Now that the project partnering agreement was signed, John and Peter decided they wanted to monitor it to ensure compliance. In the agreement they had established a prejob conference. They invited all the subcontractors to this meeting and explained how they would measure the success of the agreement. They were interested in knowing if there were any violations of the terms. They were also interested in knowing if there were any subcontractors who consistently violated their agreements. So they created the chart shown below.
John and Peter agreed to review the chart with all the subcontractors twice a year during the course of the three-year project. The first piece of work completed was the demolition and removal of an old abandoned structure. They met after that segment of the project was completed to see how well the subcontractors involved were complying with the agreement.
As the chart shows, the demolition and removal segment was not without violation, but the one minor infraction appeared to be due to an oversight rather than intentional. Both Peter and John felt the matter was handled appropriately and decided this was not a violation of their trust. Both thought the project partnering agreement was working well and agreed to continue to monitor the results. John made a comment that seemed to sum up their success so far: “Although we’ve just started the project, we’re already a week ahead of schedule because the demolition
and site cleanup went so smoothly.”
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Then we talked about the Stages of Relationship Development. The criteria Marty and Jean established for determining the health of their relationship were the number of times they met and the number of unresolved conflicts that needed to go to the general manager. Clearly they had increased the number of times they met. They were meeting at least once a day in the morning to talk about the schedules, and sometimes they met more than once a day. They also agreed that all their conflicts had been resolved in a win-win manner. They gave me an example:
At one point, a housekeeper and a maintenance person quarreled over who was to be in the room. The housekeeper was upset because it was the last room on her shift and she wanted to pick up her child at daycare. The maintenance man needed to change the air conditioner compressor, a messy job that would take more than an hour. Jean managed to reassign the room to a housekeeper who worked a later schedule. The housekeeper was happy because she could leave; the maintenance man was happy because he could get the job done and then have the room serviced.
We agree to use consensus as our decision-making style. We agree to work on handling conflict.When we have an issue between our departments, rather than go to the general manager, we will go to each other and problem-solve using a winwin orientation.We agree that no additional resources are required. We will maintain a weekly report of the number of rooms that were cleaned before maintenance took place to help measure compliance.
We will determine how the relationship is working using two criteria: (1) the number of times we meet each week (the more the better) and (2) how many times we have unresolved conflicts that require us to go to the general manager. We will define success as a decline in the number of complaints from customers about rooms that were not properly cleaned because of maintenance work.
After thirty days of working at their partnership, Marty and Jean wanted to review the outcome. They held a meeting with me, and the first thing they did was review the Stages of Partnership Development. Then Marty and Jean analyzed the data they had collected. Over the thirty days there had been more than 240 maintenance calls. During that period, all but thirteen of them had been scheduled during normal business hours. Maintenance had been able to schedule all but three of the maintenance jobs before the rooms were cleaned. They thought this was a huge success—especially since no guests complained about the condition of their room after a maintenance call.
Marty and Jean are committed to working together and have completed a Partner Compatibility Analysis. Since they knew they needed to do this, they didn’t formalize their commitment to participate but simply verbalized their commitment to each other. As a next step, they used the Agreement Between Partners Checklist to create the following agreement:
1. We will coordinate the activities between Housekeeping and Maintenance to minimize extra work for both groups and yet attain our vision: Each guest will have a clean room in which everything works properly.We will review schedules.We will establish a process whereby maintenance work will take place before the rooms are cleaned.We will work on building a good relationship between the Maintenance and Housekeeping staff.
2. We will create a timeline for reviewing the scheduling of rooms for maintenance, reviewing the scheduling of rooms for housekeeping, developing a daily list of rooms needing maintenance, and coordinating the maintenance and housekeeping staff rounds.
3. We agree that our role is to coordinate the scheduling of the rooms that require maintenance and act as go-betweens for our staffs.
Most of the larger manufacturers will require you to sign their submission documents before they will look at your information. These documents are designed to protect the manufacturer against an individual’s claiming that the company took his idea. The submission documents usually state that by signing them you are aware that they may have already seen, been working on or previously rejected the same or a similar idea. If you want to move forward with them you must sign these forms.
Submission forms that you send to manufacturers can also be considered part of your “paper trail” of proof that you disclosed your invention to them should you ever need it. Be sure to keep copies of everything in your files.
If the company is not ethical and you show your unprotected invention or idea to them, they can simply take it. Therefore, the thing to remember is to make sure that you have carefully followed your early protective procedures before approaching anyone regarding licensing. They protect themselves and you should do likewise.
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Another option that many independent inventors are choosing nowadays is to license their inventions for royalties. This is a method of choice for many inventors for lots of compelling reasons. Once a product is licensed to a manufacturer, that product will automatically have a place on the planogram of the retail stores where the manufacturer places goods. The manufacturers handle all of the responsibility for producing the product, selling it to retailers, bookkeeping, etc. The licensor (the inventor) goes to his mailbox and collects his royalty checks at regular intervals, usually quarterly. The inventor’s time is entirely his own to spend creating other moneymaking new products or in whatever way he chooses.
While receiving a royalty amount of 3-5 percent of net sales on your product may seem like settling for a very small amount, consider this: the manufacturer is taking all of the financial risk in getting the product on the market. He is spending the money to make the product, warehouse it, insure it, sell it, ship it and handle the bookkeeping. His profit margin on the product may not be as great as you imagine. In addition, if you have a guaranteed annual amount of royalty (and you should!) you will receive at least that amount whether your licensee sells that much of your product or not. Lest you jump to the conclusion that 3-5 percent of the wholesale price does not amount to much, do the math. A product that retails $8-$10 million annually returns between $120,000 and $250,000 in royalty, depending on the percentage. This is money that you didn’t lift a finger to earn once it was licensed. If you are still thinking 3-5 percent is a paltry amount of royalty, consider this; if you are unable to get the product marketed on your own, 3-5 percent of something is much to be preferred over 100 percent of nothing!
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There is yet another route that some inventors take with their inventions and sometimes this one works for those who have a good idea for a product that cannot be patent protected because it is already in the public domain. That is, the product or something very similar has already been patented or sold before, but it is still a viable product.
You are not required to get a patent if you choose not to do so. If protection from competition is not important to you and the product is not currently covered by an existing patent, you can simply market the product in whatever way you choose. If the product is a really good one, you will probably not maintain exclusivity for a very long time, but if you think yours may be a fad-type product, it could be a wise decision to just get on the market with it and make your profit while the fad lasts.
Catalogs often sell items that have no patents. It is relatively easy to get your product into catalogs if you are willing to manufacture and sell it to the catalog companies. If you are interested in this option, just go online and check with the catalog or catalogs of your choice. They all have contact information. Contact them and let them know that you are interested in submitting a product for their catalog. They will send you their submission requirements.
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Be aware that if you are the manufacturer and distributor of your product, you will be responsible for providing product liability insurance to the retailers who sell the product. All retail products, no matter how innocuous they appear to be, must carry product liability insurance.
If you are building a business around your invention, keep in mind that it is your responsibility to enforce your patent. If you should find your product infringed this could be a significant expense. Many independent inventors choose to license their products for this reason alone. They know that they would never have the financial resources to sue for infringement.
Large companies also know that small independent product developers are not likely to have the funds to force them to stop if they choose to infringe. This makes it more likely that a large company might consider it worth the relatively small risk that an independent inventor could make them stop producing and selling the inventor’s patent protected product.
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If you plan to be your own manufacturer and deal with retail buyers, learn the language of retailing and be prepared to talk about such things as “planograms,” “sku numbers, “ and “upc codes” in order to understand and be understood. Other things to consider if your goal is to be the manufacturer of your product:
A. Will you maintain manufacturing facilities and hire the work done or import your product.
B. Will you hire a sales force, place the product with a product representative and/or a distributor, or be your own salesperson.
C. Will you handle the day-to-day requirements of running the business.
There are both advantages and disadvantages to building a business around your invention. You are the only one who is in a good position to decide whether that is the correct choice for you. It will depend in large part on your current financial situation, your age, your state of health, and how you want to spend your time. If you have the financial ability, the expertise and you are up for the challenge, maybe this is the route for you. If being in control of your product is important to you, then this may be the right option for you. You can certainly exercise total control over your product when you are the manufacturer.
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One option to get around this problem, if you plan to manufacture and distribute your own product, is to place your product with an independent product representative. This is a person who represents a number of products from various manufacturers to the retailers. Be aware, if you do this, that you will have to pay the product representative a percentage of the sales for this representation. This can make a significant difference in your profit bottom line, but it may be the only way that you can get your product into the large retail chains.
You can find product representatives by contacting administrative offices of the retail stores and asking them for the names of the reps for your category of products. Product representatives usually cover a specific geographic region. For example, there may be a product representative who covers Texas, Oklahoma and Louisiana. The entire country is divided into exclusive regions for the individuals representing specific lines of products. This approach may require you to contact product representatives all over the country in order to get maximum market coverage for your product, but it can work.
In addition to individual product representatives, for many categories of products there are distributors. These are companies that handle the distribution of an entire category of products to select retailers. When we were marketing Ghostline® on our own, before licensing the product, we sold some product to a distributor who got Ghostline® into stores in a seven-state area. This involved another layer of wholesaling (from us to the distributor and from the distributor to the retailer), but if your profit margin is great enough, you can get greater distribution this way.
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