Business

Should You Manufacture and Sell Your Product or License It?

One of the most difficult questions for a budding inventor to answer is whether or not to manufacture and sell a product yourself or license it for sale through another company. Most inventors, especially ones who are on their first inventions, get emotionally attached to their products and can’t imagine not taking them across the finish line to wild success on their own. Both paths have merit but are very different.

Manufacturing and Selling

Costs associated with manufacturing and selling your own product can be significant, especially if you don’t have an existing business yet. On the plus side, though, if you pursue manufacturing and selling on your own, you will reap the rewards of a successful product well after you’ve recovered your startup costs. To pursue this path, you’ll likely want to look into contract machining. You’ll also want to make sure you research the longer-term running costs of supporting the product through its lifecycle.

Licensing Your Product

If you choose to license your product for sale through another company, you can avoid all startup costs past initial design, product prototyping and possibly initial retail package prototyping. The price of this cost avoidance is losing the opportunity to reap greater rewards from a successful product. Most product licensure deals will only bring you 2-5% in royalty fees. Whether or not the tradeoff is worth it depends upon how much more exposure and channel access your partner company brings for your product. If your partner company is likely to increase the product’s sales to the point where it becomes financially beneficial to you to license your product, this could be the way to go.

Whether you decide to manufacture and sell on your own or license your product, it is always exciting to see your idea turned into reality and available for sale.

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