Two heads are better than one, so if you are trying to license your idea why not get a partner – and often the best partner is a sales rep that is already in the industry. He or she will know the market, many of the major players, and what kind of deal really makes sense.
For inventors, this partnership doesn’t mean you have to give an equal share to the partner, often just a 10 to 15% share will be enough if you have a “works like, looks like” prototype and a marketing plan. You might need to increase the sales reps share if you need money that he or she contributes or helps raise, but typically you will pay a modest amount to the rep for all the value they can offer you. Besides just licensing an idea straight up, the rep can help you take other steps that might be important to land a licensing deal. An example is a partnership with a manufacturer who will help design the new product, build prototypes and eventually produce the product. This can be a key tool if you are licensing to a company that outsources production and if your product is too expensive for you to produce on your own.Inventors form alliances or partnerships with sales reps because they don’t have established contacts in the industry or because either they need a partner to help foot the bill. Most inventors think they just need an idea or patent to get a license, and in some cases that works, but the next section details some of the additional steps that an inventor can take to improve their chances of landing a license and to help land a higher royalty. Sales reps can help with all of these steps. One thing to note is that it is not just the reps contacts that help you. You also receive a major boost with everyone you talk to when they realize that you have an industry professional backing your idea.
Improving Your Chances of Licensing
- Having a patent or patent pending. Inventor typically does this step on their own.
- Finding an engineer or designer to complete design work on the invention. Sales rep typically knows industry people with the right expertise to do this and often knows contacts who might work for a percentage of the idea.
- Finding a manufacturer to make the prototype and possibly set up a small production run. Again the rep may know people who can do the job, and might do it for a share of the product rather than an upfront fee.
- Setting up a sales test at a key retailer or end user to get market feedback. Reps will have contacts for a wide variety of market tests.
- Getting conditional purchase agreements from manufacturer sales rep agencies, other marketers, retail chains or other key target customers to prove the product is viable.
- Arrange for the product to be shown at a trade show to get market feedback to show potential licensors that the product has high chance of creating strong sales.
- Line up other industry people as investors or supporters of the idea.
What You Need to Succeed
Sales rep partners, or any other partners, look for a significant benefit when they decide to team up with an inventor. Typically, they are only interested in your product if it can increase their annual income 15 to 25%. The perfect product, from their perspectives, is one that has considerable market impact. But inventors have another card to play with sales reps. They want to differentiate themselves from all other reps who seek profitable lines from major companies. Working with inventors is a way for sales reps to increase their value in the market and make a mark for themselves in the industry. This is important for reps, and it is a key factor in why they might help you.
From the inventor’s point of view, perfect products for a joint venture are ones that the inventor doesn’t have the resources to produce, or the marketing network or credibility to launch. A partnership with a rep allows inventors to move quickly to improve and finalize their products for licensing with much less financial risk. The key to success is finding the right reps to approach. Here are some other factors to consider as you investigate partnerships with a rep:
- Money matters: Other than key contacts, typically the main advantage of partnership is that you get funding from your potential partner. For example, you may have identified a big market opportunity, but lack the money to create prototypes. Reps can help you with the money, or help you find an engineer or a manufacture to help you develop the product.
- Protection: You don’t really need a patent to strike a partnership agreement with a rep, but it does improve your negotiating position and helps ensure that the product’s intellectual property rights belong to you.
- Prototypes: Many inventors choose a partnership because they don’t have the experience or the money to finalize a “looks like, works like” prototype. But a drawing often isn’t enough to get a positive response from a potential partner. Having a prototype is important and it helps in getting a better deal from a rep. But don’t spend too much money creating a rough prototype; just take it far enough so the partner can see your product’s sales potential.
- Research: You won’t have any trouble finding a partner if you uncover a product that satisfies the needs of a large market. The reps often know the market, but I feel it helps your negotiating position if you can show that you know the market is there. Your research should show that customers need and want your product, and that they’re willing to pay a reasonable price for it.
Dos and Don’ts
- Don’t be greedy. The sales rep will make you a lot more money in the end so don’t be afraid to offer him or her their terms if they can do the job for you.
- Do give yourself an out. Tell the rep you will offer the percentage only if they spend 20 to 40 hours every three months to help promote your idea. State that if you are unsatisfied with the effort, you will let the sales rep know you are unhappy and give him or her 60 days to rectify the situation or your agreement will be terminated.
- Don’t approach a potential partner without at least some market research from target customers. Your position is more favorable if you have survey results from at least 15 to 20 potential users.
- Don’t be a pain. Sales reps won’t proceed with a partnership arrangement, no matter how profitable, if you appear difficult to work with. Don’t call constantly with questions, revisions or suggestions. Limit your contacts to one or two per week where you mention major concerns.
Is a Partnership Right for You?
- Allows you to introduce new products that are beyond your reach in terms of either resources or experience
- Helps you gain market experience that you can use in the future
- Speeds up the introduction and market penetration of a new product
- Allows you to improve your odds of landing a licensing agreement
- Allows you to introduce new products when you can’t afford to produce a “looks like, works like” prototype
- Doesn’t give you total control of the product
- Depends on another party to do their jobs effectively for the product to succeed
- You can’t withdraw the product to start a company on your own
- May not establish you as a market force capable of launching your own company
- Your input may be overridden by the sales rep partner
There are lots of reps, but you need to know how to find them. Follow the below steps and you should be able to locate plenty of reps.
Trade Magazines and Trade Shows
Locate the leading trade magazines and trade shows for the industry. If possible attend the trade show, go to booths with complementary products and see if they have reps or maybe the booth is even run by reps.
Subscribe to the industry trade magazines and in the new product sections, send away for information on complementary products and when you receive the sales literature, see if there are local reps names included. Talk to the rep and see if he or she knows additional reps.
Trade Association Websites
Sometimes industry trade association websites have lists of reps. Gales’ Book of Associations, found at most larger libraries, and Internet searches should be enough for you to find industry trade associates.
Also check out manufactures sales representatives directories such as MANA, Manufacturers Agents National Association which is available in larger libraries.
Talk to Other Inventors
When attending trade shows or other industry events, network with other inventors and ask them if they know any good reps.
Prepare rep materials for a mailing
Having great materials for your rep mailing is key to success. You need to let reps know that you have a hot new product, that you are running a professional and serious business and that you are ready to do all it takes for your product and your reps to succeed.
The literature should include sales flyers, picture of the prototype if you have one, stories and testimonials. You need professional looking materials so the reps know you mean business. If your mailing looks like it was put together by a fly-by-night company, it is unlikely you will attract talented and experienced reps.
Sending out the mailing
Send your mailing only to 10 to 15 reps to start. Then call them up and see if any of them are interested in your line. If not, check to see why they are not interested. You may need to make some changes in your package.
If your first mailing didn’t go well, make changes to your package and send it to another 10 to 15 sales reps and again call them up and if they are not interested, find out why. Keep on doing this until you know you’ve got the right mailing materials. Then make a larger scale mailing to all of the reps on your list.
Interviewing the reps
If a rep is interested, make sure you ask him or her a few questions to make sure that he or she is really the right rep for you. Here is what should you look for:
Driven to Succeed
You want a hungry rep. Selling new products can be hard, so you want a rep that is ready to go out and give it his or her all. The best reps are ones that worked for another rep agency and then started his or her own agency and is anxious to build up sales.
Successful Track Record
Check that the rep has taken on other new lines successfully over the last two years.
Impact of Your Product
The rep needs to believe he or she can make at least $10,000 or $15,000 with your product. If they can’t make that much, it is unlikely they will support it for long.
The rep has to have the technical knowledge to properly represent your product. This doesn’t apply toall products, just ones that have a technical or scientific nature. For instance, if you have a chemical product, you need reps that can intelligently and understandably talk about how your product works and answer questions possibly of a technical nature. They don’t need to be chemists, but at least have a basic understanding.