The licensing business is one of the best sources of passive income in the whole world. Licensing includes licensing invention ideas for example and that will be the focus of this article. I'm personally a HUGE fan of licensing ideas for profit because of just how passive the income you'll generate from that can be. It's almost entirely hands-off. In fact, in the Millionaire Fastlane, it gets a passivity grade of A.
So you're interested in the licensing game? And you don't know what to do about it? Well, my first piece of advice is to get yourself a copy of One Simple Idea by Stephen Key. His book is the basis for this article and will go into greater depth explaining how it all works and how to piece all this information together. It's an awesome book. Actually, Stephen Key is the man who taught Tim Ferriss(from the 4 hour work week) all about licensing. Another great example of licensing in action is the man behind Fubu. He's a multi-millionaire now and in an episode of Shark Tank(must-watch), he explains that licensing is where he made his fortune.
While I'm not anywhere near being an expert in licensing, I do know a little and I think I can help you get a better picture of what it's all about. First, you need an idea. This is the hardest but funnest part of the whole process. There are many ways to come up with great ideas including looking at existing products all around you and using your imagination to see how these products could be improved or upgraded. There are a ton of other ways to get new ideas too described in One Simple Idea by Stephen Key.
Once you have an idea, what do you think is the next step? You might have thought that it was to get a patent. Well, the truth is that patents are VERY expensive and just not worth it. There is a better way to protect your ideas without dishing out thousands of dollars for a patent. Here's what you do: get a PROVISIONAL patent for a fraction of the price and it protects you just as much as a regular patent for a full year. And that's more than enough time to get a licensing deal with a business.
I forgot to mention one thing: you'll need a prototype. But you don't need to spend thousands of dollars on this either. Build a mock-up prototype and save that money just in case this first idea of yours leads to nowhere.
Once you have an idea, a mock-up prototype, and a provisional patent, the next obvious step is to get out there in the field and get yourself a deal with a big company. This is where you introduce yourself to big companies and pitch your idea to them. I want to re-emphasize that all these ideas are explained in more detail in One Simple Idea by Stephen Key(I highly recommend this book).
You may get a deal and you also may not get a deal. If you do, great! Your work is pretty much done... just sit back and collect royalty checks or come up with your second idea. Remember, not all ideas will be home runs. I remember reading somewhere that the best way to come up with good ideas is to come up with lots of different ideas. Some will be home runs, others will just be hits, and others still will be complete failures. That's where our next topic comes into play: fear of failure.
You cannot be afraid of failure if you want to be successful in the licensing business because sooner or later, one of your ideas will fail. You have to overcome that fear by taking risks. You need to fail in business to get better. You've probably already heard from people that they learn more from their mistakes and failures than do they from their successes. That's a great way of seeing things and it's important to keep that in mind. Your first invention idea is a flop? So what! Move on to the next one. Don't give up!
Honestly, if you're a fan of passive income and you want to make a BIG passive income stream for yourself, the licensing game is where it's at. It's made a lot of millionaires over the years.
Of course, you don't absolutely need to get into this business... there are tons of other opportunities out there for you that you could look into, I just personally really like this business model. Whatever you choose, it's important that you focus on one business model if you want to be successful. That's one important trick I learned from Ewen Chia. He's a successful internet marketer and he always teaches his students that you shouldn't spread yourself too thin by focusing on building too many businesses at once. Focus on one until it's successful, then move on to the next one. Again, I don't want you to think I'm against building multiple streams of income. Multiple streams of income are a crucial hedge against possibly losing your income.
If you'd like to learn more about multiple streams of income, I'd recommend Robert Allen's free book available on the internet called Multiple Streams of Income. It's a great introduction to the subject.
Well, that's it for now. I hope you enjoyed reading this article and I hope it's helped at least one of you out there see the potential in licensing for passive income. It really is one of the best business opportunities out there... so just grab a pen and paper and get your creative juices flowing and come up with some new inventions. Alternatively, as I end this article, I'd like to suggest another last book that you might be interested in. It's called The Six-Figure Second Income and it's all about how to make money with information products. I read it and I really liked it.