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 Trade services for profit in an invention

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Susan Bellman

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PostSubject: Trade services for profit in an invention   Mon May 04, 2009 11:03 am

Can you trade parts of your invention for services?

Someone told me you can trade parts of your invention (or the profit from it) for some of the services you need to get it to market. Is this true?

Thanks

Susan
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former mentor




PostSubject: Re: Trade services for profit in an invention   Mon May 04, 2009 11:11 am

Hi Susan,

The answer is yes, it's called "Share Equity" and it is used all the time in business, but many inventors don'r know much about it so I'll explain.

Think of your invention as a “company” As such, it has 100 “shares” of value associated with it. Each of the 100 shares can have either a positive or negative value assigned to it along with a single vote.

For this example we’ll use our Obvious Ideas LLC “Twist Cap” product. (Of course we can’t talk about the real numbers involved but I’ll use some numbers to create the example) The first thing we do is start looking at the things we can bring to the table ourselves – we happen to know how to build prototypes. So right off the bat we know we can build the parts needed to prove this is a great idea. Now let’s look at the things we can’t do very well. We can’t write a Patent, so we’re going to need a patent attorney. We can’t do graphics, so we’re going to need a graphics person who can work on the artwork and packaging. We can’t sell into retailers or do fulfillment, so guess what?....We’re going to need that person as well. Oh, and did I mention we’re broke?....so I guess we’re going to need someone who can find us some money.

We already discussed that we have 100 points to work with, and each point has a vote. That tells us if we want to maintain control over the project we have to keep 51 points to ourselves. That logically gives us a maximum of 49 points to trade off in equity for those skills we don’t have.

In the case of our Twist Cap product that picture hypothetically looks like this.

Patent Attorney = 10 shares

Graphics Person = 5 shares

National Rep/Fulfillment Manager = 5 shares (plus sales commissions)

Funding Finder = 20 shares

Controlling Member = 60 shares

In this example you see we only had to trade out 40 shares to get done all the parts we needed to develop our product. The product is developed, it’s sold to retailers, and it’s making money – now we simply use that share division to divide each dollar of profit. The controlling member receives 60 cents, that patent attorney receives 10 cents…and so on. But what would that look like in terms of selling our Twist Caps? ….it may look like this. A pack of Twist Caps sells into a retailer at $1.00 per pack. Say we sell 8000 packs per day across the country. We have 31 cents of profit built into each pack. That equals $2,480.00 of revenue generated by that product every day. Now we compare our equity shares to that revenue and we can easily see that the Patent Attorney is going to make $280.00 per day, the money guy is making $560.00 per day, the Controlling Member $1,680.00 per day, and so on.

That sounds like very nice money….and far above the normal rates each skill would charge for their services – but remember with Share Equity….no one gets paid until the product sells.
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Troy Robison

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Location : Sunny, Florida

PostSubject: Re: Trade services for profit in an invention   Mon May 04, 2009 12:22 pm

Susan, that's correct with the share equity concept.......I have to tell you its a great way to move forward if you have limited funds....Just make sure you have the proper agreements in place..




Good Luck
Gizmo
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Troy Robison

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Location : Sunny, Florida

PostSubject: Re: Trade services for profit in an invention   Mon May 04, 2009 12:45 pm

Susan,
College Universitys use the Share Equity concept all the time for funding reasearch.


Gizmo
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Ted Meyers

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PostSubject: Re: Trade services for profit in an invention   Mon May 04, 2009 3:39 pm

HI,

I'm new to all this, can you really make money doing Share Equity on an invention?

Thanks

Ted
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former mentor




PostSubject: Re: Trade services for profit in an invention   Tue May 05, 2009 10:11 pm

If you have a great invention - sure. Just put together a team of folks who have teh skills you need and drive towards teh goal line. If you do your homework you will have a very good shot at getting your product to the market and making money

Mark
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