What’s Your Million-Dollar Idea? How to Invent Products Without Risking Your Savings
Patenting, producing and marketing a product can eat your life savings, and most patents never make money, so it's understandable that many ideas never make it beyond a notebook. But guess what? You can be a part-time, low-risk inventor and still have a shot at a million-dollar payday.
Taking low-risk gambles can pay off big time, suggests philosopher and hedge fund manager Nassim Taleb in The Black Swan. He uses writing as an example, because even though most books fail, the risk is minimal, and every now and then a book that's no better than a thousand others becomes a bestseller. Risking little to nothing means you can stay in the game longer, increasing the odds of a life-changing positive event happening.
Let's look at how to apply this to inventing things part time (no need to risk quitting your job). Here are a few ways to invest little or nothing in the process, while still maintaining the possibility of making a lot of money.
Develop Inexpensive inventions
Some inventions take millions to develop. Even inventing "body-shaping" underwear can be expensive: Sara Blakely invested her life savings in Spanx. Yes, she became a billionaire as a result, but the odds of any one of your ideas succeeding are slim, and how many times can you lose your life savings? Keeping your personal investment and your expenses low lets you stay in the game to wait for your home run.
Generating ideas is easy (more on that in a moment), so just keep at it until you have some that can be developed cheaply. For example, I made a disposable lightweight (4-ounce) insulated vest that I wore to the top of 20,600-foot, glacier-covered Mount Chimborazo in Ecuador. I never tried to sell the idea, but it cost me just $3 to create the vest. How many $3 inventions can you afford to gamble on, versus $30,000 inventions?
Gary Dahl's "pet rock" was a stone sold in a plain-looking box on a bed of hay. Who couldn't afford to make that prototype? It's estimated that the pet rock made $15 million in profit for Dahl in just the first six months.
Get Others to Fund Your Ideas
In the past, inventors often hit up friends and family for money or convinced investors to provide capital for a share of profits. Those might be viable options, but they have their own risks, like losing friends. Fortunately, we now have crowdfunding.
On crowdfunding platforms like Kickstarter and Indiegogo, people help you out if they like your idea, and get small rewards. Do these sites work? PowerUp Toys raised over a million dollars this way to launch a smartphone-controlled paper airplane conversion kit. Some sites are becoming investment platforms now as well, where you give shares in your business in exchange for capital.
Another option is Quirky, a hybrid lab and crowdsourcing platform. According to a Business Insider profile, Quirky receives thousands of idea submissions each month, and has a meeting every week to select which should be developed in their prototype studio. They pay the person who had the idea a lifetime royalty on sales if the product makes it to market. All through the process, other site users comment and vote on the ideas.
You have to be a member to submit ideas, but membership is free. How much potential is there in this new business model? Founder Ben Kaufman told Business Insider that the member who invented a bendable power strip called "Pivot Power" has received $500,000 in royalties so far.
Rent Your Ideas
If you have a well-developed idea and don't want the risk of making and marketing the product, you can let someone else do the hard part while you earn a royalty on each sale. Licensing specialist Claudia Doege explains:
Licensing is the renting of an idea, and the creator gets paid royalties while keeping ownership of the rights to the product or idea. The creator is not limited to the number of markets or manufacturers he/she can license to, and has none of the hassles or overhead that a small business owner does.
If your invention isn't patented, a potential licensee first signs a non-disclosure agreement and then takes a look at your idea to decide whether or not to develop and market it. Doege suggest using an agent, who will typically take 50% of what you make. That sounds like a lot, but an agent will negotiate a better royalty rate and normally has contacts in your product’s industry. You can often find agents with a quick online search, but Doege suggests trying trade shows and magazines that are part of your target industry.
The great thing about licensing a product is that once your work is done, you can keep getting checks for years to come. Harvey Reese, author of How to License Your Million Dollar Idea, invented those antlers that people put on their pets at Christmas more than 20 years ago, and he says he still gets royalties. (Like this idea? Click to tweet it!)
Bootstrap Your Way
Bootstrapping refers to using what you have and building from there. For an example, let's consider the foam cat door I invented for our slider to the patio, so our cats could come and go without us losing much air conditioning or heat. It cost me $12 to make, and could be made for as little as $4 in volume.
Now, if I wanted to make money with my invention I might start by making and selling a few. I could parlay the profits into making and selling more, and then use those additional profits to pay the Patent Office $70 for a provisional patent.
That fee would buy me "patent pending" status that protects my idea for a year. During those 12 months, I could make and sell enough of my cat doors to pay for the rest of the patent process, or shop for a licensing deal.
The idea is that you never risk much at all if each step comes from the income generated by the steps before it. Obviously this bootstrap process works best if you start with something that costs very little to manufacture.
How to Generate Ideas
You can find more than one free book on how to generate new ideas online and, once you know just a few techniques, coming up with invention ideas is the easiest part of the whole process. Here are some basic techniques you can use right now to generate dozens of ideas:
- Combine Ideas (vacuum + bug control = motion-activated bug vacuum device)
- Find New Applications (books become hollowed-out hiding places for valuables)
- Find Problems to Solve (sore feet led to "Foot Petals," a million-dollar business)
- Challenge Assumptions ("bicycles need leg power" becomes a bike you row like a boat)
Okay, so you know how to generate ideas, you can select the ones that will cost very little to develop, and you can license your new product to avoid any major investment. Maybe it's time to start working toward that million-dollar idea.
Your Turn: Have you invented anything and taken it beyond notes and diagrams on paper? Do you want to?