Smart Answers August 17, 2010, 10:21AM EST

License or Sell Your New Product

Many companies don't consider submissions, but you can research professional advisers and cheaper options to try to get your invention in front of decision-makers

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I have a registered trademark for my product. I am looking to match it with a certain type of company but not having much luck on my own. What kind of professional can I hire to help match me with the right business? —N.B., Rockwood, Me.

As you've found, it's not easy for an entrepreneur to approach a large company about buying or licensing a new product. Corporations worry that if they look at your product, but pass because they already have something similar in development, you will sue them later. Most big companies invest in their own researchers who are constantly tweaking existing products and working on new ones.

Meeting with entrepreneurs can be a waste of time for these businesses when, realistically, very few new product ideas are commercially viable, fit well into existing product lines, and can be manufactured and distributed profitably. For these reasons, many companies simply refuse to entertain product submissions.

There are ways to identify those companies that might look at your product, however, and specific things you can do to help your case. You've already taken a big step forward by getting intellectual-property protection. If you can construct a sophisticated prototype, conduct market tests, and get excellent feedback from end users, that will also help.

There are professionals who assist fledgling companies with market research, business planning, and new product development. However, they're not always easy to find and most definitely are not cheap. You also run the risk of unwittingly hiring an unscrupulous company that will praise your new product profusely, tell you that it has excellent market potential, and then charge you an exorbitant amount (as much as $20,000) for a useless report that won't get your product on store shelves. Advice for avoiding such scammers is available from this page on the U.S.Patent & Trade Office website, and from this page on the Federal Trade Commission's site.

New Product Pros

With the caveat that you thoroughly vet and research any professional you consider hiring, you may want to consider working with a new product development company, a marketing agency, and/or a business planning consultant.

A new product developer shepherds a product from concept to eventual licensing or sale. These individuals are highly specialized and usually have spent many years as industry insiders. They can spot marketable innovations, help you find prototypers or manufacturers, make contacts for you with corporate executives, and refer you to attorneys and investors. They usually charge an hourly rate of at least $100, and they may have to work with you for several months, depending on how far along you are, says William B. Simon, vice-president and COO of the Center for Emerging Technologies, a business incubator based in St. Louis.

A market research firm will thoroughly explore the potential market for your new product and evaluate its worldwide competition. Most companies that specialize in this work will not take on a project for less than $5,000, Simon says, and some charge up to $50,000 for research on products like new pharmaceuticals. You can undertake do-it-yourself market research online and by visiting trade shows and stores and writing down who sells similar products, who manufactures and distributes them, what they sell for, how they compare to your product, and whether they are national or regional sellers. You will also want to dig for details such as the overall size of the market, the typical margins in the industry, and standard royalty rates, Simon says. "Most licensees pay 1 percent to 2 percent or maybe up in the 7-percent-to-8-percent range," he says.