You’ve made the calls, you’ve put in the work, and you’re finally being rewarded! A company is interested in licensing your product and it’s time to talk money. But, how do you do it? Asking for money, as we all know, can be uncomfortable and challenging. But beyond establishing royalty rates and minimum guarantees, I want to encourage you to ask for an advance. Here’s how.
Let’s be real: you’ve put in a ton of time and effort into your idea. You need some money up front. Most companies don’t like to top-load a deal, but there are several reasonable and mutually beneficial propositions that can be made. If a company is completely unwilling to discuss any options, that’s a pretty strong sign you may have some problems down the line. But in reality, there are ways of doing so that make sense and encourage trust. Should you ask for a random amount, like twenty or thirty thousand dollars? No.
What you should do is make clear you’ve invested time and money into protecting your product, insuring that the company that licenses it will have exclusivity on the marketplace. Ask them to pay the cost of the patents you’ve been issued and the intellectual property that you’ll need to pay for in the future. They’re not buying your patents, but they’re helping pay for the protection of an idea they’re ultimately going to benefit from. It makes sense. Give them a specific invoice for the cost of your patents. If they’re not willing to pay for old patents, ask them to cover future ones (or vice versa). They’re going to appreciate your honesty and straightforwardness. Consider capping this arrangement after a specific number of years, so the company isn’t wary of potentially paying for patent after patent.
If the company still isn’t sold on the idea, try this last proposition: offer to deduct the cost of paying for your patents from future royalties. You need some income now; this offer makes this truth very clear! And hard to argue with.
And finally, don’t ask for an advance over e-mail. Use the phone and follow up with specifics in an e-mail after. Good luck!
Stephen Key is a successful award-winning inventor who has licensed
over 20 products in the past 30 years. Along with business partner
Andrew Krauss, Stephen runs inventRight,
a company dedicated to educating inventors about selling their ideas
and the skills needed to succeed. You can listen to the weekly radio show on inventing. Get In The News, list your invention to have media outlets find you for news stories.