It’s tempting to keep brilliant business ideas to yourself. But taking Your Next Big Thing to market solo might take too long, cost too much or distract you from your existing business. Consider these four alternatives:
Franchising: This works best for concepts that can be “put in a box,” says Derek Doke, president of Calgary-based FranWorks Franchise Corp., a multi-brand franchise operator. Meaning: you must develop a system that sets out every step in running the franchise. And you are likely to have problems if your system requires that franchise managers have highly specialized skills. (So much for your dream of a chain of high-end pastry franchises.) A big franchising upside: you grow with other people’s capital. A big downside: the franchisee keeps most of the profits.
Licensing: Giving someone else the right to produce and sell your idea while you collect royalties or commissions requires less money up front. Best of all, it won’t require a CEO’s greatest asset: your daily attention. But first you’ll need a patent to avoid undue legal risks for either party-and that can take ages. You’ll also need to be a savvy negotiator: mishandle areas such as exclusivity or derivative inventions and you’ll be shut out of the profits from your own idea. “Licensing agreements are very complex,” says Moshe Tamssot, founder of The Innovation Center, a Chicago-based consultancy. “This is an area where you want the help of a very smart lawyer.”
Partnering: A smart joint venture gives you immediate access to essential resources you don’t have the time or money to develop in-house. But mind the perils: without a clear understanding of what each party will give to and get from the deal, “the risks include massive money, time and people’s energy wasted,” says Lisa Shepherd, president of Toronto-based Mezzanine Business Consulting. She says many alliances “peter out” due to poor planning. And, as consultant Larry van den Berghe, president of Saskatoon-based Strategies 2 Innovate, warns: “Often the two firms part company on less than amicable terms.”
Selling: If your primary goal is a quick commercial return, consider seeking a buyer for your innovation so you can cash out. Still, says van den Berghe, that means throwing away a chance to use the product to boost your company’s long-term value. That’s a big decision, so proceed with care.