How involved do you want to be with your product?
There are primarily two ways for an inventor to bring their product to market: licensing or manufacturing and selling it themselves.
At Enhance Product Development, we get asked all the time which one is better and what we would recommend. So we’re going to lay out the pros and cons of both options to help you make an educated decision about which method would work best for you. The goal is not to persuade you one way or another (because Enhance Product Development can help with both methods), but to lay out the pros and cons we’ve observed about them both.
LICENSING PROS:
– Can sometimes secure a licensing deal without the expense of making a physical prototype and just have a ‘virtual prototype‘ instead.
– Minimum involvement needed by the inventor. They don’t have to be involved in manufacturing, distribution or sales processes.
– Licensee pays out royalties, a percentage of sales, to the inventor.
LICENSING CONS:
– Less control of your product. A licensee may want to change elements of the product, the name, logo, price, etc.
– Negotiating is a skill, especially when you’re negotiating a fairly complex deal such as a licensing agreement.
– Usually it takes longer to get your product to market through licensing, and the licensee may want to delay the release until timing is right for them too.
– Difficulty in finding a licensee. We’ll be honest, it’s not always easy to find companies to license out products. Enhance Product Development can help with finding licensees and negotiations!
– Products that get licensed usually have to have fairly strong intellectual property protection. Many companies that license our products will only look at products with utility patents.
– Royalties are usually a lot smaller percentage than what the licensee makes.
MANUFACTURING PROS:
– Products get to market faster usually, depending on production methods.
– More control over your product. Unless you have a board or investors influencing things, you will more than likely have full control of your company and product.
– You can control your destiny. As in most situations in life, you will more than likely get out what you put in.
– Bigger profit margins than the royalty percentage for licensing usually.
MANUFACTURING CONS:
– Working out the logistics of manufacturing can be stressful- luckily Enhance Product Development does manufacturing sourcing!
– Physical prototypes are usually more expensive than virtual prototypes, but a necessity before a product can be manufactured.
– Paying for starting inventory can get very pricey depending on the manufacturers minimums.
– Tooling costs required to make your product can be very expensive, but is usually needed in order for the manufacturer to make any of your product.
– Storing inventory can be expensive and/or inconvenient, especially if you’re having any problems selling it.
– All the red tape that goes along with opening and operating a business can be taxing (pun intended).