Powerful Partners

Here's The Deal

Private-label agreements work for all types of inventors. But to succeed, you must find a company with a product line complementary to yours. Keep in mind that you don't want a private-label agreement with a company that already sells a competing product. Another consideration: Does that company sell to your target market? You should evaluate your potential partner by both size and breadth. Searcy wanted to partner with a company that had a strong presence in major discount and building-supply stores because they presented the largest potential volume for her product.

Searcy got her first lead while attending a how-to fair hosted by popular West Coast hardware retailer Orchard Supply Hardware. Her lead came when she met Hal Wrigley, president of Applied Concepts, located in Warrendale Pennsylvania, who private-labels a line of rubber grips to Sears. Searcy showed Wrigley her product, and got the name of the president of the ladder company that she's now negotiating with.

As Searcy found out, trade shows are an entrepreneur's best bet for meeting the right contacts. The best way to get started is by asking a company rep the following:

  • Do you know of any companies that sell products on a private-label basis?
  • Do you have any key contacts at those companies?
  • What do you think of my product, and do you think it could sell?
  • Can I use your name as a referral when I call to introduce myself

If you can, try to talk to a someone at one of the companies private-labeling products, rather than going through a middlemen. If the person at the company likes your idea, ask if they'll set up a meeting with decision-making executives at the company.

Private-labeling typically constitutes a "win-win" proposition for both parties. The big drawback for the inventor is that he or she must take a lower margin. That's usually offset in two ways: first, because they won't have sales and marketing expenses, and second, because manufacturing costs typically drop by at least 10 percent once production quantities increase. Private-labeling just might be your ticket to success if you don't have the resources to get your product on the shelves of major chains. Instead of getting discouraged if your sales are low, seek out a private-label partner with the resources to shoot your sales to the next level and beyond.

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This article was originally published in the April 2000 print edition of Entrepreneur with the headline: Powerful Partners.

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