This bear scared me when I was little, but it made $1,000,000 per month in royalties for the inventor.
Stephen worked on it.
This is a continuation of
with , who has licensed to companies ranging from Coca-Cola and Disney to Nestle.
He was also involved with the design of both Teddy Ruxpin and Lazer Tag.
This second and final part will cover royalty rates, negotiation, and how he calls into companies to sell his concepts (including actual call scripts).
Before we get started, here are a few other resources that I have in my licensing and product design library, which really focuses on deal making and arranging revenue splits:
(Stanley Mason, like Stephen, is a specialist at tweaking/combining existing products as a lucrative shortcut to successful deals)
(Maurice Kanbar, creator of Skyy Vodka, among many others)
(stick to the licensing recommendations)
Now, back to Stephen and his approach:
-How much money does it take to license your idea? How much time does it take?
In review, I spend $100 on a
so I can legitimately claim “patent pending” status for a full year, $80 or less on a sell sheet that I have created by a graphic design college student. My third cost is the cost of making phone calls to manufacturers. So for many simple products your total costs are $200 to see if your idea has legs. Of course there are always exceptions. Some products will cost more, but you’d be surprised at how little you can spend to be “pitch ready.”
Sample Sell Sheet
-What is a typical royalty rate?
Royalty rates can range from .0001% to 25%. Royalties are usually based on the wholesale price. This is the price the manufacturer sells to the retailers for, or that they sell to a distributor for.
A very general rough way of figuring out the wholesale price of an item is to just cut the retail price in half. This doesn’t work for all industries or product categories, but it’s a nice way to get a rough estimate of what your royalty might be for your idea.
If you think your product is going to sell for $10 at a retail store. You half that, to get a wholesale price $5. Your royalty would be on this $5 wholesale price.
So why would you ever want a .0001% royalty rate? Well if your invention went of every bottle of Coca-Cola that sold worldwide. That might not be a bad royalty rate. Or if you had a software product that only aardvark researchers bought, 25% might be very fair, since the manufacturer isn’t going to sell many units.
In my experience a 5% royalty is most common for consumer goods. I usually ask for 7% and settle on 5%.
I’ve licensed many novelty products that have sold in stores for one or two years and then never sold again. That can be fun, and I wouldn’t discourage people from licensing novelties, but that’s not where I made my millions. I’ve made serious money by selling ideas that I knew could sell 100,000’s or millions of unit every year.
My advice is to pick a product area that does high unit volume. This way that 5% of the wholesale price on every unit can really add up.
To further illustrate my point, I’ll tell you a little story. I had a student that had already filed a patent when he came to us. My approach, as you know, is to use provisional patents that only cost $100, so you don’t need to spend a bunch of money in advance of selling the idea.
It was to late for this particular student. He’d already spent about $6,000 on a patent. His invention was a drum key that made tightening the thumbscrews on a drum easy, so drummers don’t have to hurt their thumbs to get their drums tuned up.
Drummers loved it. He took our
course and licensed his idea to a musical instruments manufacturer. The manufacturer was already selling another drum key and gave him an idea of how many of his drum keys they thought they would sell each year.
So he did the numbers, then realized that it would take a year just to earn back in royalties what he had spent on the patent. It was a low volume product. The lesson – pick high volume products and you’ll make much, much more money.
Six thousand a year in royalties just isn’t worth the time for me. It takes almost the same amount of energy to license a small idea as it does a big one, so why not go for the big one?
In my prior life, I worked as a product designer at Worlds Of Wonder (a now defunct toy company). I watched the inventor of Teddy Ruxpin, the talking teddy bear popular back in the late 80’s, make $1,000,000 in royalties a month!
I know that’s a long winded response to your questions about what a typical royalty rate is, but I wanted to give your readers some solid advice and examples that they can take and use when licensing their ideas.
-What should people consider when working on their first idea?
Most inventions are just slight variations of existing ideas. I’ve found it easier to sell ideas that aren’t too radically different. The easier it is for people to understand the idea, the better.
I prefer simple ideas, but I’ve worked on a few tough ones also. My Michael Jordan wall ball was super simple [a basketball hoop attached to a cut out of Michael Jordan, all of which was attached to a door]. I licensed the idea almost overnight and received royalties for ten years. It was a great product for me to start off with because it was so simple, required very little research and the manufacturing was easy. My spin label invention is much more complicated and after many years and millions of labels, I’m still working on getting it to where I want it to be.
My best advice is to make your first idea a simple one, so you can go through the whole process of selling an idea. Then work on the harder ones after you’ve gotten a little experience under your belt.
-Who do you call at companies when you try to license a new idea?
Sales guys are great, but my first choice is the marketing manager of a product line at the company that would easily understand your invention.
Avoid purchasing.
[Note from Tim: Find the manufacturers’ names by browsing the relevant categories in a department store, or online at a place like Amazon.]
For example, if you have a new comfortable grip hammer innovation, call and ask for the “marketing manager of the easy comfort grip hammer line” at Stanley. Use the product line name when you call. It’ll sound like you know exactly whom you are calling for. I think you get the idea. This is just one of many tricks I use to get into the decision makers at companies. If this doesn’t work, there are many other tricks you can use to get your idea in front of a decision maker.
[NOTE: For real scripts that Stephen has used in calling into companies, ]
-What kinds of products can someone license?
You can license almost anything. You just need a new product benefit and some IP (Patent, Copyright or Trademark). In some industries like the toy industry, you don’t even need any IP.
However, I wouldn’t recommend licensing toys. It’s too competitive. You might have to show 200 ideas before you get interest in even one. I don’t like those numbers.
I prefer to sell ideas to industries that don’t see so many new ideas each year. I’m talking about industries that don’t currently have many innovative new products. The packaging industry is one of these industries.
I licensed my spin label invention to a packaging company. They thought I was a genius. I’m not a genius. I’m just more creative than they are, and they don’t see many new ideas.
I guess my little secret tip for you to contemplate is to consider coming up with new ideas in industries that may be a little stale. You won’t have much competition and they’ll think you are brilliant. [Note from Tim: a good method for examining industries is to browse categories or departments in a store like Wal-Mart and look for products that haven’t changed in a long time, or those where most products are nearly identical.
Can you reinvigorate a commodity with a small tweak?]
-Do you have any words of advice regarding negotiating for those new to licensing ideas?
The ability to hold back information and dole it out in small intriguing bits and pieces is a critical part of my approach. It works almost every time. And more importantly, it keeps the dialog going. Once the dialog stops, the deal slows down and fizzles out.
If you keep the dialog going with a manufacturer, you’re more likely to close the deal. So don’t give them all the information up front. The manufacturer has no reason to call you back if you give them everything up front.
This is one of the biggest mistakes I see inventors make. They give up to much to soon and don’t know how to keep a dialog going with a manufacturer. [Tim’s note: Don’t oversell.
This is as true for PR as it is for licensing — the goal isn’t to sell in one call, it’s to get a second conversation or spark questions that lead towards a deal.]
Odds and Ends: Hacking Japan and Living Like a Rockstar in Tokyo
A number of you have asked me to do a “How to Live Like a Rockstar in Tokyo” post like .
Now you can get some of my top picks and tricks for Tokyo. I have a series of sidebars called “Tokyo Tips” in the debut issue of , which is out now.
It’s a gorgeous magazine and one of the best I’ve seen in the travel genre.
It should be available starting today in most bookstores.
Posted on: November 27, 2007.Share this:
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Sorry, your blog cannot share posts by email.Sarcasm: Why It Hurts Us - Science of People
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Sarcasm: Why It Hurts Us
Everyone has someone in their life—possibly a boss, colleague, friend or parent who loves sarcastic, passive aggressive, barbed modes of communication. They love to ‘tease’ and think sarcasm is well-meaning. However, new research says that sarcasm is merely thinly veiled meanness. In fact, a recent study shows that teasers usually believe their words are less hurtful than their victim thinks.
The dictionary defines Sarcasm as: “The use of irony to mock or convey contempt”
Sarcasm is a simply a way of covering contempt or hate. So, why do people adopt sarcasm in the first place?
Sarcasm happens for three reasons:
1) Insecurity
Whenever someone around me adopts a sarcastic tone I immediately try to gauge what they are feeling insecure about. For some, using sarcasm or teasing is a way of avoiding confrontation because they are afraid of asking for what they want.
Example: (Mother to Son who wants him to shave before visiting Grandma) “Wow you look like a mountain man with that beard. Your Grandma will barely recognize you.”
2) Latent Anger
Sarcasm can also be passive aggressive or as a way to assert dominance. For someone who is angry or upset, but is too afraid to bring it up will often use sarcasm as a disguised barb.
Example: (Wife to Husband after husband forgot to take out the trash) “You would think we are living like lazy trash beetles with the way this kitchen looks!”
3) Social Awkwardness
When people are not good at reading those around them, or are not sure how to carry on a conversation they will often employ sarcasm hoping it sounds playful or affectionate. This is another kind of insecurity, but you will often hear loners at parties or networking events use sarcasm as an attempt to lighten the mood or bond. Unfortunately it tends to have the opposite effect—teasees tend to rate sarcastic incidents as malicious and annoying.
Example: (Man at networking event) “This buffet spread is pretty weak, guess it mirrors this company’s portfolio, huh?”
Sarcasm is not only hurtful, it is also the least genuine mode of communication. What can you do if you have someone sarcastic in your life? First, you can try sending them this article or posting it on Facebook and see if they get the hint. If that is a little too direct, next time you are with the teaser, take what I call, the “Genuine Approach”. This is when you take everything they say as a genuine comment without the sarcastic tone.
For example, I was recently with a friend of a friend who constantly makes sarcastic comments—preventing genuine conversation. I employed the “Genuine Approach” here:
Her: “Hey I saw you on CNN the other day.”
Me: “Oh cool.”
Her: [Sarcastic Tone] “Yeah I could barely recognize you with all of that make-up on.”
Me: “Oh wow really? That’s not good at all. Do you think people in the audience didn’t know it was me? Should I email the make-up artists about it?”
At this she became flustered and said something along the lines of, “Well it’s not that I couldn’t recognize you, I mean it was, well, oh never mind.” I continued to do this throughout the night and eventually she started to have real conversation with us and make genuine comments—which we received warmly and with encouragement.
Is sarcasm ever ok? How about teasing? Some lighthearted teasing can be ok, but for the most part we should encourage genuine interaction in our communication and try to get to the heart of the person we are speaking with—what do you think they are trying to cover-up with their sarcasm?
Citations:
David Dunning, Self-Insight: Road Blocks and Detours on the Path to Knowing Thyself: (Kruger, Gordon, Kuban).
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Get the FREE course:How to piss off a Czech - Matador Network
MOST OF the things that&ll piss off a Czech are based in the harsh realities citizens experienced living under Communism. So while some of the stuff that gets them riled up might seem ridiculous, there&s a deeper meaning to it all. Even though it&s been more than 20 years since the fall of Communism, the past still affects those currently living there. You try bouncing back from having your civil rights so blatantly violated, and tell me how it goes.
My family is part Czech, and when I studied abroad in
I identified very intimately with the people I encountered. Even if you haven&t grown up in the place where your ancestors came from, stereotypes about a culture can still piss you off. I get prickly when people call me an &Eastern European Commie Lover.& That seriously makes no sense, and you are dumb. Here are some surefire ways to piss off a Czech currently living in the Czech Republic, or elsewhere.
Cut us in line.
If you see a queue forming in the Czech Republic, get on it because there&s something you really want waiting at the end of it. But don&t you dare cut a Czech in line. Yes, we&ll come home from the grocery store with 25 oranges just because they happened to be on sale at Tesco. And yes, we waited 20 minutes in line to acquire them.
During Communism, common items you might see every day were not readily found in shops, so queuing up for stuff on sale is something taken very seriously. Even holding a space for a friend in line will provoke some angry comments. And it&s just RUDE.
Assume we are depressed.
I know some places around the world have this idea that the only way a person can be happy is if they wear a perpetual smile on their face. Not Czechs. We&re pragmatic people, and don&t like to exert ourselves unnecessarily. So if we&re not smiling, we might be sad. But we also might be happy. Why don&t you ask us instead of making a stupid assumption based off our facial expressions?
Label us &Eastern European.&
We&re not. We&re Central European. The capital of Prague is further west than Vienna. Basic geography, folks.
More like this:
Call us alcoholics.
Yes, we consume more beer per capita than any other country. And yes, most of us develop a penchant for booze by the age of 15. But we really don&t drink as much as the world thinks we do. Or maybe we do, but we just hold our liquor better.
Czechs will drink you under the table, but you&ll never see a Czech boot (unlike many a weak-stomached visitor). When someone becomes unacceptably drunk, we don&t label them an alcoholic & we call them &problem drinkers.& And when beer is cheaper than bottled water, what do you expect? We&re a super relaxed country and most of that can be attributed to our alcohol consumption. Don&t you wish your culture was just as cool?
Purposely rip holes in your blue jeans.
We LOVE our blue jeans and we wear them everywhere & to the office, to fancy parties, even to award ceremonies. Any holes developed in our jeans are a result of wearing them out, not necessarily as a fashion statement. Even then, we mend them with tenderness. The reason so many of us look like we&re stuck in a 1990s time warp is because we never threw out that precious pair of jeans we bought in 1996, when Western fashion brands started buying up Czech real estate. We respect the almighty denim, and ripping it up to look cool is totally unacceptable.
Compare us to Russians.
We are not, and never have been, Russian. Look on a bloody map & blocked by Poland, the Ukraine, and Belarus, the Czech Republic isn&t anywhere close. We make marionettes, not Matryoshka dolls. We don&t wear babushkas, we have babičkas (Czech grannies). Our country is landlocked so we don&t eat herring, and we drink beer, not vodka.
We don&t know how to read Cyrillic writing, and we don&t care either. The Russian Orthodox church means nothing to us because only about 21% of the country is religious. If you need further convincing, we dislike Russians because the Soviets invaded our country with tanks in 1968, and fucked everything up. So just stop.
Read more:
Be a vegan.
We&ve JUST figured out how to incorporate vegetarian meals into our diet, and most of those dishes still include cheese or milk. If you have a picky palate, you are basically going to starve, and we won&t have any sympathy for you.
We love our breads, meats, and milks and cook everything with those products. I hope you like salad. Make sure to learn these phrases too: bez s&ra and bez ml&ka. Otherwise, demanding your meal be free of dairy or gluten products, and getting exactly what you want, is not going to happen.
Refer to our country as &Czechoslovakia.&
It&s been more than 20 years since the Czech Republic gracefully &broke up& with Slovakia. They are two different countries, with two different cultures, and two different languages. We get along just fine, but even so, start referring to us by our separate identities.
For example, Slovaks have adopted the Euro, and Czechs would rather pay for things in beer. And if you say you love &Czechoslovakian hockey& you will get punched in the face, because THEY ARE TWO DIFFERENT LEAGUES.
Order an American Budweiser.
Czechs take their beer drinking seriously. Why bother coming to the Czech Republic if you&re going to drink foreign brews? But apart from that, Czech Budweiser and American Budweiser have a sketchy history. Exportation drama and legalities surrounding rights to the Budweiser name have existed since the 1870s. Only recently has the adoption of the name Czechvar cooled things between breweries in Ceske Budejovice and Anheuser-Busch, but even so, it&s bad form to order your favorite American beer when Pilsner Urquell, Staropramen, Gambrinus, and Budvar will get you drunker, and taste better.
Think that all the men are &just a couple of WILD and CRAZY GUYS!&
Czech men are actually pretty placid. They party in their own way, and that typically involves drinking about 16 beers in a smoky pub, followed by a conversation about football or complaining about their wives. They do like to dance, but they&re not really interested in hooking up with travelers. Also, Dan Aykroyd and Steve Martin don&t know how to speak C the language they used on those SNL sketches was completely made up. BUZZ KILL, I KNOW.
Assume we all love absinthe.
We don&t even drink it. We just like taking your money. But it still pisses us off that you think we suck that shit down on the regular.
Mix up our country with Chechnya.
Oh man, seriously? Not only did the world create social media diarrhea by spouting out all sorts of rumors associated with the Boston Marathon bombers, but a gagillion people
for producing the suspects. You have not only insulted a nation known for its pacifism, you have also insulted your own intelligence.
Understand that Czechs are too busy watching downloaded copies of The Big Bang Theory and smoking reefer at underground clubs to plan a terrorist attack. Open Google Maps on your iPhone, type in Czechoslovakia, and tell us what comes up.
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