Should I Manufacture or License My Product or Invention?

During a recent meeting at my local Inventors Association (InventorsAllianceinNorthernCalifornia) I noticed that a common question brought up was about the differences between manufacturing and licensing a product, with people being confused about what these terms meant and wanting to learn more about the factors to consider when looking into their own situations and options.  In response to those questions, here's some basic information on both and some things to think about.

Let's start with Manufacturing.  Manufacturing is the process by which an Inventor dos it all - designs, develops, sells and markets their product. They are responsible for taking a product idea and bringing it to market and creating an entire business venture around this product idea.   If you decide to take this on, keep in mind you'll need to also take on all the other facets of a business - you'll be responsible for product development, packaging, marketing, selling and much more.

On the other hand, Licensing is when you ‘rent' your product idea to an interested company who will do all of that other work for you.  They'll deal with product development, packaging, marketing and selling for your product idea.  They get a new product to market, and you get a check for every unit sold.

Why would a company agree to license a product idea?

Quite simply, large product companies need innovation in order to stay competitive in their marketplace.  They'll have an efficient manufacturing process in place already, as well as excellent sales distribution channels for current products.  They just need to make sure they have a steady supply of new ideas so put through those channels. That's where you come in - your ideas fee into their existing business model and you both benefit.

So which is the right approach for your product idea?

AndrewKrauss (President of Inventors Alliance) said it beautifully that day when he explained that making the decision of either manufacturing vs licensing your product idea really has a lot to do with your personality.

Some people would only want to go the manufacturing route because they can't stand the idea of someone else having fun with their idea and bringing it to life. They want to see it through from start to finish and make sure their idea blooms the way they envisaged it. They also may not come up with huge numbers of ideas, so they have the time to invest in the ideas they do have.

Other people are just constant idea generators - always coming up with solutions to everyday problems.  Ideas just flow out of them.  This means however that these Inventors couldn't possibly manufacture each and every one of their ideas themselves - there's not enough hours in the day.

You'll need to think about your creative style, and how you like to work, and then decide for yourself what makes sense for you. Do you have the energy to take on a project from start to finish? Or does the thought of starting a business and developing a product idea completely uninspire you? Do you have the money to get started? Or are you short on cash and need a company to do all of the work for you?

Luckily, you don't have to chose and then stick to one option. You can try both manufacturing and licensing and see what works for you. I've met many inventors who tried Licensing and then didn't get anywhere, so they switched to Manufacturing. Conversely,  I've met many Inventors who start with Manufacturing and then switched to Licensing because the project was too overwhelming to continue. That's the beauty of the invention business - you just have to keep trying until something happens.

My goal has been to provide you basic information about licensing vs. manufacturing so that you can decide which action steps to take.  And ultimately, taking action is the only way for anyone to succeed in the business of inventing.  So my advice to you is to just take action - you could be the next million dollar inventor success story!