Licensing or Small Business Start-Up?

If you have a great new idea, there is a point where you have to consider the pros and cons of starting a small business to permit the manufacturer to market and ship a new product. Both are viable options, with varying degrees of risk and reward.


Licensing fast, low resources, and relatively risk-free. The manufacturer, who assumed the licensee of all the risk of long-license agreement, in exchange for which they will keep most of the profits while the inventor of a percent of sales anywhere from 3% to 15%. Often after a good faith payment of signing the contract, the advance royalties is expected to further encourage the manufacturer to produce the product, and return on investment. The manufacturer knows the market and has existing relationships in the distribution and deep pockets for a new product. Six months is not an unreasonable time frame to see the product being manufactured.


Small business start-up is slow, requires a large amount of resources, and risk. The increase is directly proportional to risk the possibility of higher gain. I assume all risks in product development, to operating, finance, procurement, fabrication, delivery / transportation, marketing, advertising and sales. It takes years to build a new product in the market and are competing for a small business operators who have the home court advantage. These larger companies to negotiate better deals with suppliers, you can afford advertising, fancy packaging and design. Even if the product is capable of, you will not be able to compete with the bigger companies out there. This is a very uneven playing field.


Someone with a new idea is to ask what their business goals are to make money fast and sell your idea, or is it a business owner to invest the time and energy to the construction of a society, not only to invent new products. Not every case inventor cut with a company to deal with, and all aspects of the property that have nothing to do with the process of invention. Ask yourself if your passion for research and development of a new idea, or is it a business to new ideas.