In this article I’ll talk about how to sell an idea to a company. I just want to provide you with a disclaimer upfront: it’s not easy, and sometimes it’s best to have a professional invention company work on your behalf (that’s why I offer a free invention kit on the right to budding inventors to help them professionalize their offering).
Ok, so now that you know it’s not a walk in the park, let’s get on with it. Like most things that lead to success, it’s best to follow a methodical approach.
1. Is it unique or protectable?
Firstly, let’s distinguish between an’ idea’ and an ‘invention’.
If the idea that you want to sell to a company is a new feature for a website, a better way for an existing product to function, or a scenario for an advertisement, it clearly falls into the ‘idea’ space. This means that it may not be patentable or protectable. In saying that, have a look at our feature on patenting an idea. Much of the time you may not wish to spend too much money on protecting it if you come to the conclusion that it is not something that can effectively be patented or protected in some form.
If your idea is a new kind of product, a new process or a new technology, then it falls into the ‘invention’ space. This means that you may need to consider protecting it in the form of a patent. The first place to start is doing a free patent search. You can then look at doing a provisional patent application and going down a process to protect it before you try and sell it to a company.
2. The Market
The next step would be to get a better understanding of the market for your idea or innovation. Do some research online to see what else is out there (you may have done this already), go to shops in a similar space and speak to sales consultants, or just consult with family, friends or co-workers about your idea.
Talk to people. Sometimes it’s best to be open about things and not too cagey, but you can judge for yourself. See what the feedback is for your idea.
This market research will be really valuable and can help you tweak your idea, or provide you with some questions that need answers, or give you the boost you need to take your idea to a company. Sometimes it will open up new ideas in your mind, or someone will suggest something seemingly obvious that you didn’t think of. Be psychologically prepared: your idea may be criticized or put down. Listen to the criticism, but in the end it’s up to you whether to dismiss it or to incorporate some of the feedback into your idea.
Also try and find out the potential size of the market for your idea. If it’s a niche market, try work out how big it is. Is it a product that could only work in the USA, or does it have potential to go international? Is it limited to one category, or could it be expanded into new ones? In doing this research, be realistic. Don’t assume that since the market you are targeting is a billion-dollar market, that you’ve suddenly got a billion dollar idea, or that it will be easy to capture even 1% of that market. Do your sums.
3. Sourcing and Manufacturing
If your idea is a tangible ‘real-world’ product, then it is going to have to be produced. Before you step into potentially difficult meetings with the companies to whom you will be trying to sell the idea, it will really help for you to be prepared. Research how your product is made, what materials are used, what processes are involved. What are the costs of the raw materials, and where are they sourced? Is your product something that could be manufactured locally, or will it need to be manufactured in China? Obvious questions but you’ll be surprised how often this is overlooked. If you can, do some kind of cost analysis based on quantities of production, and quantities of scale. When you do finally step into the meeting, you’ll be well prepared to answer some of the questions the may have. It will also place you in a much better negotiating position,
And don’t worry too much if you don’t have ‘perfect’ information (the company you are selling the idea to will probably have much more market data than you), but have enough information at your disposal so that it’s obvious you have done your homework.
4. Research the Right Companies
The web is your best friend here. You’ll be able to find, through Google searches most likely, target companies. Search for products in your idea’s niche, and see who manufactures them. Try find out who the parent company is of one of the companies you are researching, see how the companies are connected, and look out for who heads product development, research, or strategy. Go onto LinkedIn and see if you have any connections to these people. If not, just phone the company up and ask who is the person responsible for new ideas and development, and you’ll often be directed to the right person that way.
It is very important that you are well-prepared for your meeting. Be sure to have some kind of presentation, whether it be Powerpoint slides, or designs that you hand out, or even a prototype. The more tangible you can show your idea, the more likely you are to sell your idea to a company . Watch Shark Tank on Youtube to see which presentation techniques work and which don’t.
Be prepared to be rejected 9 times out of 10. Don’t walk into the first meeting thinking you are going to walk out a millionaire. It is going to take a lot of hard work and persistence to making this idea work for you.
If you’ve got to the point where a company is interested in buying your idea, you will need to have an idea of what kind of compensation you are looking for. This is probably a good point to bring in a lawyer or a invention advisory company to help you out, but generally your two options are:
a. An upfront one-off payment: here you will get a once-off fee for your idea. In some cases, if you are offered this, grab it. In others you may wish to be a but more pushy in getting a better longer lasting deal.
b. Royalties: sometimes this can be the best deal. You get a percentage (either for life or for a period of time), often a very low percentage such as 1-3%, of the wholesale price of each unit.
Other factors you will need to consider is that the purchasing company often wants some kind of exclusivity over your idea locally or globally.
How to Sell an Idea to a Company: Conclusion
This very broad and brief overview should give you some idea of how to sell an idea to a company. I recommend you also consider the invention kit on the right hand side, which will provide you with further information.