Stephen Key was a mentor to Tim Ferriss. If he’s not familiar with Tim, he wrote two best-selling books, The 4-Hour Workweek and The 4-Hour Body. One Simple Idea is an instruction book on how to license ideas from it. Licensing is one of the most lucrative business models in the world. Think of these companies, Microsoft, Oracle and Apple. All of these companies license their ideas and make more money per person than 99% of all other companies. I’m 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 controls. This book shows you how to do it and I’ll expand on why.
Why license? I have owned 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 from the next license sold is infinite. That’s a pretty good markup by anyone’s standards.
Investing 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 earlier that Licensing is one of the best models out there. Let’s use inversion to show you why. When you sell someone else’s stuff, you’re only as good as your next sale. This means that no matter what, you always have to buy what you sell. Therefore, your gross profit can range from 0% to 50% depending on your cost structure and level of competition. This is what Wal-Mart does. Keep in mind that they are the best cost reducers in the world and to compete with them head on would be a disaster.
Suppose you are a consulting or service company. Again, you’re only as good as your next consulting job. I know consultants make a lot of money, but for every hour they consult, they lose that hour of opportunity to do something else. Therefore, you are exchanging hours for dollars.
One Simple Idea is packed with great information and Stephen’s 10-step plan that shows you how. We will touch on some points.
First of all, there are two main reasons for obtaining a license. Number 1 is royalty checks. You can earn money while you sleep. Now you are NOT trading dollars for hours because you can be doing something else and still get checks. Number 2 is omnipresence. You can do it from anywhere in the world. You don’t have to be handcuffed to a desk in some locked vaulted building. All you need is a computer and ideas.
Stephen outlines several key factors for successful licensing. In the interest of time, I will highlight some of the themes in this review.
1. Look for ideas: You don’t have to be Einstein to come up with an innovative idea. If you have ever gone shopping then ideas may come to mind. The key here is to focus on the things that are really bothering you. If they annoy you, they may annoy others. This is a starting point for a new idea. Think about the problems and find solutions. This also gives you a reason to go shopping.
2. Demonstrate your idea: The traditional licensing model works like this. Find an idea, build an expensive prototype, spend a small fortune on patent protection, and hope it sells. This is why most people don’t think of licensing as a viable career because the barriers SEEM too high to overcome. Testing your idea before spending money is now easy to do. Google has built in traffic. It is a ready platform for the creation and testing of ideas. An easy 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 headache and money. You need to test the idea before doing 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 apply 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 test your idea and bring it to market. This concept can pay for this book 5,000 times.
4. Present your idea: If you decide to take your idea to market, then you need to be educated in business. This means that you need money, administration and accounting, production, sales and marketing. Then after you have all this, you need customers. This is like a beginner climbing Mount Everest in winter. All odds point to your death with this approach. Presenting your idea to the big boys is the way to go. They have the brand, infrastructure, and distribution channel to reach millions of people RIGHT NOW. Pitch your idea is the best way to do it and it causes more fear. Everyone hates cold calling, but this is necessary 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 involved.
One Simple Idea is a great guide to help you turn your ideas into a royalty check.
I hope you found this short summary useful. The key to any new idea is to work it into your daily routine until it becomes a habit. Habits are formed in as little as 21 days. One thing you can take away from this book is the PPA. The biggest obstacle to getting ideas to market is the high cost of getting protection and the fear of someone stealing your stuff. For $110, you can protect it for a year, and if it makes you money, you can protect it for longer. Remember, in this game, the first to trade wins.