I watched Shark Tank a few nights ago.  Reluctantly.  I’ve been turned off by inventor shows since one of the first shows a couple of years ago.  Its judges not only lacked an understanding of the business of inventing, but they insulted the intelligence of the viewer.

     But the Shark Tank panel, although brutal to those inventors with screwball ideas and naïve marketing plans, is realistic in its assessments.  And what I heard again and again, as the “sharks” assessed each inventor’s scheme, was, “But you have no sales.”

     Are preliminary sales really that important if we want to gain the interest of a potential licensee?  Yes, they are.  One of our early clients developed a job interview kit for students about to graduate from college.  Its logical market channel would be the college book stores.  And sales would be stimulated by a showcase display and advertising in the college newspaper.  He placed ads that cost $500.  What were his sales?  Zero.  Not one.

     Another client had invented a sunglasses case that attached to a car’s sunvisor.  He arranged with a local drugstore chain to display his product at the checkout counters in a few of its stores.  After two months he had sold only one.

     There would be no point in appearing before the Shark Tank panel with either of these products.  They needed a lot more than money to survive.  But suppose that sales had been brisk.  It would seem safe to presume that rolling out at the national level would emulate the local performance.  Investment from the sharks, or from other angels, would then be much more promising.

     Another of our early clients, we’ll call her Kate, invented a device for safely washing under-wire bras in the washing machine.  When early sales from her web site and Amazon.com showed promise, she contacted a prospective licensee.  The “honeymoon” phase of negotiations had all of us excited.  But this “match made in heaven” broke down at the negotiations table when the prospect demanded more in writing than had been discussed and agreed to.  However, the point here is that growing sales were the lure, not the product by itself. 

     And still another of our clients produced a kitchen and bath product she sold from her web site.  We put her in touch with an inventor-friendly catalog agent, and she was soon selling to four catalogs.  Although sales are not overwhelming, they were sufficient to interest both QVC and a prospective licensee.

     Whether failure or success, early sales enable us to shape the fate of our inventions and products.  No early sales suggest either the wrong marketing channel, the wrong method of exposure, or that the market is too small to accommodate a profitable enterprise. Fair to brisk early sales suggest a good future for either producing or licensing.  Even when sales are encouraging, however, we must tweak the plan to optimize our profits.  But in the absence of any attempt at producing and selling our invention as a product, we are asking independent and corporate sharks to believe in us, and invest in our naked dreams.  And that’s not typically in their DNA.

     Now, what if the inventor has no more money to invest in setting up small-scale production?  Even on a small scale, tooling, printing, packaging, inventory, etc., must be paid for.  The ideal answer is to get the money somehow without borrowing it.  Set up an LLC (limited liability company), and issue letters that delineate each investors’ percentage of ownership.  (Don’t do this without guidance from an attorney that has experience in setting up small companies.)  This way you aren’t borrowing, you’re taking in investors in a relatively risky venture.  If the venture fails, each investor knows that his or her money is forever lost.  Most people like to gamble, but hate to lend money

     As a last resort—if you don’t have the stomach for the LLC approach—use the “promise of sales” in place of actual sales. Get endorsements from credible sources, and use these in the testimonial section of your sell-sheet.  One of our clients, Joe, had pheno-menal acceptance of his product by the builder’s supply stores.  But he had to guarantee that he could replenish the buyer’s inventory within a few days.  Since his product was being made in India, and since he had to pay for a container-full in advance, he couldn’t make such a guarantee.  So, he asked each interested buyer for a letter indicating that they inten-ded to buy as soon as Joe could guarantee backup inventory.  He’s placed these statements in his sell-sheet, and we’re now searching for an investor based on the promise of sales rather than real sales.

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