According to the SBA (Small Business Association), approximately 600,000 new businesses are started each year. Even with all the associated risk and the hard work, there’s something that draws people toward starting their own small business. There must be some great advantages in starting up your own company, as opposed to working for someone else or licensing your product for someone else to manage.
It’s not easy to start up your own business. There are a thousand different details to consider, from production of your product, to marketing, to fees and regulations. But for thousands upon thousands of entrepreneurs, the benefits far outweigh the difficulties. When you run your own business, you’re doing what you want to do, following your passion instead of someone else’s. Once your business is established, you can choose your hours, spending those important times in your life with your family instead of on the job. Whatever happens, it’s your choice.
Still, some people look at the apparently daunting task of starting up their own business and choose instead to license their creation to a larger concern, so their only job from that point is to collect royalties. In many cases, these entrepreneurs feel they don’t have the ability to build their creation on their own, unaware of the possibilities of outsourcing their production and distribution to an outside party. Don’t let your lack of a team of engineers or a manufacturing plant force you into feeling like licensing is the only choice you have. Maintaining control of your product can do far more for you and your creation than simply reaping royalties.
All the Risk — But All the Rewards
When you run your own business, all the burdens are on you, but your product is yours. If your creation has great success, the benefits will belong completely to you. When you license your product to someone else, you give up the risk, but you also lose creative control, and often a lot of the profit. Those willing to take the plunge into the world of business may very well see new possibilities they could not even imagine just a few short months earlier.
Your Creation Remains Yours
It’s very likely you’re going to spend many hours bringing your product to market and selling it, working with a good team to get things just right. It’s hard work, but it’s not going to feel like work, because you’ll be doing something you love, taking a dream of yours and making it into reality. When you have an idea to make it better, you can just do it without consulting anyone else. It’s yours, to do with as you please.
The Customer Connection
Licensing separates you from your product in every way, including most forms of customer feedback. When your product belongs solely to you, not only can you deal directly with clients who love what you’ve made, you can choose not to do business with clients whose business practices or personalities clash with your own.
Eventually (or even from the start), you may want to have employees, and those employees will be taken from your local community. You’ve become a job creator, someone who’s giving back to the community. Even if your business is essentially a one-person endeavor, whatever you create is obviously something useful, because no one would buy it otherwise.
The Perils of Licensing
There are benefits to licensing, to be sure, but most of them come from the loss of control you suffer from giving up the rights to your product. Just remember, once you sign the contract, the company that’s licensed your product may not even put it on the market. That first payment may be all you ever see and you’re back to the drawing board to create something new. And if they do produce it, they may not properly produce it or distribute it.
Instead of getting paid directly from the customers who love your product, you’ll have to wait for royalties, which are only a percentage of the profit you would have otherwise received. That means the sales will have to be particularly good for you to make any real money. Good or bad, royalties don’t last forever. The typical length is about three years, which means even if your licensed product does extraordinarily well, you won’t be making money off it forever.
Easier Than You Think
Starting with just a great idea, it can look like an impossible task to get a product from conception to reality. Fortunately, you don’t have to do it alone. Great ideas deserve a shot at success and the right outsourcing options can provide that shot, allowing any inventor or entrepreneur to achieve his or her dream and make the world a better place on their own terms. Let Pivot International help you bring your product to life. Request your free consultation today.