by: Geoff Ficke

Converting an Idea to Income Is a Process That Requires Planting and Fertilization, Not Hope and Dreaming

Under the category of inexperienced blind hope, a surprising number of people that approach my Consumer Product Development group with a new business idea want us to find someone who will buy the concept in its undeveloped form. This always amazes, even after so many years of hearing these vapid elevator pitches. A person has an idea, they have performed little or no due diligence, and they believe it has commercial value. Daffy!

Behind every existing product, service or successful business there was originally an idea. In order to achieve any level of viability and ultimately market success, the idea was planted and fertilized with work, research, investment (money and sweat), strategizing, and so many other necessary layers of work product that confirm the concepts usefulness or lack thereof.

A person that attempts to peddle an idea without conducting necessary due diligence is immediately obviated as a wastrel. Ideas are a dime a dozen, actually they are worth 10 cents less than a dime. The reasons so few people become successful entrepreneurs, even though most people dream of entrepreneurial conquests, is that they are dreamers not doers.

I recently took a call from a supposed entrepreneur who was looking for someone to buy his toy idea. In response to my qualifying probes he was entirely negative. He did not have patent filings. He did not have 3D CAD art. He did not have, or worse, want to build rough prototypes, so, of course, he was never going to have production quality prototypes. Without 3D CAD art and prototypes he was never going to discover manufacturing protocols and Cost of Goods.

In short, he was the ultimate dreamer. Many of these poseurs are serial stalkers of investment, partners and/or licensing relationships. They troll the internet endlessly looking for a home for their get-rich-schemes. The time and effort that could be devoted to productive due diligence is wasted on blind hopes and dreams.

I have counseled clients, students and prospective entrepreneurs for many years to avoid taking shortcuts at all costs. Resources are more easily found and utilized today than ever before. Many, many years ago, when I launched my first product there was no e-mail, internet, cell-phone, Software, Google or WikiPedia. Heck, there weren’t even fax machines or FedEx. Every step of the process was slower and more arduous than today.

The ease and availability of contemporary resource tools makes the launching of a new Consumer Product or Small Business a much simpler process. An idea which is not accompanied by at least a smattering of supporting design and data is a non-starter. Worse it brands the presenter as an amateur.

Let’s assume you are shopping for shoes. If you visited a shoe store, and the store only had pictures of shoes, but none to try on, how would you react? Of course, you can buy shoes on-line, but typically you know the brand, style and size you need and search for an on-line match at a price. When in a store, you want to touch and feel the products you seek. It is the same with venture capital and licensees.

The market is flush with opportunities for investment. Money always seeks the most market ready products. You have no chance to compete for seed monies or licensing unless your project is fully vetted. A successful entrepreneur always plants and fertilizes their work product to maximize chances of achieving a great result.

by: Geoff Ficke

Adopt a Pre-Sell Strategy to Drive Interest in Your Project Before Seeking to Attract Investment Funding

Recently I met with a prospective client who presented my Consumer Product Marketing and Branding Consulting firm with an overview of his project, its development status and needs. The opportunity seemed to have legs until we reached the point in the discussion where funding took center stage. I listened as this entrepreneur, with great passion and skill, pitched his reasoning and support data for a funding round that he felt necessary to move ahead.

I took the “devil’s advocate” approach that any project faces when seeking investment from angels, investors, venture capital or partners. My questions were the standard fare that I have heard professional investment groups pose time and time again. As the cross examination continued the passionate, confident entrepreneur began to wither.

The simplest question that I asked, and one that is always of paramount interest to investors: “Do you have Purchase Orders”, drew a telling lack of response. This very smart presenter had never considered the question and the possibilities that a positive response would have for his proposed enterprise.

Purchase Orders from target customers, stores, distributors and wholesalers indicate what we call a “Proof of Product Life”. Entrepreneurs are always excited about their product or service. They have reams of documentation that they   include in their Business Plan to attempt to impress investors with the promise they offer. Focus Groups results are nice. Orders and successful test markets, no matter how small are much more valuable.

How can an inventor, entrepreneur or small business generate sales orders before receiving an adequate funding round? The prospective client I was meeting for the first time asked exactly this question. I then described several Bootstrapping and Pre-Sell strategies that he had never considered.

We often utilize a Bootstrapping Pre-Sell plan for clients. This is done without going to the expense of an inventory build out. We have a host of vendors that work with us to create Production Quality product prototypes, CAD Art, Release Packets, Point-of-Purchase display, Sales Collateral, Web-Sites, Attorney’s, Social Media, Video Production and much more that we use to generate Purchase Orders from Trade Shows, EXPO’s, showrooms and on-line sales. These vendors know that once sales traction is achieved they will have a long term relationship with a happy new client. They are more than willing to hand craft a display or sign unit carton or brochure for minimal cost.

Recently we attended a large Trade Show in Hong Kong with a client to launch a new Skin Care regimen. We attended with four dozen Production Quality prototype samples fully dressed with graphic packaging. Our display vendor hand cut three Point-of-Purchase displays. The booth display visuals, video loop, Sales Collateral, Product Folios and Distributor Contracts were one-off produced just for the show. The product performance demonstration was spectacular and the stand was swamped with interested Asian distributors. We have concluded deals for exclusive territory sales of the line with nine firms. Pre-Selling works!

With these agreements and the initial Purchase Orders they have generated we are organizing International Bank Letters of Credit to fund the initial full inventory build and provide working capital. Investors are now keen to review the opportunity and, with this type of “Product Proof of Life” successfully achieved, they have less leverage in negotiations.

A successful Pre-Sell campaign in the American market can lead to securing investment, but also Partnering, Licensing, Receivable Finance or Factoring options for funding operations and growth. We have utilized Factoring for many years for our own businesses and clients. Sales orders open doors.

Next month we will attend a Jewelry trade show and a Men’s Fashion trade show with client products that will be launched utilizing a Bootstrap Pre-Sell campaign. More prospective entrepreneurs should utilize this strategy. The process involved in successfully winning a funding round is beyond the pale for most startups. Meeting an investor with a plump order book creates an entirely different leveling of the playing field. Take advantage of this inexpensive, simpler strategy to launch your product.

by: Geoff Ficke

5 Tips for Small Businesses and Start-ups to Use To Appear Bigger than They Really Are

For many years I have worked almost exclusively with entrepreneurs, inventors and small businesses seeking to start, or grow a business against daunting odds and competitive disadvantages. We specialize in Consumer Products, packaged goods that are marketed in every category and sales channel. Despite the deck seemingly being so stacked against these micro-enterprises it is amazing how many succeed.

One of the lessons we counsel and preach is the importance of acting and presenting the business to consumers and merchants as being more solid and substantial than it in reality is. No one wants to do business with a firm that appears to be struggling. People smell weakness. They are attracted to success.

One of our goals for clients is to be able to meet key decision makers in a specific category and open doors that seem closed to most fledgling start-ups. In order to achieve this we must have the client act like the puffer fish and blow themselves up to appear bigger and stronger than they are. How can this be accomplished?

The edifice that is presented as the core of the business can be inflated with creativity and a bit of illusion. It is essential that entrepreneur’s utilize every tool available to level the playing field as much as possible. Here are 5 ways to embellish the appearance of strength for of a start-up.

1.  Have a professional, original, customized Branding Strategy. Colors, icons, lyrical Branding Statements and graphics that work as one are crucial in differentiating the Company and its products and services from competitors, large and small.

2.  Your place of business and mailing address speak volumes about your firm and product. Most start-ups cannot afford an office in Beverly Hills, or London. They can rent a mail box service in a prestigious zip code. For meetings, there are impressive offices with secretarial services that can be secured by the hour or half-day.

3.  Put some effort and diligence into building and editing your web-site. The only thing worse than not having a web-site is having a mass market template that screams “unprofessional”. Currently, there are an endless number of do-it-yourself templates available to guide construction of a web-site. The construction is not as important as the content. Do not take shortcuts on content.

4.  Sales collateral stays with the prospective buyer, consumer or merchant long after you physically vacate the premises. Make your brochures, business cards and samples first class.

5.  Use production quality prototypes to pre-sell your product at trade shows, fairs and to investors. We typically pre-sell every project we are engaged to manage for our clients. We do not want them investing in building inventory until we have secured orders, letters of intent and confirmation from key industry decision makers that the product on offer is desirable and commercial. Production quality prototypes are the key to gaining this crucial proof of product life.

We have utilized this simple menu to enhance any number of start-up businesses that we have introduced as Managing Consultants. It works for every category of Consumer Product including Toys, Gourmet Foods, Cosmetics, Fragrance, Aromatherapy, Hardware, Pet Products, DIY, Jewelry and many more. These are tools that are invaluable when bootstrapping an under-funded business, product or service.

by: Geoff Ficke

5 Questions That Must Be Answered Before Attempting to Fund or Launch Your Consumer Product

I am constantly amazed at the naivety of first time entrepreneurs and inventors when it comes to the due diligence they must conduct in order to get their idea, concept or prototype to market. Even with the amazing information tools at hand in the 21^st century, so many still try to fake out the marketplace by taking shortcuts. This is the equivalent of death by neglect. 

There are 5 questions that must be organized and perfected before a new product can be considered ready for preparation of a fully documented, well-crafted, customized Business Plan.

Question 1: Do you have a production quality prototype built, a unit that can demonstrate the full functionality, features and benefits of your product? 

This provides the base template of everything that must follow in pursuing accurate assumptions on which to base your strategy for investment, marketing strategies, sales model and financial projections.

Question 2: Have you assembled and distributed Release Packets to multiple manufacturing/production sources? 

The Release Packet is the blue print and content map that producers will utilize to conduct proper time, assembly protocols, manufacturing standards required, and estimate production costs for your products build out.

Question 3: After choosing the factory that provides best service, lead times and quality control, have you been given a dead-net Cost of Goods to produce your item in mass production volume? 

Dead-net Cost of Goods means cost to produce, package, handle, ship (by ship and container if off-shore production), freight-customs-duties, local freight from port of landing to your destination for product fulfillment, all inclusive. This is the real Cost of Goods that is the first and most crucial element necessary to create an exciting, well-documented Business Plan.

Question 4: Have you created a Sales Model that works for your enterprise, and for all up-channel re-sellers of your product? 

Different Consumer Product categories must utilize Sales Models that factor many variables into the pricing equation. Some product categories require heavier Sales promotion budgets (Cosmetics, Skin Care, Toys, Games, etc.). Others require strong levels of store support for display, co-op advertising and point of purchase signage (food, drinks, oral care). Limited distribution, exclusivity models are built on a low volume, high retail model. 

Question 5: Why is the Sales Model so important, and why do so few Entrepreneurs devote enough time, energy and research to perfecting this crucial building block of their Business Plan?

The second half of this question is easily answered: Some do not know how to detail their Sales Model, some do not want to put in the effort, and others do not understand the process required to achieve investment, licensing opportunities, partnerships or sales traction in a brutal marketplace.

The Sales Model (based on Question 3: Cost of Goods) is so very important because it is the “alpha” assumption that supports every declaration built into a Business Plan. If the cost to produce, and thus the selling basis for a product cannot be torturously defended every other element and assumption included in the plan will fall of its own weight. Investors will see this immediately and bail.

 I write this after a particularly busy month of reading and hearing elevator pitches for projects that have been almost uniformly under-vetted. Some of the concepts might have even been commercially viable. However, when I ask these 5 questions and hear crickets on the other end of the phone line, I know I am not dealing with a serious, committed, driven entrepreneur, and I am not alone. Every other investor, venture capitalist, licensee and buyer I know experiences the same disappointment when exposed to plans built on quicksand.

by: Geoff Ficke

Customizing Products and Services Presents Entrepreneurs a Great Way to Bootstrap a Business 

We live in a world where mass production and scalability have enabled consumers around the world the opportunity to enjoy a wider range of Consumer Products and Services than ever before. Large scale production drives down prices. Items that were once luxuries are now within reach of masses of consumers on every continent.

Overwhelmingly the benefits of scale and industrialization are beneficial to society. Jobs, distribution opportunities, global trade and finance have all thrived in large part because of the benefits of a consumer driven world. The Benetton sweater or MAC cosmetic that is purchased in Denver is the same as a unit of either sold in Sydney. 

There is a downside to mass production, a downside that presents opportunities for those seeking to position their enterprise successfully within the whirl of this hyper–competitive consumer marketplace. Most mass produced products are impersonal. They offer value, utility and uniform performance features. They do not, however, differentiate themselves significantly from competitors. This is where the creative and craft minded producers can maximize their offerings. 

Hermes purses and scarves are famous, but simple examples of a Brand that has been built from scratch, painstakingly over time and by being extremely protective of distribution channels for their limited production, hand crafted products. Hermes controls the price and design of each unit produced with a discipline that borders on fanaticism. When a design becomes popular and demand soars, the family owned Company caps production far short of maximum sales potential. This is a classic example of a limited distribution strategy that serves to increase Hermes’ product desirability among discerning consumers. 

Ferrari automobiles, Zegna menswear, Piaget watches, Tory Burch fashions and La Prairie Skin Care and Cosmetics are other examples of Brands that have created world-wide franchises by avoiding any taint of a mass production model. They sell service, customization and personalized product that elite customers demand. The strategy does not need to be limited to exclusive couture brands, however!

The Branding and Marketing Consulting firm that we manage utilizes many different forms of personalized service or customized product assembly to differentiate our clients. In order to be able to compete with behemoth, multi-national brands a new company must be able to identify their Unique Selling Proposition (USP). A better ingredient story or a better mousetrap design will not suffice. 

Recently a prospective client approached us with a Perfume concept. The Fragrance world is huge and brutally competitive. The perfumer we met with was keen to commercialize a range of scents, mainly by utilizing generic top notes. We spent a good deal of time trying to define a USP that would differentiate her product, while creating a niche she could occupy. The final, agreed suggestion was to sell a value added personalized blending service with each offering customized, value added and unique to each client. There are a number of added special service features which insure that the Brand will be perceived as unique by her “alpha” clientele.

We have utilized one form or another of this strategy for Gourmet Food products, Toys, Cosmetics, Wellness regimens, Service Providers and many other client projects. An important feature of this strategy is the opportunity to bootstrap the product or service when limited resources are at hand. Local sales can be leveraged to regional sales and beyond. The enterprise can be grown at a pace that is more easily handled by thinly resourced entrepreneurs. 

Red Bull, Snapple and Arizona Iced Tea did not start as national and international brands. They were bootstrapped. They found holes in saturated, developed marketplaces and they filled niches. This model is available to creative entrepreneurs who are driven to compete, but understand that they must deal from a different, smaller deck of cards.

by: Geoff Ficke

The Old Adage “You Get What You Pay For” Is Especially Important to Service Providers in Today’s Economy 

The 19^th century British essayist John Ruskin once presciently stated, “There is scarcely a thing in the world that some man cannot make a little worse, and sell a little more cheaply. The person who buys on price alone is this man’s lawful prey”. Great wordsmith that he was, Mr. Ruskin’s stylish prose has been re-engineered in more modern form to become the universal adage “You get what you pay for”. People universally understand this to be true, even if they do not always practice the rule in their own dealings. 

I earn my living as a Consumer Product Marketing Consultant. My firm sells a full menu of services. We use a variety of associated independent vendors who sell their services in specific areas to our clients. Patent Attorneys, Product Development Engineers, Graphic Artists, Chemists, Nutritionists, Manufacturers, Display Designers, Prototype Builders, Pattern Makers, Lithographers, Packaging Engineers and dozens of other specialists collaborate with us to provide a turn-key Product Development service. 

My job is to save clients time, mistakes and money. We are good and very successful, having been doing this type of work for over 40 years. The specialists we involve in each project are hand chosen for their expertise, past successes and the value they bring to our clients. I have never chosen a vendor because they are cheapest, but because they offer an excellent service at a fair price. 

It is true that economic times are difficult. Many people have been neutralized by the economic chaos they see occurring around them. Some fear plunging into a new business venture until things calm down. Others use the uncertainty as an excuse for not moving ahead at all. Some attempt to leverage the pullback to negotiate reductions in fees, costs and development work provided by skilled professionals that may have suffered a loss of work over the past three years. 

Here is a caution. It is very unwise to compete for project work by selling service at discounted prices or fees. There are still plenty of qualified clients seeking the best possible outcomes for their projects. They understand that it is silly to try to cut corners on quality and creativity to save a bit of money when they really want the best possible product to sell to consumers. If you discount your fees, and the perceived value of your service, you will only diminish your reputation for top quality work now, and when the economy rebounds. 

We review hundreds of products and projects each year. This has been consistent during the recession, as it was before. We have never had to discount a fee to secure a client project. Once we describe our work template, experience and the unique concierge one-stop Product Development service we provide it is unnecessary to barter away a fair remuneration for the valuable work product we produce and our clients ultimately enjoy.

Several months ago we were approached by a pediatric nurse with an interesting Wellness Product. She had discovered an opportunity niche in her work with small children. The Juvenile Product she had conceived possessed all of the elements necessary to achieve commercial success. We walked the nurse though each step necessary to convert her concept to a market ready Consumer Product. 

As we discussed Gantt Chart work items and the timeline involved we quoted fee ranges for each component. As the meeting concluded, the nurse asked if we would defer fees. We advised why we could not. Our suggestion was that she interview at least three other firms, listen to their ideas for the project and negotiate fees with them. If she wanted to go with another firm we would wish her good luck. If not, we would love to work with her to make the product real. 

This week she called and asked if we had space available for her project. She advised that she had spent a good bit of time interviewing other firms and always came back to the fact that we offered the best combination of experience, convenience, creativity and value. The nurse was also impressed that we did not press or hard-sell her, and actually suggested that she speak with competitors. We have a new client. She has a good deal. A good deal is one where both parties receive benefits. 

Whether you are an independent contractor, a real estate agent, engineer, designer, an artisan or any of hundreds of other occupations where you sell your service we encourage you to ask a fair compensation for your professional experience. If you are good at what you do you should be properly remunerated.

Discounting payment of fees is an indicator of weakness. As John Ruskin said, “The person who buys on price alone is the “seller’s lawful prey”. Sell quality work and be paid accordingly. Your work is worth it.

Duquesa Marketing, Inc.

www.duquesamarketing.com

Press Release

For Immediate Release

October 7, 2011

Contact:  Geoff Ficke

859-567-1609

gficke@msn.com

Duquesa Marketing Unveils New, More Inter-Active Web-site at www.DuquesaMarketing.com

 Fresh Design Includes Free Consultation Feature and Free New Consumer Product Readiness Test for Inventors and Entrepreneurs 

Florence, KY    Nancy Ficke, General Manager of international award winning Consumer Product Development and Branding Consulting firm Duquesa Marketing announced that her firm has unveiled its newly designed and enhanced web-site at www.DuquesaMarketing.com on October 6, 2011. 

“We made the decision to add significant guidance and tutorial features to the site so that small businesses, inventors and entrepreneurs can more easily access tools that will be of importance to their project success”, said Mrs. Ficke. “The case studies, blog articles and the massive content archive are derived from projects that we have managed over the last 40 years”. 

“The new site highlights the opportunity for visitors to receive a FREE, no obligation consultation in order to evaluate the various options and strategies available when launching new Consumer Products or re-marketing an old brands”, said Alexis Bruning, V.P. of New Product Development for Duquesa Marketing. “There is also a FREE 20 Question test that is very valuable in evaluating a proposed projects readiness for Product Development”. 

Duquesa Marketing is unique in that it offers a one-stop, turnkey Branding, Marketing Consulting, Sales and Consumer Product Development concierge service. The Company has over 40 years experience and has worked as Managing Consultants for clients large and small, in the United States and internationally.

by: Geoff Ficke

6 Things You Need to Know In Order to License Your Product 

My Marketing Consulting, Branding and Product Development firm receives numerous queries on Licensing Consumer Products, Services and Concepts every week. Most inquiries are of no value as the hopeful Licensor has not organized proper due diligence that potential Licensees will require. The following are 6 Points to address before attempting to present a License opportunity. 

1. Who is the Competition? 

You need to know your market category backward and forward, inside and out. Who are the biggest competitors your Gourmet Marinade or Mascara, or Wellness Product will be fighting for shelf space, display and sales promotional slots? Who are the hottest competitors? What is the current market pricing model? Potential Licensees will know the answers to these questions and many more. A Licensor had better know them as well. 

2.    How will the Idea/Product be executed? 

You will need to know the Logistic, Tooling, Manufacturing, Lead times, Production Limitations (if any), suggested optimal Marketing Strategy, Pricing and Sales Models that support the Licensing effort. Make it easy for potential Licensees to decide in your favor by covering all of the bases. 

3.    What is the Unique Selling Proposition inherent in your product? 

The market does not need another Pet Product, Car Wax, Aromatherapy, Juvenile Product, etc. unless the item has a Unique Selling Proposition (USP). This identifies your special product niche, its point of difference from competition. This is a crucial element for Licensees to be able to quickly see, understand and value. 

4.    What is the size of the Market?

Conduct proper Demographic and Market Research to learn the latest data on the size of the market you are seeking to address with your License opportunity. There are 74 million licensed dogs in the United States alone. This is important if you are attempting to sell a Pet Product or Accessory. The Baby Food market was $5.5 Billion in 2009, crucial if you are trying to make a deal on a Baby Consumable Product.

Having command of this type of knowledge stamps you as a professional in the eyes of the target licensee.

5.    Who are the Prime Licensee Targets of Opportunity? 

What are the four best targets of opportunity for you to approach with a Licensing offering? Some Companies are public about their Open Invitation search for outside product opportunities. Others are very fearful of litigation and difficult to penetrate with an offer. 

I always look at mid-level size targets first. These Companies are a bit faster on their feet and can make more facile decisions. They have resources and have not yet become bureaucratically bloated. 

6.    What is the sales potential for your product?

This requires the construction of a conservative Sales Model and requires a bit of research in order to assemble data that will withstand scrutiny.

Let’s assume you have developed a Fashion Accessory product. Your research indicates that there are 80,000 potential sales outlets for the product in the United States alone. The following is a hypothetical example of Sales Potential for this fictitious Fashion Accessory:

Unit Sell-in           =  60 pieces per door  — 12 pieces of 5 styles/colors

Wholesale                $10.00

Total per door         $600.00

Stock Turn                  4 X’s 

Total Yr. Sales          $2400 annual wholesale per door 

Size of Universe       80,000 doors

Penetration               1,600 doors   2% year one, to 4% yr. 2, 6% yr. 3, etc. 

Total 1^st year Sales = $3,840,000 

Obviously the variables move wildly based on market research for each category. If you conduct this work with diligence, and base assumptions on verifiable, historic realities this will confirm that your License offer is valuable, serious and being presented by professionals. 

The biggest mistake we see aspiring Licensors make is to think that they can sell an un-vetted idea. There is simply no room in this super-competitive market for those that take shortcuts. Do not waste your time unless you are prepared to provide a professional package that will interest and excite target Licensees about the unique Features and Benefits of your Consumer Product. Each of these 6 points is equally important when seeking Investment, Venture Capital or Strategic Alliance consideration.

by: Geoff Ficke

Most inexperienced entrepreneurs are unaware of the many options and alternative strategies available to push a new idea or invention to market. The most common approach they seek to implement is a classic funding round. When this avenue fails, and with overwhelming frequency it does, the idea often is dropped.

Driven inventors attend invention trade fairs, venture capital conferences, small business incubators, and network at every possible opportunity in search of funding and working capital for their invention. It is commendable and a tribute to the pursuit of the American dream that such efforts are expended in this daunting effort. However, virtually all will come to a disappointing end with no funding and disappointment.

In 2005 over 500,000 new business incorporations were organized in the United States. This does not include the hundreds of thousands of sole proprietorships, partnerships, joint ventures and strategic alliances formed. From this sea on creative, new opportunities only about 1000 were funded by traditional venture capital sources. The odds are so long against a successful funding round: the wonder is that so many entrepreneurs, with so much creativity to offer, are chasing so few sources of funds.

There are other opportunities and strategies available for successfully getting a great idea to market. The bar for acquiring venture capital funding is so high, so difficult and so competitive, that it is unfortunate how many inventors quit the pursuit of their goal after receiving no traditional funding commitment. One of several alternatives to venture funding is a license campaign.

Licensing is the assignment of intellectual property or product rights to a licensee for consideration. The consideration may consist of a rights fee, royalty, options, personal service fees, minimum annual sales turnover and more. The licensee agrees to make good faith efforts to commercialize the product or intellectual property and the agreement is memorialized in a License Agreement.
There are many more companies interested in licensing a product or technology than there are conventional funding sources for startups. Having said this, there is really no difference in the requirements for success in either venue. You will just get more swings at the ball when seeking a license for your project.

Entrepreneurs read about Blackrock Capital, Harvard Capital Management or Kohlberb Kravis Roberts funding a new opportunity for $200 million dollars or more. This is exciting, motivating and for most, unrealistic. A fully fundable opportunity is a rare amalgam of huge upside, mitigated risk, unique, potentially disruptive product and REALLY strong, experienced management. Very few entrepreneurs can present such a comprehensive package.

In the world of licensing the product, upside, risk mitigation and disruption features are crucial. Management is irrelevant as the licensee presumably has the management in hand to drive the project to success. The same elements that excite venture capitalists also excite the licensee. They are keen on a strong Unique Selling Proposition detailing the niche the product will claim.
A powerful, well-structured sales model will quantify and support the sales universe available to the product or technology.

There are many successful approach strategies available when seeking to license an exciting new product. The following are some broad elements we have utilized in our consulting firm with success. Remember there is no linear, set in steel index to follow. Innovate, adapt and keep pushing and try everything necessary to get that appointment with the decision-maker.

Create a Working, Production Quality Prototype

Whether you have a new product, a service or a technology, you MUST be able to demonstrate the unique features and benefits of your offering. Some inventors have a facility to create, design and construct the necessary demonstration unit. The great majority of people do not. This is a simple hurdle to overcome.

In every city in America there are job shops, product design and development firms, engineers and software writers capable of providing professional guidance resulting in production of the prototype required.

A key by-product of this process will be the creation of 3-D, Computer Assisted Design art. This art is essential in the assembly of the product for production, in obtaining crucial and totally accurate cost of goods and filing patents.

Patent Filing – Intellectual Property Protection

Very few licensees are interested in investing significant monies in marketing a new product without the guarantee of some patent, copyright and/or trademark protection. See a Patent Attorney. Patent law is exceedingly specific and for this reason it is a legal specialty. A competent patent attorney will conduct a search and, using the results, advise the possibility of successfully receiving a utility patent (highly preferred), design patent (patent on art, easily overcome) or not being artful enough to receive any cover.

If an item has dicey patent prospects we like an alternative strategy. I have been a proponent for several of my clients of a strategy we call “patent pending forever”. Our goal is to keep a product in patent pending status for as long as possible by timing addendum to the application and art and filing these in order to keep having the filing reviewed again.

During patent pending a filing is essentially in limbo. The advantage for the inventor is that there is no publication of the details of the art, features and unique benefits of their product. Secrecy is an asset. Once a patent number is received two undesirable things happen: details of the patented product become public knowledge, and the clock starts ticking against the 20-year life of the patent.

For most entrepreneurs seeking a license, we do not push for international patent filing. International filing is very expensive and we let the licensee assume this expense.

Source of Production, Manufacturing

Depending on the product, service or technology offered for license, you MUST source production. The reason is simple: this will set you apart from the dreamer. It reflects your commitment to the opportunity. It reassures that the product can be built (we see a number of projects that are unrealistic from an assembly and economic standpoint).
Now, let’s discuss a touchy subject in the current economic climate. I love my country. America is the land of opportunity. However, I am a capitalist and the rules of capitalism are much bigger than any one individual: including you, the entrepreneur. If at all possible I prefer to assemble components, source, and manufacture here in the United States. However, it is becoming more and more difficult to be competitive here in America.

I have clients that are adamant they do not want their project assembled offshore. Do not be a Luddite. You really have two options: you can go with the flow, or you can be drowned by the overflow. In the past decade, we have not found a single project that could be produced in the United States as inexpensively as we could produce offshore, including the cost of freight, customs and duty. Not even close!

We search out four or five factories, or offshore resources, for submission of the 3-D CAD art and a Release Packet. The Release Packet contains all of the hard samples of components that will be parts of the finished product. After this is forwarded, we typically receive quotes in four to six weeks.

This quote should include all line item costs contained in the Bill of Materials for the product, plus outer packaging, costs of display (if any), shipping carton, inserts (directions for assembly, etc.), plus freight to United States port of arrival, customs, duty and inland freight to your warehousing/fulfillment point. This is a dead net cost of goods.

Use of Cost of Goods (COG)

Knowing the cost of goods is crucial! This number proves the viability of the products pricing model, confirms margin assumptions and the ability to construct an exciting sales model. If COG is too high, and there is no capacity to squeeze costs, the future license prospects for the product are not exciting. This number sets the parameters for the potential of your project and indicates to the potential licensee that they are dealing with a thoughtful, serious and skilled licensor.

Research

The licensee with an exciting opportunity on offer will want to know (not guess) everything possible about the market they are about to enter. This will include; customer demographics, size of market, growth of the category, competition, and potential licensors. Cite sources of research and assemble as a portion of the Opportunity to License document you will offer. This is the knowledge that will set you apart from run of the mill tire kickers hoping to make a deal.

Professional Endorsements

Nothing resonates with buyers more than professional endorsements. I am not necessarily talking about celebrity endorsement. They are great for certain products. A pediatrician endorsing a juvenile product, or a professional association giving a positive quote on a service, or an educator endorsing a toy, are simple examples of taking a product and brandishing it with the glow of an expert. This is invaluable and a technique we utilize regularly for our projects. Include these quotes in all collateral materials.

Test Market / Focus Group

If you only have one prototype it can be difficult to assemble a focus group or test market. What we recommend is to show the product to strangers sequentially in the field where the product would typically be used. Recently, with a single prototype of a baby stroller accessory, we spent an afternoon in Central Park in Manhattan, demonstrating the unit to mothers pushing strollers. We walked away with positive quotes for attribution from 26 of 29 mothers that used the prototype. These we included as an exhibit in our product folio.

Opportunity to License Document

With all of the above in hand, you have the data and resources to assemble an approach document. We all have heard stories about the inventor sidling up to a banker in a bar, uninvited, and successfully pitching his idea over a scotch and soda. Good Luck!

You get only one chance to make a great first impression. Do not shortcut on any aspect of the initial approach. With your patent, prototype, possible endorsement, research and costs well in hand, you are ready to assemble the written document that will detail the features and benefits of your project and quantify the opportunity.

As you are not seeking funding, and are not interested in self-marketing, a classic business plan is not required. However, you will need a written synopsis of your project, written along the lines of the business plan. We call this the Opportunity to License.

This document needs to be crisp, exciting and short, eight to 10 pages, plus exhibits. The exhibits should include; patent information, list of contributors to the project, CAD art, bill of materials, cost of goods, research data.

Selling the Opportunity

Successful completion of the above now places the opportunity in position to seriously, and professionally, approach licensee targets. Your research will have identified the obvious candidates. Networking, walking trade shows and scouring appropriate industry trade publications will increase familiarity with added possible homes for placement of the item.

The target list needs to be approached with care and diligence. Large, publicly traded Companies have different, but fairly stringent standards for accepting unsolicited submissions. I find this barrier crazy, as many great opportunities are never viewed for fear of litigation. Mid-size and small companies, the really fast growers, are more open to reviewing unsolicited submissions.

Prepare mailings with care. Be sure to know the exact name and title of the decision-maker at each targeted potential licensee. Personalize each letter and assemble the mailing in a folio. The cover letter should be on top in the right pocket with the Opportunity to License document directly behind. In the left pocket place any public relations, positive user endorsements, etc.

Follow up the mailing with a phone call in 7 to 10 business days. Now the ebb and flow of making a deal begins.

Negotiations

No two deals are alike. This not a cookie cutter, fill in the blanks process. Securing that face to face meeting with Mr. Decision-Maker is crucial, and the opportunity cannot be blown. We seek to maximize every potential income stream for our clients. These include:

Rights Fee

You must receive consideration in the form of a Rights Fee in exchange for turning over all aspects of your project to the licensee. This should be paid on signing the license documents and is not returnable. The licensee should perform all due diligence prior to signing. There are no make goods here. The size of the Rights Fee will be in direct proportion to the size of the opportunity you offer.

Royalty

This is the vast bulk of income any licensor receives from a successful product placement in a licensing deal. The variables in structuring percentages are never ending. Some royalties are built to sales growth and minimum sales promotion investment. Others are tied to achievement of tiered sales goals. Many contain buyout options that automatically kick in at certain trip points.

The term (length) of the license is crucial. The licensee will want a shorter term. The licensor will want as long as possible to maximize income.

The details of each license are unique and specific to that particular deal.

Production

Another reason we are aggressive about controlling the production sources, and knowing our costs is because this often becomes another income stream for the inventor. For instance, assume a dead net cost of goods of $1.92 per unit. Assuming we can maintain production control in negotiations, and this happens often enough, we will quote the licensor $2.00 per unit COG. The difference of $.08 (4%) goes right to the licensor when peeled from the Letter of Credit that is organized to pay for the offshore inventory production. $.08 might not seem like a lot of income per unit. However, apply this number to potentially hundreds of thousands of units per year, for seven, 10 or 15 years. Do the math!

Several points to make here.

Do not be a hog. Hog’s get slaughtered. A good deal is a deal where every party feels fairly treated! This is an area where we see too many deals go south. Every party should profit handsomely, according to their level of participation.

Second, do not attempt to license a product without undertaking the steps detailed above (or some variant of the process). I have mentioned this before. This is just an outline. There are endless variables that apply to different industries, styles and categories of offerings. Do your homework and do not attempt to take shortcuts. You will be wasting your time and resources.

Finally, do not, EVER; utilize the services of an invention mill. These firms typically advertise on late night infomercials and they prey on the inexperienced, naïve and desperate. These firms are little more than boiler rooms with a goal of separating the weak from their cash. Check with your Better Business Bureau and State Attorney General for history on one of these houses. Even then proceed with caution.

Licensing is a real, viable option for inventors having opportunities that offer fresh, definable features and benefits. The Unique Selling Proposition contained in these inventions may have real value to licensees, while venture capital may not be able to overcome one or more shortcomings inherent in the project. Funding sources are often seeking a different deal parameter. Licensees are simply seeking the opportunity to bring in house a product, service or invention that compliments their array of assets. This makes licensing the best choice for entrepreneurs hobbled in one area or another: they simply have a great product to offer.

by: Geoff Ficke

The ability to succeed as an entrepreneur is one of the most rewarding experiences any person can enjoy. Seeing your product on a store shelf is an amazing rush. Knowing that your service is benefiting the public is incredibly rewarding. Beyond the obvious monetary rewards, the knowledge that you have achieved a level of success most people can not even attempt is a significant gift.

So what does an inventor, or creator, do to advance their opportunity if they do not have classic entrepreneurial makeup. In my consulting business I see an inordinate number of great product placement opportunities and an inversely small number of real potentially successful entrepreneurs. It is very tough for anyone to step out of their comfort zone and wear a completely new shirt. This is one reason there are so few entrepreneurs and so many dreamers. Nevertheless, there are opportunities and strategies that can overcome personal entrepreneurial limitations.

There are numerous, sound, legitimate, capable consulting firms that can handle business opportunities for inventors. They are able to perform a basket of services that most individuals would find overwhelming. A good consultant saves the client time, money and mistakes. Make sure you interview more than one firm, ask for current and past references, request samples of products the firm has developed.

Do not use an invention submission service, ever! This is always a road to heartbreak hotel.

An effective consultant should be able to offer a strategy for execution before the inventor lays out a single dollar. The firm should be able to perform, or have access to professionals that can perform every aspect of the projects needed elements. If the inventor has certain abilities, (ability to assemble financials, engineering, production of 3D CAD art, etc.) ask to have them backed out of the fee structure, as these can be self-performed. The comprehensive consultant can act as a projects managing consultant (handles every aspect of development, sales, marketing, production, negotiations, etc.). Often, the inventor needs only needs specific tasks performed, in areas where they are inexperienced or challenged. This often includes sales and marketing.

A consultant should be able to clearly advise best strategies, opportunities and limitations the project might face. They should also be realistic in assessing potential for success. Be wary of unbounded enthusiasm and guarantees of success.

Many inventors approach me and state unequivocally that they need a specific amount of money. I have never, never seen an inventor who could justify the amount of money they THINK they need. They are guessing and have not conducted any of the required research essential for quantifying the projects real financial needs.

Many inventors believe they need to raise vast sums of money to complete development, produce and sell their product. Rarely is this so. It is far more likely that a prototype can be sold or licensed, a strategic alliance entered, or a partnership formed, seriously mitigating the need for significant investment dollars. These are a few of the strategies a competent consultant might consider.

As an inventor of a potentially exciting commercial opportunity, it is important that you remain flexible and realistic. Inflated expectations kill more deals than almost any other factor. When I meet an inventor that has been working on their project for many years, I become wary, very wary. This is always a sign that they are deal averse, can not let go, want too much control, or have unrealistic financial hopes.

While consultants are available, there are other potential sources of help for the timid inventor. Many universities now have entrepreneurial study programs and offer mentoring. The Service Corp of Retired Executives is a well-known resource for small business assistance. Also, many local/regional governments have organized small business development programs, recognizing that small business is the principal creator of job growth and tax revenues.

Just because you do not have an entrepreneurial makeup does not eliminate your creative commercial opportunity from potential market success. Investment monies will not be chasing a rookie, limited ability entrepreneur. However, money and opportunity always is interested in exciting new technologies, products and services. Get the necessary experienced help to drive the project and enjoy the significant potential income stream that can be generated when a product is successfully sold, licensed or partnered.