When Nancy Tedeschi was struck by the idea to reinvent the screw by adding a long snap-off piece--thereby enabling glasses-wearers the world over to quickly fix their eyewear--she was absolutely sure she wanted to bring the product to market herself.
"I thought, this can't be that difficult. And if I do it myself, I won't have to share the profits," Tedeschi said. Her innovation, the SnapIt Screw, has been remarkably successful by any measure. After investing $250,000 of her own money to get the business off the ground, her repair kits are now sold by Walmart, Office Depot, and Ace Hardware, as well as many online retailers. But these days, Tedeschi is a little less excited about going it alone. "You couldn't pay me to do what I did!" she exclaimed during our interview. Why? "Because it was excruciatingly painful. I was a rookie; I knew nothing. And I had to know everything about everything, make all of the right decisions at the right time, and that resulted in a lot of pressure and stress."
Three and half years after she began the process of bringing the SnapIt Screw to life, Tedeschi decided to license the idea to her distributor. And she's been breathing a lot easier ever since. A royalty rate that didn't sound very high when she started out makes a lot more sense to her now, she explained. Yes, the licensor is making most of the profits. It's also doing all the work.
Tedeschi's story illustrates some of the differences between licensing and venturing. Before you begin investing in a business, stop and ask yourself: Is this idea more suited for licensing or venturing? Neither approach is better than the other, although I would argue that licensing is a faster, easier, and cheaper route to market for most ideas developed by entrepreneurs and independent inventors.
If you choose to venture an idea and start a business, you assume all of the responsibilities and risks. For people who love to wear multiple hats and thrive on being in control, this route makes sense. Some ideas are also too complicated, too new, or too expensive for a licensor to want to take on, leaving an entrepreneur no choice but to go it alone. When I came up with the idea to change the shape of the guitar pick, I knew I couldn't license it. For one, there was no way to prevent someone from ripping me off. So I started a business with my friend Rob. I learned a lot and then I got out, because ultimately, I wasn't enjoying the day-to-day tasks of running a small business--like managing cash flow and doing inventory control. I wanted to be innovating.
Licensing a product requires significantly less time and money than venturing. To be successful at licensing, an entrepreneur must be creative and resourceful, understand manufacturing, and function as a salesman. If you focus on licensing your ideas, you will have the freedom to live and work anywhere. However, Tedeschi was right: The potential payoff is also much smaller. She's quick to acknowledge that her product ended up fetching a much higher-than-normal royalty rate because she had already done the legwork. Eight months ago, she began selling the SnapIt Screw in European markets, and plans to eventually license the idea there as well. In the end, doing both has worked out pretty wonderfully for her.
Which path is your skill set geared toward? Which path is more likely to guarantee your idea's success?