to make some money. Sure, there can be a certain amount of satisfaction that comes from introducing a new idea that makes the world a little bit sunnier of a place, but bringing those ideas to life is costly. Every realistic inventor needs to be concerned with how their invention is going to bring in a return on investment. and that means coming up with a strategy for marketing your idea.<\/p>

There are two basic marketing paths available to an inventor with a commercially viable product idea.<\/a> One is to form a company and take on the task of manufacturing and distributing the product yourself. The other option is to license your idea out to an already established firm that will handle the manufacturing and distribution, in exchange paying you a royalty on the profits generated.<\/p>

Neither option is inherently better or worse than the other. The strategy that works best for you will largely be determined by your access to capital and your attitude towards risk. So how do you decide which path is better for your project?<\/p>

Product Licensing and Manufacturing: What’s the Difference?<\/h3>

During the early phases of product development, there is no real difference between the licensing and manufacturing paths. Idea generation and even up to early testing and prototyping will be the same whether or not you decide to license, because in either case, you will have to take this burden on yourself. The paths diverge once the invention gets to the state where it can be pitched to firms who might want to license it.<\/p>

Licensing an invention involves taking a well-formed (though not necessarily fully developed) idea and granting a company with an established manufacturing and distribution network the rights to produce and sell that invention for a period of time. This is different from straight-out selling the rights to the invention, and is more like a lease \u2014 the inventor maintains ownership of the intellectual property. <\/strong>In exchange for these distribution rights, the company pays the inventor a percentage of the revenue from the product sales. A royalty of 1% is quite typical.<\/p>

Now, 1% might seem pretty low, particularly considering that the inventor could presumably keep 100% of the profits were they to sell the product themselves, and that’s a pretty big difference. But a royalty of 1% or 2% seems a lot more reasonable when you consider the reduced costs the inventor, from product development through to realization. In addition, these companies frequently engineering design<\/a> and 3D modeling<\/a> support for products.<\/p>

Once a firm has licensed an invention, the costs for the continued development, marketing, production, and sale will all be handled by the licensing company and not <\/em>by the inventor. This means two things. One, it means that the inventor can start seeing a profit from their invention without having to invest a whole lot of their own money into it first. And second, that if the product fails to perform as hoped, the inventor isn’t carrying nearly as much personal risk.<\/p>

These two factors \u2014 lower capital investment, and lower risk \u2014 are the reason that a 1% royalty might be appealing to an inventor who could otherwise keep all the profits to themselves.<\/p>

If you’re going to manufacture the product yourself, you may be able to find investors to help shoulder some of the development costs. But the amount of investor support you will get will vary, and you may need to put forward some considerable personal investment before being able to generate much serious investor interest. Bringing an invention the market is a costly process.<\/p>

Picking The Best Strategy<\/h3>

The biggest question to ask yourself when considering whether you want to license your invention or go it alone is this: how much of your own time and money do you want to invest in seeing the realization of your product? If the thought of long hours and big upfront investments don’t excite you, then you should definitely consider licensing. If you aren’t put off by the thought of devoting yourself fully to the development of your product and you have access to the necessary capital, then you should seriously consider manufacturing yourself, as the possible rewards are much higher.<\/p>

Licensing is not an easy way out, though. You’ll still need to be devoted enough to the project to bring it to a state that companies will want to pay you a royalty for the distribution rights. It can be quite a challenge to convince a company to go out on a limb for your invention \u2014 after all, in addition to the considerable financial risk of running a new product, the company will also have to figure in the cost of the royalties they’ll be paying you<\/em>. In order to justify that extra cost, your product will have to represent a significant advantage over the competition. It may not be enough that your product is viable, you’ll have to show how your product is exceptional.<\/em><\/p>

The main things you’ll want to consider when considering how to market your invention are:<\/p>