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Inventing Business
Entrepreneur, April, 2001 by Don Dedelak
People want to start businesses. They just need an idea: yours.
BACK in 1992, Michael Miller decided the time had come to strike out on his own. Miller was 30 and had nine years of corporate experience under his belt. What he didn't have was an idea for a business.
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Miller got that final piece of the puzzle from an inventor he was associated with. The inventor (who wishes to remain anonymous) had come up with a mechanical device that takes weeds and roots out of lawns and gardens. Miller liked the invention, called the Weed Hound, and felt the inventor was really onto something. Miller test-marketed the product at several lawn and garden shops. The response was favorable, and Miller knew what he wanted to do: "When I demonstrated the product to people, they said, 'Wow, that is really great.' I knew then the product was a winner, and I decided to license it." In 1994, Miller launched his company, Hound Dog Products Inc., in Edina, Minnesota, to do just that. Since that time, he's added a variety of different items to the Hound Dog line and expects sales to grow from $5 million in 1999 to up to $6 million this year.
EXPLORE YOUR OPTIONS
The moral of the story? Most of the people or companies that actually license products are not established companies, but rather start-ups or individuals wanting to launch businesses. So, as an inventor, you need to. explore all your options when trying to license your idea--don't spend all your time courting established companies. They're overwhelmed with innovations from myriad inventors and don't have time to evaluate everything.
Instead, you can often make much more progress in licensing your idea if you expand your options. For instance, if you consider your invention a unique opportunity for someone looking to start a company and manufacture a new product, you can then list your invention on Web sites that compile business-for-sale ads. Some good ones to start with are the Business Resale Network (www.br-network.com), MergerNetwork (www.mergernetwork.com) and the US Business Exchange (www.usbx.com).
Another avenue is to talk to people in a distribution channel who would be able to carry your product, such as manufacturer's sales agents (independent contractors who sell products for anywhere from three to 20 manufacturers) and distributor salespeople. These; contacts have experience in the market and might be interested in starting a company based on your invention. To find leads, read through trade magazines that target retailers, distributors and manufacturers in specific industries. You can find some titles in Gale's Source of Publications and Broadcast Media, available at your local library.
Contact the publishers of every trade magazine related to your product and ask to be put on their mailing lists. Look in the magazines' ads and new product sections; start requesting information on every product you see that's even remotely similar to yours. Often, the literature you receive includes the name of the local representative and/or distributor--that's the person you need to contact and try to convince to license or buy your idea. Sometimes, those distributors are even willing to partner up with you to help launch your invention.
WHEN INVENTIONS SELL
What do potential licensors look for in inventions, anyway? After eight years in business, Hound Dog has reached the level where it prefers to work with in-house products rather than take outside submissions. In the early days, however, Miller had strict criteria he used to weed out the good ideas from the bad. The first thing he wanted to know is whether the product would fit his market: unique tools used outside the home in a suburban yard. Inventors who want to succeed with licensors have the best chance of hitting a hot button when they describe their product in terms of the same narrow market opportunity their contacts already operate in. So the next time you talk to a potential licensor, concentrate first on finding out what market they target. Next, explain how your product fits that market. Whatever you do, don't talk about how your product can be sold in dozens of markets--your contact will just end up thinking you sell to a different market than they do.
Miller, for one, uses several guidelines--applicable to every invention-- when evaluating new ideas. "First and most important," he says, "the product has to have a 'wow' factor." All inventors must ask themselves the key question of whether their products are innovative enough to make it in the target market. The truth is, an invention with just a few minor improvements will be considered a "me, too" product or a product--line extension-not a true innovation. Small improvements alone aren't enough for you to succeed as an inventor.
One way to generate that "wow" factor is to meet a significant need or desire consumers share. Miller explains: "I want to know what my target customers' problems are. I'm going to get everyone's attention when I provide a product that solves a problem."
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