Jump Start a Licensing Deal with a Service Business

Often inventors run into stiff resistance while trying to license their idea because they can’t prove the product will sell. Selling the product in the market can be an expensive proposition: you need to have an inventory, a marketing campaign and you need to build up a distribution network. But you can also prove that your product will sell for a lot less money by starting a service business, or by getting a service business to carry your product and sell it successfully. This approach works especially well for products that are either are too complicated to explain, or too complicated for most people to use. As an example, let’s say you invent a machine that gets rid of pests in backyards and keeps them out. Consumers would have no reason to purchase one of these machines if they cost more than a few hundred dollars. If the product does its job, it may only need to be used once every five years and making a large purchase for a product you use only once in five years doesn’t make a lot of sense. Instead, if there was a company that owned the machine and provided a service once every five years, that makes much more sense. There are other opportunities to sell products like these, like selling to other service businesses. So what kinds of products are well suited for service businesses?

{Don Debelak’s new book, Turning Your Invention into Cash is now available on Amazon for $3.49. Go to Amazon.com and enter inventions Don Debelak to purchase. From the author of Entrepreneur Magazine’s Bringing Your Product to Market.}

The products that work the best for service businesses provide a service that people recognize they need and search for it; it should fit in the categories of the yellow pages so people will look for you and find you. For instance, in the example we used above, people with pest problems know they need a pest treatment and can use the yellow pages or the Internet to find appropriate businesses. The appeal can be limited or mass, just as long people search for your product/service business.

On the other hand, if your product provides a service that people don’t know they need, you will spend large amounts of money on advertising telling people that they need your service. In these cases, you are better off selling to other service businesses. For instance if you have a product that better protects driveways from different weather conditions, people don’t know that they could protect their driveways and won’t look for your service. But if you sold your product to a company that resurfaces driveways, they could offer the service to customers that are resurfacing their driveways. The driveway resurfacing company would probably have more success selling that service than you could as a separate company.

Selling a service instead of a product also works well when you have a product that is difficult for customers to understand, as long as the benefit of your product is easy to grasp. Many consumers won’t buy a product, or will be very slow to adopt a product, that is difficult to understand or difficult to use. As long as your product gives the desired result, you don’t need to worry about this. Also, many consumers are hesitant to try a product that is vastly different from competing products, but again, by providing a service, you will not face this resistance.

Finally, service businesses are also well suited for products that are very expensive. Customers are very hesitant to buy a product for even several hundred dollars, but with a service business you are not limited in the price range of your product since you are just using your product to provide a service. As long as you can recover your investment in the development and manufacturing of your product, your product can cost as little as 1 dollar or as much as millions of dollars.

Starting a service business is in many ways like selling a new product, but instead of selling the product, you are selling the results of your product. But that doesn’t mean you need to downplay your invention, in fact it can be your biggest selling point. Phrases like, “Using a new, patented technology, we can…” can help your business have an edge over existing service businesses in the same market.

Once you have success with service businesses you will be in a much better position to license the idea, or you might find you are doing so well with the product itself, that you can just keep selling to service businesses and possible set up your own franchise system.

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