When it comes to getting a new product into the market, there are essentially two routes an inventor can take. The first? Start a company and manufacture, market, and sell the product on one’s own. The second? License the product to another company, and let them handle the manufacturing, marketing, and selling.
As with everything, there are pros and cons to both choices. The question of whether to license deserves some serious consideration – and potentially the advice of a lawyer – but here are a few things to think about to get you started.
Producing your product on your own
For many inventors, this is probably what you imagined doing when you were a kid. You’d create an amazing product that people went crazy over, stores would beg you to sell it to them so they could supply their customers’ massive demand, and your family members would see it on shelves everywhere and realize what a genius you were.
Well, that scenario might happen for a very, very select few people, but for most of us, sadly, it’s a bit harder to get our product from a design on paper to being sold in a store, without any outside help.
One of the biggest reasons that people avoid licensing their products is that they maintain control of the product and every aspect of its development, production, and marketing. This is a huge pro on the side of self-producing. But you should also make sure that you’re willing to assume the business risk that comes with taking this route before you make any hard and fast decisions.
Another thing to think about is that If you decide to market and sell your product yourself, you’ll have to get it manufactured, market the product, and approach retailers on your own. This can be a daunting proposition, and it’s actually why we at Pivot do what we do.
Instead of searching for the right manufacturer, which may be located across the globe, you can hire Pivot to do the manufacturing for you. We can handle that entire process, as well as creating prototypes, helping with regulatory compliance, and other important parts of getting a product to market.
If you’re ready to dive headfirst into making your product a success, this might be the path you want to take.
Licensing your product
Licensing your product involves selling someone else the rights to produce and sell your product for a given period of time. In turn, you collect payments – either up front or at regular intervals – called royalties.
One of the positive things about choosing to license is that the company that holds the license also effectively holds all the business risk associated with producing your product. It’s up to them to make sure the product turns a profit, and they’ve got a vested interest in doing so. At the same time, you have to put in a lot less cash up front than you would producing your item yourself.
Usually, these companies know exactly how to proceed in order to get the best results, and have contacts in the manufacturing, distribution, and retail worlds that enable them to get your product into stores.
The downside to this process is that you are ceding control of your product to another entity. They’ll be in charge of packaging decisions, marketing, pricing, and more. And of course, you lose control over your intellectual property.
In addition, there’s always a chance that the company will choose not to produce your product, and they could block you from producing it for a certain period of time.
If licensing is something you want to pursue, you should expect to put in a good deal of work on your product before you begin pitching it to companies. Anyone interested in your product will absolutely require a prototype, and they’ll expect you to have worked out most, if not all, of the kinks before you bring it to them. If they think it’s got a solid chance of making a great profit, they may agree to buy it.
The bottom line? Both self-producing and licensing have their good and bad points, and it really just depends on what you’re comfortable with. If you decide to go the self-production route and need some help getting from start to finish, contact us at Pivot!