Child's Play

Breaking into the multibillion-dollar toy industry is easier than you think. Here's how to get your toy on the top of every kid's wish list.
Magazine Contributor
9 min read

This story appears in the August 2007 issue of Entrepreneur. Subscribe »

Imagine turning an idea you hatched during your morning shower into a $5 million business--in just three years. That is precisely how Don McNeill, the Wilmington, Delaware, inventor of You've Been Sentenced, conceived of his now wildly popular board game for kids ages 8 and up, which uses a deck of 540 pentagon-shaped cards to come up with ingenious and hilarious sentences.

"I started with an idea, one investor and $50,000, which was just enough to pay the bills," says McNeill, 43. "My daughter drew the prototype on her computer, and I called people I knew from a 20-year career selling commercial printing and gave them one-quarter of 1 percent of the company to help me produce the game."

It's a success story you can emulate. With the right idea, enough upfront cash and sufficient market research, it's possible to turn your dreams of entering the $22 billion toy industry into a viable career--and have fun doing it. But while brilliant ideas and cash are certainly paramount to success, toy industry insiders say it's the research that can make or break your toy empire. "The industry is strong, but you need to find holes in the marketplace and target them," says Chris Byrne, aka "The Toy Guy," an independent researcher and strategic marketing planner for the youth industry. "You also need to make sure that what you're planning to do is consistent with current trends and consumption patterns. For instance, right now the hottest toy trends are in electronics [like Nintendo DS, Webkinz and Wii], arts and crafts, and 'narrative' toys that expand a child's cognitive activity and inspire the imagination, so these are definitely areas you should explore. It's always easier to go in the direction of the market than to buck a trend."

That was the approach taken by Gwen Austin Yuffa, 36, the Denver inventor of RC Color Bug. Capitalizing on the hot market for radio-controlled products, she took a 10-year-old college project that was languishing in a box in her basement and transformed it into a ladybug-shaped, radio-controlled drawing implement for kids 4 and up. Even before its September 2007 launch, the product has already garnered orders of $300,000, against startup costs of more than $80,000 funded by angel investors. Color Bug was also one of just eight products recently featured on The Oprah Winfrey Show's annual "Next Big Idea" program, giving it priceless national exposure.

Get the Ball Rolling
Since hiring a credible market research firm can be quite pricey (upwards of $100,000, according to Byrne), most entrepreneurs undertake the task themselves. Visiting toy stores to see what is hot, talking to parents and kids, and joining organizations such as Toy Industry Association Inc. are good ways to touch base with what kids want and what parents want to buy.

Once you've identified a market, the next challenge is to produce a prototype you can shop around to test its marketability. Don't even think of trying to sell just an idea--buyers want to see the actual product to judge whether it has potential and to experience the fun factor firsthand. "Seeing a sketch on a napkin is not a good use of our time," says Ed Schmults, CEO of FAO Schwartz in New York City, which holds auditions for aspiring toy-makers several times a year. "We want inventors to come with a sample we can look at and play with. We need unique toys that are ready for production and retail shelves."

In fact, that's exactly how McNeill caught the FAO team's eye. In addition to challenging them to a few rounds of You've Been Sentenced at his audition, he trotted out another game, Twisted Fish, and the team decided to carry that one, too. "Talk about being on cloud nine. I walked out of there in tears," says McNeill.

While the toy audition is a great place to get an audience for your product, another way to get feedback--and orders--is to exhibit at an industry show like the American International Toy Fair in New York City. For the cost of a booth ($2,600 and up) and travel expenses, you're exposed to up to 12,000 buyers in four days. Armed with your proto-type, you'll have plenty of opportunities to dazzle buyers.

Coming up with that prototype and manufacturing a product to specification isn't as daunting a process as you might think. Many factories--some in the Far East--are quite capable of and willing to work with entrepreneurs. The biggest obstacles are usually distance and the time it takes to produce your toy, which is about 18 months to two years from concept to the retail shelf, according to Byrne.

Yuffa worked with her Chinese factory entirely by phone and e-mail but admits she found it difficult to find a company she could trust from so far away. Jim Glime, CEO of Jaag Plush in Madison Heights, Michigan, relied on contacts he acquired during a lengthy career with Kmart to scout out reputable manufacturers for the realistic North American wildlife toys he created, then took a trip to China to meet and interview factory owners and tour their facilities. "I was fortunate to have friends from the Kmart import department who retired to Hong Kong and helped me narrow down the field," says Glime, who expects 2007 sales of $4 million to $5 million. "But if you don't have contacts, visit the Hong Kong Trade Development Council website to find trade shows in China. The toy shows have tons of exhibitors with factories wanting to sell production time."

Different Paths
While many aspiring toy moguls see the industry as an opportunity to bring their imaginative ideas to life, others jump in without an original creation. There is yet another way to break into the business that does not require the considerable time and energy investment necessary to manufacture products to your specifications: You can become a toy retailer by purchasing products from wholesalers, then reselling them through your own website, through websites like eBay or through a brick-and-mortar store.

That's the route Pat Cuartero, 26, and Weber Hsu, 27, of, an online yo-yo seller, took to become toy tycoons, with projected 2007 sales of $1.1 million. Just two years ago, when the guys were assistant vice presidents on Wall Street, it occurred to Cuartero, who is a world yo-yo champion, that there wasn't a good source for the high-tech yo-yos he uses to impress judges and audiences. Starting their online business part time, the pair soon found themselves getting just one hour of sleep a night to keep up with orders. Within a year, they both quit their six-figure jobs to devote all their time to the New York City business.

Cuartero found product vendors by tapping into industry contacts he made while on the yo-yo competition circuit, but most new toy sellers have to find their products the old-fashioned way: through research and sales calls. Fortunately, toy fairs and the internet have made locating products easier.

What's more, you don't even necessarily have to stash your stock in a warehouse or your home or garage, as Cuartero and Hsu currently do. Depending on the type of toy you are selling, you may be able to enter into a drop-shipping agreement, where you take orders for the product and turn them over to the manufacturer, who in turn ships toys directly to the customers. As a drop-shipper, you will earn a percentage on each toy you sell--and all you need to do is write the order, process the payment and forward it to the manufacturer.

Internet sales portals such as are rapidly becoming the sales channels of choice for new toy sellers, especially since it can be very difficult to catch the eye of big-box retailers. With a minimal investment, it's possible to get a website up and running quickly, and such sales channels are no longer seen as the stepchildren of the retail industry.

"Wholesalers recognize that the internet gives you instant access to consumers around the world," Byrne says. "They'd rather have a big order from a retailer, but they realize that retail shelf space has been shrinking over the past seven to eight years. The internet really has leveled the playing field for new entrepreneurs."

No matter which avenue you take to toy stardom, entrepreneurs say that persistence is the key. Says Yuffa, "You need strong self-belief and the ability to accept criticism and not take no for an answer."

Keep It to Yourself
You've come up with a great idea--maybe even the next Pokémon or Tickle Me Elmo--and you're ready to create prototypes you can shop around. But should you be afraid that someone will steal your idea and run with it? Absolutely, says David K.S. Cornwell, director at intellectual property law firm Sterne, Kessler, Goldstein & Fox PLLC. "Infringement is more and more of an issue today, because once a product hits the shelves, it will be copied by competitors," he explains. "The number of toy patent infringement cases has skyrocketed in the past three to four years."

To protect yourself, Cornwell recommends obtaining a patent for your invention. A patent gives the inventor "the right to exclude others from making, using, offering for sale, or selling the invention in the United States or importing the invention into the United States," according to the U.S. Patent and Trademark Office. But this protection comes at a steep price. You can expect to pay $8,000 to $15,000 to get a case on file, then another $15,000 to $20,000 to obtain an allowed patent, Cornwell says. But if your toy takes off, there could be millions at stake, so it pays to consult a patent attorney early on. You can find a list of patent attorneys on the USPTO website.

Eileen Figure Sandlin is an award-winning freelance writer and author who writes on business topics.


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