Something Old, Something New
Position yourself for growth in 2017—join us live at the Entrepreneur 360™ Conference in Long Beach, Calif. on Nov. 16. Secure Your Seat »
Kris Ramer always wanted her own business. After graduating from college with a degree in small-business management, Ramer, now 27, decided to put her schooling to use by forming a company with her father to market one of his inventions.
Her father, Paul Ramer, 58, already owned Ramer Products, a company that marketed ski-mountaineering equipment. His new invention, Notwax, lubricated cross-country skis and snowboards without using wax. The product worked well, but the only way to sell it was to get users to actually try it, and Ramer Products didn't have the distribution network needed to market Notwax. So Kris and her father formed a new company, Zardoz, in Boulder, Colorado, solely to market Notwax.
Notwax required "legwork" to succeed: Someone had to actually go out to ski resorts and demonstrate to skiers and snowboarders how Notwax worked. Products requiring legwork--like Notwax--are ideally suited for young entrepreneurs with lots of energy and enthusiasm.
Kris teamed up with her father, but you don't have to have an inventor in the family to make such a partnership work for you. There are thousands of older inventors who could benefit from a young partner with energy and determination. If you don't have enough money to start your own business, consider teaming up with an older inventor instead.
Don Debelak (email@example.com) is a new-business marketing consultant who has introduced new products for more than 20 years. He is the author of Bringing Your Product to Market (John Wiley & Sons, $19.95, 800-225-5945).
The Youth Edge
What can young entrepreneurs offer older inventors? In working with new products, over and over again I hear inventors say "I just don't have the time to market my invention." There are two reasons for this comment: First, many older inventors have families, homes and financial obligations. They can't afford to quit their jobs and spend all their time working to introduce a new product. Notwax inventor Paul Ramer, for example, already had a business to run. When you're in your 20s and 30s, you're more likely to have fewer financial obligations. At your age, it's easier to take a pay cut and work for a low salary for a few years in hopes of a big payoff.
The second reason older inventors lack time is simply that introducing new products requires a lot of effort. In the five years she's been in business with her dad, Kris has given away 300,000 samples at ski resorts, consumer ski shows, swap meets and movie screenings targeting hard-core ski enthusiasts.
Ski shops and resorts would buy Notwax whenever Kris was there handing out samples, but they wouldn't carry the product without a sampling program. Heavy sampling was an effective alternative to advertising, but it requires weekends away from home and grueling days on the ski slopes, which Paul couldn't have handled.
Another advantage Kris offered her father was that she's closer in age to the target customers and simply understood their needs better than her dad did. That alone made her a more effective salesperson for the company.
The Age Advantage
What can older inventors offer you? A product, often a patent, and access to cash you simply don't have.
It's important for an invention to be fully developed prior to introduction. Many novice inventors make the mistake of rushing a product to market before it's ready. More experienced inventors are willing to spend a year or two fine-tuning the invention so it's as marketable as possible when it hits the market.
Experienced inventors are also more likely to have access to funding. Their friends have more money, and they often have a network of business associates who want to fund the product. One inventor I worked with who had an engineering background raised $150,000 from his engineering friends--$5,000 at a time--to market a pump he had invented. He never quit his day job--he had a friend market the invention for him instead.
Entrepreneurs do best in markets where they're similar to the target customers. They do even better when they're actually in the target customer group. Who's best qualified to sell products to snowboarders? Other snowboarders, of course. In trying to find an inventing partner, look for inventions you might actually buy or use. Then follow these six steps:
1.Choose one or two types of products you'd like to sell. In Kris' case, the product areas would have been cross-country skiing and snowboarding.
2.Find trade magazines and trade shows that target retailers or end users in that market. You can find trade magazines in Gale Directory (The Gale Group), available at most libraries. You can find trade shows at www.tscentral.com or in trade show directories (at your local library).
3.Look in the trade magazines for press releases about products you'd like to sell, or visit a trade show and look for booths with interesting products. Ask the owners of those companies if they have a distributor in your area. If they don't, there's a good chance they would be open to a proposal from a young entrepreneur seeking to form a partnership to develop the business.
4.Tell the inventor you'd like to work with him or her to market the idea. Explain that you love the product; that you're in the target customer group; and that you have the time, energy and determination to get the product off the ground.
5.If the inventor is interested, ask to visit his or her location so you can see the production facilities and review the progress that's been made in marketing the idea. There are two reasons for this visit: It shows the inventor you're professional, and it allows you to make sure the inventor can produce enough to support your sales efforts.
6.Make a proposal about earning a share of the inventor's business. (See "Deal Me In".)
Young entrepreneurs run into a lot of obstacles when starting businesses, including finding an opportunity, creating the right product and raising sufficient capital. Working with an established inventor gets you over these hurdles and allows you to put into play your greatest assets: time, energy and determination.
Even if your first product launch fails, you'll be in a much better position to succeed in your second effort. The worst that can happen is you'll get a cheap education. And that's a pretty good payoff.
Deal Me In
Don't move forward with a partner without a letter of agreement specifying how each person will participate in ownership of the business. A written agreement protects you if disagreements arise later on when the company starts making money.
Making a deal can be difficult. The inventor won't want to give away ownership of the idea to someone who hasn't yet done anything to help it; you won't want to invest time or energy in the project unless you're guaranteed significant ownership of the invention.
The fairest way to proceed is to strike an "earn your way" agreement with a buyout clause. With this type of agreement, you get no ownership of the company unless you meet certain performance criteria. For example, you might receive a certain amount of stock, or a percentage of ownership, for every $50,000 in sales, up to a certain maximum percentage of the company. You might be able to earn up to 40 percent of the company if the inventor is involved in day-to-day business operations, or up to 60 or 70 percent of a company if the inventor isn't actively involved. With an agreement like this, the inventor doesn't have to give up any ownership unless you produce results, and you know you'll be rewarded if you do your job.
Include a buyout clause that lets either partner buy out the other if the two partners prove to be incompatible. A buyout clause dictates in advance how much one partner has to pay to buy out the other. I recommend a clause that allows a buyout after three years at fair market value, which can be a number agreed to by the partners at the time of the buyout, or the average of the appraisals given by two or three appraisers.
Be sure to have your partnership agreement reviewed by a lawyer.
Looking for an inventor partner? Head to an invention convention. You'll often find inventors at these shows who have developed their inventions so they're ready to market, but who don't know how to begin marketing. These inventors usually have much less experience than inventors you'll find through a trade magazine or trade show. That means they'll often give an energetic entrepreneur favorable terms in a partnership agreement. Some conventions to try:
- Inpex. Location: Pittsburgh. Next show: May 17-21. For more information, contact Jennifer Yarnell, (800) 422-0871, www.inventionshow.com
- Minnesota Inventors Congress. Location: Redwood Falls, Minnesota. Next show: June. For details, call (800) 468-3681, www.invent1.org
- Yankee Invention Exposition. Location: Waterbury, Connecticut. Next show: October. For information, call (203) 597-9527.