The fundamental decision facing the inventor is whether to produce and market his or her invention, or patent and license it. This decision depends largely on the personal traits of the inventor and especially his answer to the following questions:
- The inventor personality ranges from true inventor to intense entrepreneur. Where are you on this spectrum?
- Which is more important to you, money or glory?
- Do you have adequate financial resources?
- Will you be dependent on your day job to keep your living costs paid?
- Do you know manufacturing processes?
- Will you produce in the United States or Canada, or will you use an off-shore source?
There’s more to it than that, of course. But you can decide whether you should be an entrepreneur or remain an inventor if you answer those six questions honestly.
Some things to consider on each point:
1 Inventor or entrepreneur?
I’ve been studying the characteristics of true inventors for many years, and here’s how I sum up the guy or gal who comes up with two new ideas each day before breakfast. This person has a messy desk or workplace. His or her priorities are inventions, and maintaining a neat workplace is thought of as time taken away from the important work. This person has forgotten appointments in the past and will do so again. His or her cellphone is a flip top. If this person has a tablet, its glass is cracked. Work starts on a new invention before resolving the fate of the last one. He or she is sometimes late paying bills that got lost under the mess on the desk.
Now, let’s look at the true entrepreneur. He or she has an iPhone that answers question in voice. This person never forgets an appointment or is late for one. His or her desk is neat, but the person is not OCD about it. He or she is less concerned about the nature of the invention to take to market than about the thrill of having strangers purchase the product. He or she may aim to build a company for five years or so, sell out, and start again with a new product.
These are extreme examples, of course. Most of us lie somewhere between the center and the inventor end of the spectrum. But if you are closer to the inventor end than the center, you might not succeed as an entrepreneur. A start-up is a challenge, even if you are more entrepreneur than inventor. But if you are a dedicated inventor, you may find it difficult to maintain the entrepreneurial discipline that is required for success.
2 Money or glory?
I’ve asked many inventors to decide which of two alternatives they would prefer: making a lot of money, or having fame and honor. Fame and honor had the edge. When a true inventor does want money, it’s usually so that he can pursue inventing more effectively. But without an eye on profitability and cash flow, an inventor who turns entrepreneur will often find himself in financial trouble and may have to give up his dream.
The entrepreneur, on the other hand, may like a bit of glory—but he or she is more concerned about earning money and growing a business. The invention need not be his or her own; the larger concern is that it can be sold and earn a profit. Money is a way of proving the dream was valid, of keeping score, more than it is the means to buy grown-up toys and drive a luxury car.
3 Adequate financial resources?
Although this is an obvious question, many inventors and wouldbe entrepreneurs don’t form a good plan for setting up. Tooling is often the killer.
For example, one of my clients needed a plastic injection mold about the size of a file storage box. He was shocked when I told him the mold for such a part would probably cost in the neighborhood of $100,000. There was no way he could raise that much money, even from friends and relatives, due to the uncertainty of the unproven success of his invention. A start-up is a challenge, even if you are more entrepreneur than inventor.
Another inventor has been selling her product for a few years but can’t step up to the next level of production because she doesn’t have collateral to back a bank loan. Some inventors believe that the Small Business Administration will back their loan. True, they will, but you must first get approval from a bank. If the bank approves your request, the SBA will guarantee about 80 percent of the loan in case you default on paying it back. So the bank stands to lose 20 percent of its loan if you go belly up. That means that you have to have sales and show a profit. It’s Catch-22. However, some states have programs to help inventors financially. Check it out. Theoretically, angel investors are waiting for promising new products in which to invest. But most angels are sharks. That is, like the investors on Shark Tank, they want to see a sales history and know the selling-price to cost-to-produce ratio. It’s rare that an angel will finance an invention that is not yet in its production phase. With a typical utility patent costing about $10,000 today—often more—consider forgoing your patent and using this money for all of the other start-up expenses. If you have competition later, when your product is selling well, the entry of such a competitor in the market may not be detrimental. A competitor helps to popularize the product, and it often happens that both producers gain sales. And if sales are not high, you probably won’t have any competition.
4 Keep day job while starting up?
A start-up is demanding of time. Unless it is penny ante and you’re doing it for a small income on the side, you’ll almost certainly have to devote full time to getting started and building your market.
5 Manufacturing processes?
To plan your startup costs, you’ll need to become an expert in manufacturing processes. Some products can be farmed out at minimal NRE (non-recurring expense, or non-recurring engineering).Suppose you invent a product made from cloth. You purchase it from a vendor who specializes in custom- sewn items. Your vendor already has the sewing machines and hand tools needed for your job. You will still have to pay for the initial bolts of cloth, thread, special hardware, etc. But you won’t have to invest in NRE. If your invention will be made of stamped steel, your vendor already has the stamping machine (punch press). But the die-set is custom made. Tool-and-die designers and tool makers are well paid, and a die for even a small product might cost $10,000 or more— much more for a “progressive die,” which has several stages, bends the part and ejects it automatically. The sensible approach is to hire an industrial designer to select the production process and kind of tooling needed for your anticipated production volume. For most processes, there are several appropriate machines that range from labor intensive and general purpose to semi-automatic, computer driven, and even to robotics. As your volume grows, the economic machine will produce each unit a reduced cost but will require an investment in NRE. Industrial designers specialize, so be sure to find one that is experienced in manufacturing your kind of product and is capable of 3D CAD design. You might also visit the bookstore of your nearest tech college and find a good book or two on manufacturing processes.
6 Produce in the U.S. or Canada, or off-shore?
China, India and Mexico offer low labor costs relative to U.S. and Canadian factories. We’d all love to support U.S. vendors, but the market generally determines your choice. If you can’t produce at a cost that results in a price your customers will pay, you may find that off-shore manufacture is your only option.
In conclusion: Half a century ago, psychologist Abraham Maslow created a hierarchy of human needs that is often illustrated as a pyramid. At the top is selfactualization. In his book “Toward a Psychology of Being,” Maslow said: “Self-actualization is based upon the unconscious and preconscious perception of our own nature, of our own destiny, of our capacities, of our own ‘call’ in life. It insists that we be true to our inner nature, and that we do not deny it out of weakness or for advantage or for any other reason.”
Be true to your call in life. If that call is inventing, you are not likely to find fulfillment as an entrepreneur.