Play Your Cards Right

URL: http://www.entrepreneur.com/article/59826

The entrepreneur: James Tiscione, 49, and Anthony Tiscione, 79, founders of ACM Enterprises in Tucson, Arizona

Product description: The Auto Card Manager (ACM), a thin metal case that holds a driver's license and up to five credit cards. When users push one of the six buttons on the case, the selected credit card is dispensed.

Start-up: $50,000 in 2000 and 2001, to pay for the first production run of 25,000 units

Sales: $1.8 million in 2002

The challenge: bringing a new product to market with a limited marketing budget

James Tiscione didn't have a lot of money when he launched his business, but that didn't stop him from finding a way to bring his unusual product to market. Here are the steps he followed:

Steps to Success
1. Obtain a patent. Tiscione started by visiting www.uspto.gov, the official Web site of the U.S. Patent and Trademark Office, to look for similar patents. "I looked at over 1,000 patents and found only two that were even remotely similar to mine," he says. "Only after completing the search did I go to a patent attorney." Doing some research on his own did more than just save Tiscione money: "I was trying to hedge my bets before investing dollars in attorney fees, engineering design and prototypes. I also wanted to see what other ideas were out there. I was surprised no one else ever had the idea." Before long, Tiscione applied for a provisional patent, which doesn't give inventors patent protection, but does allow them to show their ideas to people. "It is an inexpensive way of protection that allows inventors one year for research and development," Tiscione says. In 2001, he applied for his utility patent.

2. Decide what help you need. Because Tiscione had never developed a product before, he felt he lacked the experience he needed to launch the idea. He asked his father, Anthony, an inventor, for help in finalizing his product design. Tiscione also approached Steve Pagac, a marketing whiz who owned a real estate and investment firm. Says Tiscione, "Steve invested sweat equity in our venture, and he is responsible for lining up all our customers."

3. Make a prototype. Tiscione knew people wouldn't understand the ACM without trying it, so he made a prototype. Tiscione ended up choosing a prototype supplier in California. Once he began using the prototype, people started asking where they could buy one. The positive feedback played a major role in moving the business ahead.

4. Locate a production source. Tiscione's first stop was the Hong Kong Chamber of Commerce, which has an office in San Francisco. "They sent me a list of companies I e-mailed," he says. He narrowed it down to one-but only signed the final agreement after visiting the company several times and viewing a few trial production pieces.

5. Explore all possibilities to find distribution outlets. Tiscione and Pagac weren't sure which retailers would want to buy their product, so they started by approaching catalogs and stores such as Brookstone, The Sharper Image and Things Remembered. "While the stores didn't bite, one promotional company did-AMG of Plymouth, Wisconsin," Tiscione says. "AMG signed an exclusive agreement with us for the promotional products market in 2001."

Tiscione and Pagac also approached SkyMall, a specialty retailer that produces a cost-sharing catalog targeting in-flight airline passengers. "After two quarters ending in September," says Tiscione, "SkyMall reported that the ACM was the No. 1- selling product in [the catalog], and they agreed to carry the product through March."

Tiscione and Pagac also contacted MJ Media, a TV marketer in Phoenix that signed a nonexclusive agreement to sell the ACM through TV ads. "We revamped our original agreement with MJ Media to include a broader base of distribution," Tiscione says. "Originally, the contract was for TV advertising only. Since then, MJ Media has expanded into Internet sales and master distribution to small distributors." Now, Tiscione has a broad range of customers selling his products. As a bonus, Taylor Gifts, a major consumer catalog, picked up the ACM for the 2002 Christmas season.

6. Sign deals that maximize marketing exposure but limit financial risk. Advertising and marketing expenses can kill a product-but Tiscione avoided these expenses by signing contracts with limited risk. Both AMG and MJ Media signed agreements to purchase the product from ACM and promote it themselves. Also, Tiscione's deal with SkyMall was cooperative. Tiscione paid nothing to be listed in SkyMall, but all the sales went to SkyMall up to a certain sales level. Once that level was reached, sales were split equally between SkyMall and ACM. At press time, ACM switched to a standard contract, which requires them to pay for the ad but allows them to retain all sales.

Lessons Learned
1. Unique and novel products fare better. Inventors face challenges when launching their products because retailers, distributors and catalogs don't like one-product companies. But the reality is, people in any market are always looking for new and interesting products, and inventors will usually find sellers if their products are unique. But remember, developing a product that's simply an improvement on existing products usually isn't enough to overcome market resistance.

2. You don't need as much money as you think. It seems as if products with broad appeal require cash outlays that most inventors can't afford. But don't let that deter you. If you proceed cautiously, one step at a time, you should be able to get your product developed far enough to either attract outside investors or get help from companies anxious to introduce your product. If you can't get help, it's probably a sign you should reconsider whether your product is truly novel.

3. Sweat equity doesn't mean you need to quit your job. No matter how great an idea is, there is still considerable risk in successfully introducing it. The good news is that many of the early stages of development-such as obtaining patents, developing early prototypes and producing a small initial sales run-can all be done before you quit your job. Even if you can afford to quit, don't. You might find it takes two or three times as long as you expected to launch your product, and you might need your current income.

Don Debelak is the author of Think Big: Make Millions From Your Ideas.