Stephen Key was a mentor to Tim Ferriss. If you are not familiar with Tim, he wrote two bestselling books, The 4 Hour Work Week and the 4 Hour Body. One Simple Idea is a “how to” book on licensing your ideas. Licensing is one of the most lucrative business models in the world. Think about these companies, Microsoft, Oracle and Apple. These companies all license their ideas and make more money per person than 99% of all other companies. I am a big fan of Real Estate but if you need to make money with less risk and less capital requirements, then licensing is the way to go.
Why is this important to me?
Most people are not familiar with the power of licensing and royalty checks. This book shows you how to do it and I will expand on the why.
Why licensing? I have had several businesses and I can tell you that licensing is by far the most lucrative of all. When you own the IP (intellectual property), your marginal revenue of the next license sold is infinite. That is a very good profit margin by anybody’s standards.
Inversion is one of the most powerful learning strategies in the world. Inversion means to look at the opposite or reverse of something. I told you above that Licensing is one of the best models out there. Let’s use inversion to show you why. When you sell somebody else’s stuff, you are only as good as your next sale. This means that no matter what, you have to buy what you sell every time. Thus your gross profit can be anywhere from 0% to 50% based on your cost structure and the competition level. This is what Wal-Mart does. Note that they are the best cost cutters in the world and competing with them head on would be a disaster.
Let’s suppose you are a consulting or service based company. Again, you are only as good as your next consulting gig. I know that consultants make a ton of money but for every hour they consult, they lose that hour of opportunity to do something else. Thus you are trading hours for dollars.
One Simple Idea is packed with great information and Stephen’s 10 step plan that shows you how to do it. We will touch on a few points.
First of all, there are two major reasons to license. Number 1 is royalty checks. You can make money while you sleep. Now you are NOT trading dollars for hours because you can be doing something else and still receive checks. Number 2 is omnipresence. You can do this from anywhere in the world. You do not have to be handcuffed to a desk in some vaulted locked building. All you need is a computer and ideas.
Stephen outlines several key factors to being successful at licensing. For the sake of time, I will highlight a few of the topics in this review.
1. Look for ideas – You do not have to be Einstein to have a break through idea. If you have ever been shopping, then you can come up with ideas. The key here is to focus on thins that really annoy you. If they annoy you then maybe they annoy others. This is a starting point for a new idea. Think about problems and come up with solutions. This also gives you a reason to go shopping.
2. Prove your idea – The traditional licensing model works like this. Find an idea, build an expensive prototype, spend a small fortune for patent protection and hope it sells. This is why most people don’t think of licensing as a viable career because the barriers APPEAR too big to bridge. Proving your idea before you spend any money is now easy to do. Google has built in traffic. It is a ready-made platform for idea creation and proof. One simple way to do this is to create a video of your idea and ask for feedback. You can do this for a few hundred dollars. This process alone will save you tons of heartache and money. You need to prove the idea before you do anything else.
3. Protect your idea- Contrary to negative belief; most companies do NOT want to steal your idea. The traditional way to protect your idea was to submit for patents. This is a very expensive endeavor. One thing Stephen points out to avoid this is a PPA. This is a provisional patent application and costs $110 to submit. This gives you Patent Pending status which is all you need for 1 year to prove your idea and get it to market. This one concept can pay for this book 5,000 times.
4. Pitch your idea – If you decide to bring your idea to market then you need to be schooled in business. This means you need money, management, and accounting, production, sales and marketing. Then after you have all this, you need customers. This is like a beginner climbing Mount Everest in the winter time. The odds all point to your death with this approach. Pitching your idea to the big guys is the way to go. They have the name brand, infrastructure and distribution channel to hit millions of people NOW. Pitching your idea is the best way to go and causes the most fear. Everybody hates to cold call but this is required for you to pitch your idea. This is much easier than it seems because companies want new ideas and that is the hook for you to get in.
One Simple Idea is an outstanding guide to help you turn your ideas into a royalty check.
I hope you have found this short summary useful. The key to any new idea is to work it into your daily routine until it becomes habit. Habits form in as little as 21 days. One thing you can take away from this book is the PPA. The biggest obstacle to ideas coming to market is the shear cost of getting protection and the fear of somebody stealing your stuff. For $110, you can protect it for one year and if it makes you money then you can protect it longer. Remember, in this game, the first to market wins.