How Much Is Your Idea Worth?

You have to pay special attention today. 
I’ve spent hours looking for a way to talk to you about a topic that is key but, at the same time, a true pain. 
¿How much is your idea worth??
Open your eyes.
¿Quieres vender tu idea? ¿Ya le pusiste precio?
Let me guess your answers:
 “Yes” and “It’s negotiable.”
I’d love to tell you that you’re very close to achieving it.
But, as you know, I’m not very good at sweetening the truth. 🙂
Let’s get down to brass tacks!
First, try to answer these six questions:
1- Who are your potential buyers? 
I’m not referring to major platforms selling… 
List them by first and last name. Had you already done it? 
2- Why will they buy your invention?
…well, users would be thrilled with… 
Nooooo! The question is: Why will a distributor or manufacturer buy your invention?
This is someone who is supposedly already positioned in the market, does not live too badly, and knows the market like no one else. 
So, why will they buy it? 
3- How much does your potential buyer sell?
Tick-tock, tick-tock… So… 
You have to know all the details, from their billing to the future of their business strategy. 

If you don’t have these data, chances are you won’t get past the first meeting.

4 – ¿Cómo encaja tu producto en su estrategia?
I’m referring to their business and product strategies.
You have to find arguments justifying the purchase at both levels. 

We’ll take a look at that later. 🙂

5 – ¿Cómo pusiste precio a tu invento?
Formula: 15 days in Punta Cana + 20 years of living in style = a load of €

Nothing could be farther from the truth. Shortly, I’ll recount an experience. 

6 – ¿Qué harás si todas las puertas se cierran?
Please don’t leave this consideration out of your analysis. 
It’s key, even if the doors do open. 
Open your eyes; I’m going to give you some pieces of the puzzle:
Who are your potential buyers? 
The easy answer is to list those that already sell similar products.
Remember that indirect competitors exist. 
That is, companies that aspire to the money of the party you considered to be your potential buyer. They have and probably seek alternative solutions that have not attained success. 
From among them, seek out those that may have the dough to pay for your invention. 
Also, remember that companies are made up of PERSONS… Pinpoint who the decision-makers are in each case, draw their organization chart (purchasing, innovation, operations, commercial, etc.) and really analyze who might see value in your proposal. 
Why did they buy your invention?
Don’t think you’re the all-powerful owner of the invention and the patent. 
That’s 5% of the story.
It’s key that you have some data showing that the market accepts your proposal. 
Careful: surveys or predictions don’t count. The only thing left are “user-prototype” interaction hands-on experiments.
On the other hand, make sure you have a working prototype that is perfectly documented, industrializable and that, moreover, fits into the buyer’s strategy.
How much does your potential buyer sell?
Remember, you get what you pay for. 
You have to present arguments and scenarios showing how the buyer will benefit and profit. 
Don’t worry, if they’re interested, they will run their numbers; however, you have to take them the work already done. 
It’s essential for you to be able to justify how your invention will maximize those periods in which their sales dip: 
That the value you contribute will make it possible to increase the margin on their products. 
As if that weren’t enough, that your invention translates into clear competitive advantages for their product catalog. 

I’m not saying that your invention has to deliver on everything. But almost. 🙂

How does your product fit into their strategy? 
There’s no room for guesswork. 
If you look at social media, websites, product evolution, values shared with your potential buyer, you can build a strategy and link it to a timeline. 
This exercise will not only allow you to figure out the strategy, it will also allow you to define when’s the right time to approach the buyer. 
A single product, your invention, can be sold using very different pitches. 

This analysis will let you select the right path. 

How did you set your invention’s price?
I must confess that I love the formula: 15 days in Punta Cana + 20 years of living in style = €XXXXX.
I must also confess that, with it, we’ll never get out of the starting gate. 
In some pitches in which we’ve had the opportunity to participate, this is what we’ve done:
  • Place the ingredients on the table: buyer’s income statements, information on the news or other media speaking of their projections, etc.
  • Translate into numbers: present a business plan for at least five years. Use this potential buyer’s actual product evolution, possible production costs, etc. The best scenario would be to be able to extrapolate the results obtained by you yourself with the initial experiments.
  • The method: apply one or more business valuation methods prior to defining a price. Remember that your invention must be valued in terms of at least the cash it will be able to generate in the future. 
Forget about delivering a spiel; you have to calculate a price and know how that conclusion was arrived at.
 What will you do if all the doors close on you?
I already told you, this answer is key for two reasons:
It gives you negotiating power. 
It allows you to design a plan B.
Believe me, in a negotiation, the other party may notice if they’re your only option. It’s the worst thing that could happen to you in this scenario. 
Si tuvieras que definirlo ahora ¿Cuánto vale tu idea?
I truly hope that you can take advantage of these tips.
Remember... With these tips, I don't intend to sell you anything. 
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