The Simplest Ideas Can Be Extremely Profitable. Here's Proof.
Does the licensing lifestyle sound too good to be true? It might. But, if you're creative and you hustle, you can pitch and rent out your ideas for consumer products to companies with global distribution. In fact, I can tout the power of open innovation because I've practiced it myself.
And so has Gene Luoma, a lifelong independent product developer who hit it big with an incredibly simple household tool offering an enormous benefit. Using materials from his garage, Luoma prototyped the first Zip-It drain cleaner in less than a few minutes. Since he first licensed the idea and began receiving monthly royalty checks in 2000, he's seen more than 33 million units sold!
When I met Luoma in 2007, I was struck by the similarities in our careers. He has licensed at least a dozen of his other ideas in addition to designing countless products to meet the needs of local businesses near his hometown, Duluth, Minn. But what I appreciate most about him is his attitude. Luoma is limited physically (due to a rare kind of muscular dystrophy), yet relentlessly positive. His can-do disposition has never waivered over the many years we've communicated.
What's more, he has manifested his own destiny and inspired his children to do the same. I meet so many inventors who are consumed by what they can't do or don't know. Luoma shows it doesn't have to be that way.
After growing up on a farm, where he constantly had to make due with what he had, and studying mechanical design and engineering at a vocational school, Luoma opened his own product-development company in 1978.
A wide variety of local companies approached him with their needs, and the result was many different inventions. For example, Luoma invented and patented a "blueberry cluster buster" for a company that needed a more efficient, gentler way of separating frozen clumps for its pie filling. When his disability prevented him from drawing back his archer's bow, he designed a device that worked a like a caulking gun, to draw the weapon back for him. He also approached companies with his own ideas for products, which he designed by hand.
Clearly, Luoma is resourceful. The same philosophy extends to his work in inventing. When Luoma used to come e up with an idea, he would shop it around to different potential licensees, using only a disclosure document to protect him. (This was before the advent of provisional patent applications.)
If a company liked his idea and licensed it from him, it would pay for a patent to be filed in his name. Accordingly, to date, Luoma has 15 patents to his name. But his most successful invention by far is that Zip-It drain cleaner, for which he has received royalty checks once a month for more than a decade.
"I don't look at my disability as something stopping me," Luoma told me. "Sure, it has slowed me down from doing cross-country skiing or bowling. [But] too many people complain: 'If I could walk, I'd be out there motivating people to motivate themselves'"
Luoma obviously didn't complain; he acted. He credits his wife, Kathie, with coming up with the Zip-It name. And he dates the invention back to when their daughter Kim was in her teens and her long hair clogged the shower drain. When chemical cleaners didn't work, Luoma fashioned a hook out of wire. When Kathie asked him to clear the drain for the umpteenth time, he improvised, usng plastic he cut off a sled in the garage. "Like a typical inventor, I never throw anything away," he joked. After notching the plastic, he used the device to remove what looked like a "dead rat" from the shower drain.
"You could sell these!"
"Boy, that thing worked great! I bet you could sell these," Luoma remembers his brother-in-law saying. Luoma made more and improved on the design and put a one-sentence benefit statement on the front of the packaging: "Unclog your drain in seconds!" To test the market, he gave Zip-Its to family and friends. Would they use this product?
They would. So, with the help of his son Brian, who owned a local printing company, Luoma made more prototypes to bring to hardware stores near Duluth. He didn't need to explain much. Like the best ideas, his device solved a universal problem. When a buyer at the Midwestern chain Menards, which had about 400 stores, asked to order thousands, Luoma had a decision to make. He'd already been weighing the merits of manufacturing Zip-Its on his own after getting a quote for tooling.
He reasoned that he could manufacture Zip-Its for 15 cents apiece and sell them to Menards for $1.50. His first order was for 60,000 units. Within two or three weeks, another 40,000-unit order came in. That's when he knew his gamble had paid off.
But, a hitch: Ggetting his product into other retail outlets proved to be dispiriting. They didn't want to do business with anyone who sold just one product. Manufacturing, packaging and supply chain management began to consume his time. Then, the buyer for the plumbing department at Cobra Products asked if he would consider licensing. By January of 2000, they had a deal.
The relationship has been good, Luoma told me. For the past 17 years, he's received a royalty check based on the number of Zip-Its Cobra sells.
Of course, knockoffs can happen, which is why I was not surprised to hear that Luoma had sued several industry leaders for alleged infringement. To keep collecting royalties, he's had to defend his design and utility patents.
"Some of the product developers I meet can't believe they're only going to get a 3 percent to 7 percent royalty rate," Luoma told me. "You're lucky if you get that! When I licensed Zip-It to Cobra, it was in 25,000 stores within six months. How much longer would that have taken me on my own? Think about it."
Currently, Luoma is trying to license a bag clip, a camera-mounting device he developed with his son, a fishing lure designed by his nephew and a spring coil mattress compactor for which he has been issued a patent. He has brought dozens of other ideas to market. What advice does he have for other inventor-entrepreneurs? "Keep it simple," he answers. "People like to complicate things. Keeping it simple -- that's actually the hardest part."
I couldn't agree more.