Do you want to license your invention?

There's a difficult decision to be made once you have a viable product. Do you want to go after a licensing deal. There are advantages of getting a licencing deal but there are also down sides.

First the upside: You won't have to set up manufacturing. You won't have to do the marketing. Most companies, if they pick you up, will take care of everything that goes into getting a product on the shelves for the general publics consumption. You just sit back and collect your royalty check and live the good life........or do you?

the downside is that you will only get a very small percentage of what you would if you manufactured and sold it yourself. Usually in a licensing deal, you get a certain percentage of the profits. Usually between 3-5%. Sounds Ok right? Well maybe not. That 3-5% is based on the wholesale price after expenses.

Let's say you have a product that would retail for $20.00. 5% is $1.00. sell 1 million units make a million. Not really. Whole sale would typically be half of retail, so your at $10.00. After other expenses such as shipping etc., your maybe down to $8.00. At 5% that's $0.40. So now you have to hope that your product sells 2.5 million units to make a million. Then after you pay income taxes, your back down to $600K. Now on a large global scale, 2.5million units is entirely possible.

If you think you can handle all of the manufacturing, marketing, sales reps cost, insurance etc. and you want to make this your job then by all means go for it. You will have the potential to make much more money because you have taken on much more risk.

If you decide to license your product, I would recommend that you find an attorney that specializes in Licensing deals.