To License or Not to License?

 Two ways to bring your product to the market

A key decision when embarking on the invention process is whether you should independently operate the business or license the idea to an established company or manufacturer.

• Going into business by yourself requires a greater commitment and tolerance for risk with the promise of greater rewards.
• Licensing an invention minimizes risk and financial return.

This decision requires three main considerations:

• Your goals
• Your available resources
• Your tolerance for risk and expectation for rewards

#1. Your Goals

Determine which route will best suit your lifestyle.

• Do you want to create a business with the potential to earn a lot of money, or will you be satisfied with a modest, low-effort supplemental source of income?
• Do you want to take the idea to market yourself, or are you okay with passing the creative process and control to someone else?

#2. Available Resources

Evaluate tangible resources:

• Do you have access to necessary technology and equipment (telephone and internet)? Do you have a practical workspace? Do you have financial resources and sustainable income?

Evaluate innate resources:

• Do you have discipline and organizational skills? Do you have the interest and willingness to educate yourself? Will you seek out help when needed?

#3. Risks vs Rewards

Measure your tolerance for risk and desire for rewards

• Can you tolerate financial pressure? Can you face failure? Can you handle success?

Licensing-vs.-Business-Comparison

Side by Side Comparison

Ask the experts

Get expert support, whether from an experienced friend/relative, professionals or from a free resource…

• Local Small Business Development Center of the U.S. Small Business Administration –sba.gov
• Local SCORE chapter – score.org
• the One Page Business Plan workbook by Jim Horan – free template at onepagebusinessplan.com
• Entrepreneur’s “How to Build a Business Plan ” guide
• Ask us at LA New Product Development Team

Taking a product from concept to market requires time, energy, and money. If successful, the financial and personal gratification can be well worth the effort. Ultimately, only you can decide (with the help of experts in your field). Consider and analyze each option carefully.

Best of luck!

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