I had the pleasure of taking part of Inc.com’s Facebook chat. It was interesting that a lot of people had the same questions. The main theme was how do you start a business with little or no money? More precisely, it was “I have a big idea that takes a lot of money . . . and I have none.”
It is difficult when you think you have something revolutionary but no funds to bring it together. I have talked about getting funding for your business previously. But sometimes things need to be put in place before you can even get to that point.
Patents . . . To have or not to have?
One thing that I noticed is that a lot of people felt that they had patentable ideas. A patent is a specific termed used to describe a “right” granted by the government to exclude others from an invention. An invention is a solution to a specific technological problem and is a product or a process. My first question is, do you have something that is patentable? Many people think that they do. However the patent process is long and expensive. You have to be willing to put the time and money into getting things done right. I really liked this explanation from WikiHow http://www.wikihow.com/Patent-an-Invention. It was a good basic breakdown of the patent process and what to expect.
You also need to think about whether or not it is marketable. Some inventions need other products for it to work. Have you determined whether the product could be used independent of a secondary product? If not, how will you sell it? If you cannot figure how you will sell it . . . or to whom, then maybe you should not obtain a patent.
If you do not have the money to patent your product, then you may need to think about something else. If you are not in a financially sound place to get your product patented, then you should wait and take the time until you have saved enough money for you to do so.
Twenty Grand later . . .
So now that you have spent your life savings on getting your product patented. You may consider how to get it developed. If you have spent all of your money on the patenting process, you now need to raise money for the development. Many people consider licensing their product.
It is a great concept if you can get it done. When licensing, you give another company or individual the right to develop the product and you will receive royalties from the sale of the product. The average royalty rate is about 5% of the wholesale price. The problem with licensing that some people have, is the lack of control. You will have little if any say so on how the product develops and its final outcome.
If you have the need to control the development, licensing may not be the best option for you. You do not necessarily need the prototype in hand in order to move forward with licensing. However, you still need to market the idea to potential buyers. Therefore, you need to understand your product inside and out in order to convince companies to take your product on.
Before you give up . . .
If all of this sounds like a reason not to do this, do not be discouraged. There is a reason this path is difficult and expensive. It is not for everyone. Having a great idea for a product and no money does not mean that you cannot move forward with your idea. It just means that you need to take the time to acquire the resources to protect yourself and your product. Do not be fooled by the cheap options out there. Provisional patents while useful, are temporary. That means that eventually you need to come up with the funds to successfully bring your product to the market.
Shahara Wright is an experienced and highly sought after business law attorney and business strategist. She is the author of From Entrepreneur to CEO and host of the CEO Collaboration Circle. Shahara founded The CEO Effect, LLC to work with small business owners who want to implement strategy to build capacity.