Step #11 Negotitation

The Invention Addict 12 Step Program to Invent—Going from Inspiration to Innovation.
This is a series of posts on the 12 steps how to invent a product. A DIY class for Inventors.

The tenth step is NEGOTIATION– We are getting close. You did your homework and now you have the interest of a potential licensee. Don’t freak out.  Just the word can strike fear or cause your adrenalin to surge as you look forward to the dance.

Yes, negotiation is a dance. You both want something, you don’t know each other too well, it can be awkward, but it can lead to mutually beneficial relationship.

Who’s who?

Your are the licensor, the company is the licensee.

Common mistakes

  • Rushing into a deal.
  • Getting greedy–Maintain perspective and look at the big picture. Run the numbers, a tiered royalty structure with guarantees may be better over the life of the contract. Each party can make money, don’t be a hog.
  • Getting stuck or getting fixated on a single item in the contract.
  • Getting emotional–The best deal I got on car was a car I did not want. It was a car for my wife.
  • Talking more than listening.
  • Thinking win-lose. It’s give and take. You need to make concessions for something that you want you need to give up something.
  • Not getting someone to review–someone who’s objective and preferable trained.
  • Letting two lawyers go at it–Try to contact the decision maker and not just let the lawyers duke it out on your nickel.

Typical Components of a Licensing Contract

  • Royalty payments–the percentage of sales you will receive as a royalty. Royalties are based on gross sales–not on company profits. They are usually paid quarterly and can range from 1%-10%.
  • Territory–You want to try to get royalties for the countries where the company is selling into.
  • Advance payment–Upon execution of this Agreement, LICENSEE will make a non-refundable payment to LICENSOR of $_________, which shall be construed as an advance against future earned royalties.
  • Copyrights, Patents and Trademarks
  • Terms and Warrants
  • Product Designs
  • Default, Bankruptcy, Violation
  • Licensees Right to Terminate
  • Indemnification
  • No partnership
  • Governing law

Non-Negotiable Items-What to look out for

  • Get the right to see the books
  • You are not responsible for legal bills
  • No end to payments-as long as the product is sold
  • Products that are derived from your product. This means if there are follow on products that build on your patent, you should be co-inventor of future patent filings.
  • Non-refundable advance-25% of first year’s royalties is not uncommon.
  • Make sure that there is a date specified for when the product is on the market, often referred to as “performance date certain”.
  • Don’t agree to pay product liability insurance.
  • Make no promise to sue, if there are infringements, it should not all be on you.

Techniques or Tactics

  • The Advice technique is when the party makes proposal, you say, “You’ll have (need) to do better than that”.You are not demanding, you are advising them that they need to sharpen their pencil.
  • Don’t be the first to speak.  If you put a proposal or counter offer out there, let the other party speak first. There will be a real uncomfortable span of silence that will test your nerves. Say something to the effect ”That’s not good enough” and shut up. A great salesman I worked with would say “the first one to speaks looses”, not exactly in line with win-win mindset.
  • Splitting the difference. This is where you encourage the other person to offer to split the difference. You say, “We’ve spent so much tin on this and we’ve come so far. We are only $XX,XXX a part. Let them make the offer to split the difference.
  • Flinching is when you balk at the first offer, even if it’s good. You want your reaction to be slightly negative, repeat the offer in a questioning tone. “Hmmmm, you are offering ABC?” See if they raise the bid
  • Nibbling is where you don’t ask for everything upfront. After you have an agreement in principle, add for more. The person feels good that they made a deal. Adding to the deal reinforces the feeling that they accomplished the deal. Buying car, about to sign, “It comes with a full tank of gas … right?”
  • Validate their objection, especially if they upfront say that something is a deal breaker. They might say. “There’s no way I can go over $XXXXXX.” Ask questions to understand why, it may not be a deal breaker after all.
The Invention Addict 12 Step Program to Invent—Going from Inspiration to Innovation.
This is a series of posts on the 12 steps how to invent a product. A DIY class for Inventors.

The tenth step is NEGOTIATION– We are getting close. You did your homework and now you have the interest of a potential licensee. Don’t freak out!

Just the word can strike fear or cause your adrenalin to surge as you look forward to the dance.

Yes, negotiation is a dance. You both want something, you don’t know each other too well, it can be awkward, but it can lead to mutually beneficial relationship.

Common mistakes

Rushing

Getting greedy, maintain perspective and look at the big picture. Run the numbers, a tiered royalty structure with guarantees may be better over the life of the contract. Each party can make money, don’t be a hog.

Getting stuck one item fixation

Getting emotional-best deal I got on car was a car I did not want. It was my wife’s car.

Talking more than listening

Thinking win-lose. It’s give and take. You need to make concessions for something that you want you need to give up something

Not getting someone to review–someone who’s objective and preferable trained

Letting two lawyers go at it

Techniques ot Tactics

Advice-say, “You’ll have to do better than that.

This is often followed by holding your tongue. If you put it out there, let the other party speak first. There will be a real uncomfortable time of silence.

Splitting the difference-encourage the other person to offer to split the difference. You say, “We’ve spent so much tin on this and we’ve come so far. We are only $XX,XXX a part. Let them make the offer to split the difference.

Flinching-balk at the first offer, even if it’s good. See if they raise the bid

Nibbling-don’t ask for everything upfront. After you have an agreement in principle, add for more. The person feels good that they made a deal. Adding to the deal reinforces the feeling that they accomplished the deal. Buying car, about to sign, “It comes with a full tank of gas … right?”

Validate the objection. There’s no way I can go over XYZ. Understand why, it may not be a deal breaker after all.

Components of a Licensing Contract

Royalty payments

Territory

Advance payment

Copyrights, Patents and Trademarks

Terms and Warrants

Product Designs

Default, Bankruptcy, Violation

Licensees Right to Terminate

Indemnification

No partnership

Governing law

Non-Negotiable Items-What to look out for

Royalties are based on Gross Sales-not on company profits

Get the right to see the books

You are not responsible for legal bills

No end to payments-as long as the product is sold

Products that are derived form your product

Non-refundable advance-25% of first year’s

Performance date certain

Don’t agree to pay product liability insurance

Make no promise to sue

Happy Birthday Invention Addict

This marks the one year mark for my blog. Is it a birthday or anniversary? Let’s go with birthday.

Thanks to all the readers and commenters. Comments are what kept me going early on. There were some dark spots, times when I did not post for weeks but I persevered.

RoboPlow

I think we got all the snow we are going to get for this season. Maybe I’ll get one of these for next year.  I wonder if it can rake leaves?

Protect your iPad with the Cloak; broken tablets are no joke


Planning to get an iPad? You should check out this cool cover. Here’s the description from the Quirky site:

Protect your iPad with Quirky’s Cloak! Cloak is a sleek, sturdy case for the Apple iPad with a modern design resembling an office folder.

The Cloak is constructed from non-slip rubber, with durable plastic on the hinge mechanisms. The iPad slides into the case through a top opening and is held in place by a sturdy friction grip. It can be positioned to sit on a flat surface in both portrait and landscape positions. Here’s how:

Portrait: fold the Cloak’s front cover behind the iPad. Use the plastic support brace located on the product’s inside cover to prop up the iPad screen vertically.

Landscape: open Cloak’s front cover and use it to prop up the iPad’s screen from behind. Depending on your viewing preference, the cover can click into different angles by pressing a button on the hinge.

The Apple iPad is scheduled to arrive in stores on April 3. Don’t delay – purchase Cloak today!

Aquanotes: I get my best ideas in the shower

For those times when inspiration hits in the shower–AquaNotes

I  often get some good ideas in the shower or driving to work. It seems that there is some research to back up my observations. I had heard that the sound of water stimulated the brain but I could not find any research to back that up. I think the sound of water may be relaxing and that may help to release you mind.

The phenomenon is called the creative pause. This is where you let your ideas incubate by not thinking about them in the conscious mind. After the idea has a chance to incubate, you have that “aha moment” in the shower.

Why is that? Here are a few reasons why:

  • There’s little opportunity for distraction
  • Minimal mental engagement is required for the the task at hand
  • Showering creates a “white noise” effect
  • A change of scenery sets the stage for the unexpected

For more details see: http://www.cameronmoll.com/archives/2008/11/showering_and_thinking/

As Seen on TV – TeleBrands Inventor Day

“As Seen on TV” giant, TeleBrands, who has marketed such popular products such as the PedEgg and the Jupiter Jack is taking their “Inventor’s Day” on the road to this year’s International Home & Housewares Show in Chicago.

Inventors from all over the country will have five minutes to pitch their product ideas to the CEO and “Infomercial King”, A.J. Khubani. If you think your product has what it takes, please email your contact information and your product idea to InventorsDay[at]TeleBrands[dot]com to be considered to participate in the event.

Please be sure to have appropriate intellectual property protection before disclosing your inventions.

Please note that you need to edit the e-mail address to add the “@” symbol and the  “.” This is to prevent spambots.

Step #10-CONVERSATION

The Invention Addict 12 Step Program to Invent—Going from Inspiration to Innovation.
This is a series of posts on the 12 steps how to invent a product. A DIY class for Inventors.

The tenth step is CONVERSATION– We are getting close. You did your homework and now you have the interest of a potential licensee. Don’t freak out!

I prefer to e-mail over a phone call but the time will come when you need to talk to someone about your invention. People are people. A CEO of a small company may be the only employee. You would be surprised how helpful people are. Even if they are not interested, they can sometimes give you guidance.

The outcome from sending you sell sheet can be one of these responses in an e-mail:

  1. “Are you kidding, this is the most stupid invention I have seen in my life, why did you waste my time!” No, they won’t say this. The will say thank you but it’s not a good fit.
  2. “I need to see more.” They may want to see a working prototype, details of the PPA, or even you. They might want to meet.
  3. “This is what we are looking for. Please send me a terms sheet for the licensing agreement” (more on that in the next post).

Here is an actual e-mail I got back; a kindly worded rejection letter. I’m not sure how much is boiler plate or did they really struggle with turning me down.

Thank you very much for sending us the product submission for the _____.  We also appreciate your patience on giving us the time we need to review the product.Unfortunately, after extensive consideration, we feel your product does not fit within our merchandising objectives at this time. Although this product was not right for us at this time, we hope you will contact us again if you have any other kitchen-related products.

If you get the first response, the rejection, send them note back. You don’t want to burn bridges. Thank them for their time.

One bicycle company said it was not a good fit with their market segment. I asked if they knew of companies that might be a better fit. He sent me back a list of three companies. I already had contacted these, but I was a nice gesture.

I had a converastion with a CEO and got a response like #2. The product was not a great fit because it used different technology than he was acoustomed. He said when you get a prototype, I can show it to my people at the company and give you more feedback.

Still waiting for #3. Stay tuned …

Blogs for Passive Income and Escaping the 9 to 5

I’m not exactly sure how this happened but I came across TWO awesome blogs that have become my new favorites. Why my favorites?

First is the content. If I find a blog that stays on my RSS list, it has to have content that is relevent, fresh and actionable. I’m not just a warm and fuzzy kind of guy. I’m a “show me the money”, “where’s the beef” kind of reader.

Second is the people who write them. They are real people like you and me and they want to help people. They actually reply to e-mails! Check out their sites and read their stories that lead them to write the blogs. Reading stories like theirs inspires me and keeps me reaching for my goals.

The third thing is that they share a common theme that has become a goal of mine. When I was out of work for the second time in 18 months, I had some free-time to hang out at Barnes and Chernobyl (that’s what my 12-year-old son and I call B&N).

Being out of work and not wanting to spend money to actually buy any books, I would read a chapter or two each time I visited the store. One of the books I read was “The Four Hour Work Week” by Tim Ferriss.

That is where I learned that I could escape the 9-5 and generate passive income through inventing. I already had six patents but employment agreements meant that the patents belonged to my employer. Now had a plan to invent my way out of  the rat race.

So now without further adieu; here are a couple of my new favorite blogs:

Ladies First – Maren Kate is the dynamo behind Escaping the 9 to 5.com I don’t know how she’s able to write so much. Her blog is chock full of great tips for entrepreneurs and social networking. She even started an on-line class called Start-up School.


Next up is Pat Flynn – The man, the myth, the legend. The author of Smart Passive Income. It was Pat who gave me the tools to write my first eBook. Download his FREE eBook guide that will answer some of the real nuts and bolts kind of questions you run into when writing an eBook. It’s a great read and did I mention it’s free!

Pat has lots of videos, podcasts, and so much more stuff I have not been able to even scratch the surface.

More on my upcoming eBook.

With the tips I learned from Pat, I was able to finally get the missing pieces to get my eBook off the ground. The inventing eBook is tittle, “From Ideas to Profits: The essential guide for beginning inventors”. Here is a sneak peak of the cover. It will be very affordable because my goal in to help others reach their dreams and go from inspiration to innovation.

Keep your cables on the table – Cordies

Order the cool and quirky cable wrangler called “Cordies”. Click here to purchase for only $12.99

Read more »

Step #9-COMMUNICATION

The Invention Addict 12 Step Program to Invent—Going from Inspiration to Innovation.
This is a series of posts on the 12 steps how to invent a product. A DIY class for Inventors.

The ninth step is COMMUNICATION– I mentioned this in my last two posts. There are three elements to consider:

  1. Who are you going to contact?
  2. How are you going to piqué their interest?
  3. How can you succinctly convey you product pitch without hopping on a plane and being there?

Read more »