License an Invention to a Retailer

Retailers

Once you have created your invention, the next thought is obviously “How can I capitalize on it?” One time-tested way of doing this is licensing your invention to a retailer who will bring it to paying customers. Retailers can be anyone with the ability to reach your market, whether it’s Wal-Mart, Target, Home Depot, or even an Internet website. The idea is that you will be cutting them in on the profits from the sales they make possible. However, there are a few things you should know about this approach before you dive into it. In this article, we will touch upon the most important considerations.

The first think to keep in mind is the notion of “inventory available.” Generally, successful retailers will want to know that you can supply them with enough inventory to handle a large volume of sales. This is simply part of the planning process that retailers engage in, especially catalogs. Therefore, you should have some type of strategy for addressing this before you go trying to license your invention to a retailer. Do you have the facilities and equipment to mass-produce your invention? Do you need to hire staff? If you are not sure what your capabilities are, ask the retailer in question what their inventory available requirements are. This will give you an indication of what you will need to do to produce enough inventory.

Another term you should get familiar with is the purchase order. About.com defines a purchase order as such:

“A written sales contract between buyer and seller detailing the exact merchandise or services to be rendered from a single vendor. It will specify payment terms, delivery dates, item identification, quantities, shipping terms and all other obligations and conditions.

Purchase orders are generally preprinted, numbered documents generated by the retailer’s financial management system which shows that purchase details have been recorded and payment will be made.”

The basic idea is that the retailer you license your invention to will be sending you purchase orders which say how much product they are buying from you at that time. It will be crucial for you to store and file these records in an efficient way, as they will over time contain almost all of your financial history with that retailer.

Another all too important aspect of licensing an invention to a retailer is the terms of payment. There are four main terms that are common today: net 30, net 60, net 90, and net 120. However, many retailers are known for using other, more creative terms of payment. Wikipedia offers some helpful hints that will help you clear up the confusion.

“Net 30 is a trade credit which specifies payment is expected to be received in full 30 days after the goods are delivered. Net 30 terms are often coupled with a credit for early payment; e.g. the notation “2% 10, net 30″ indicates that a 2% discount is provided if payment is received within 10 days of the delivery of goods, and that full payment is expected within 30 days.

 

For example, if “$1000 2/10 net 30″ is written on a bill, the buyer can take a 2% discount ($1000 x .02 = $20) and make a payment of $980 within 10 days, …

If credit terms of “2/10, net 30″ are offered, the approximate cost of not taking the discount and paying at the end of the credit period would be as follow:

[2/(100-2)]*[365/(30-10)]=0.3724 in percentage = 37.24%”

Obviously, you as the licensor will want to secure the timeliest payment terms possible; most likely, this means Net 30. However, you should be warned that not every retailer will go along with this. The bigger the retailer is, the more clout they have in compelling you to accept their terms. One way around this is to start by licensing your invention to smaller retailers, building a successful track record that you can use as leverage when it comes time to negotiate payment terms with larger retailers. Either way, you want to try and negotiate as hard as possible for payment terms that benefit you.

Another way to license your invention to a retailer is to go through what are known as “reps.” Although reps are somewhat less commonly used today than in the past, they still have a large role to play. Reps are people who are on good terms with the buyers at various retailers and who convince those buyers to stock certain products. If the buyer’s store does stock those products, the rep gets a kickback from the product manufacturer for getting them into the store. While you might balk at the idea of paying someone to get you in the door, it may be worth investigating. Sometimes all it takes is an introduction to get the deal done.

Keep these tips in mind and you should find that licensing your invention to a retailer makes more sense than it did before.

Eric Corl is the President of Idea Buyer LLC, a new product development company that owns and operates IdeaBuyer.com- The Online Marketplace for Intellectual Property. The site gives inventors the opportunity to showcase their intellectual property to consumer product companies, entrepreneurs, retailers, and manufacturers. You can email him at EricCorl@IdeaBuyer.com.

3 Responses to “License an Invention to a Retailer”

  1. Slavica Nedic Says:

    I would like to know how to licence and how much would cost several pairs shoes incorporated with my invention,acupressure foot massager.My husband ,who is an mwechanical engineer,and I have made a prototype of our invention(insol-acupressure foot massager),and did a lot of researches in last three years.It works wery well and helps with many foot and other ailements.There is no similar things on nowadays market.I hope you will contact us soon.Thank you in advance.
    Best regards!
    Slavica Nedic

  2. William Jacquart Says:

    I’m looking for someone to market my new invention design for a pump up tent that includes an air matress. It will pump up and deflate with a 2 way solar powered air pump. The design will be easy to make, is dumby proof for setting up, and could save lives of campers caught in floods. I’m anxiously waiting for the provisional patent which I mailed in about 3 weeks ago.

  3. yosef Says:

    Iam designer and I’m processing ideas. I am researching on futuristic vehicles.
    I invented a system to recharge batteries I have. The system pressure of the weight of the car uses to generate electricity. push anything into the engine does not. and not the same in the world. and can always charge the electric car does. I ready to cooperate more If I ask’
    and
    I’ve invented a system that can recharge the vehicle kinetic energy of lithium ion Batryhayy use.
    In this way the desire Kordan (shaft) that the kinetic power of the engine to the wheels as a generator Kndkhvd pass electrical current acts.. with minimal losses and reduced efficiency. and this is much better than previous systems. I want to invent in your country I would register. Venice, if you desire to produce work I would sell points. If you require further details will be sent.tanks

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