Stephen Key is an inventor coach and author. I reviewed his first book One Simple Idea: Turn Your Ideas Into a Licensing Goldmine, in June 2011. Key now has a second book under the One Simple Idea brand, this one titled One Simple Idea for Startups and Entrepreneurs: Live Your Dreams and Create Your Own Profitable Company. Leading up to the recent release of his new book I had the opportunity to speak with Key on the record, to get his thoughts about the process of moving from inventor to entrepreneur.
In addition to being an inventor coach and successful author (both of Key’s books are in the Amazon.com top 100 for Small Business and Entrepreneurship), Key is also a successful inventor. Perhaps Key’s biggest, most successful invention relates to a rotatable label system and associated method. The earliest patent I found relating to what became a patent portfolio to cover this innovation is U.S. Patent No. 5,809,674. Key’s innovation adds 75% more labeling space to a container. This patent family was owned by Stephen Key Designs, LLC, which was acquired by Accudial Pharmaceutical in the Fall of 2011. See Key Scores His Own Big Success. Thus, Key is more than the typical coach or author. He has had real success in his own right and many of the students he teaches and consults with have succeeded in their own right. Simply put, Stephen Key knows a thing or two about inventing, licensing, taking reasonable and appropriate risks and succeeding as an entrepreneur.
I spoke with Key on the record on October 15, 2012. We discussed his new book, as well as some of the critically important considerations that go into starting a business based on a product idea. Over and over again Key will preach to keep things simple, not in a patronizing way, but rather to make sure that things are pursued in a reasonable fashion in workable increments. Inventors and would-be entrepreneurs will learn a lot from this interview, and for under $14 on Amazon.com you won’t go wrong with his new book either.
Without further ado, here is part 1 of my conversation with Stephen Key.
QUINN: Thanks for taking the time. And I know we want to chat with you about your new book, One Simple Idea for Start-Ups and Entrepreneurs. So the first logical question is, is this a sequel to One Simple Idea, which was more for inventors I think, right?
KEY: Well, the first book, One Simple Idea was really for inventors in terms of understanding licensing. And I think a lot of inventors are very different than entrepreneurs.
QUINN: How so?
KEY: Well, number one, inventors, which I have found are a little bit, I’d say they’re a little quieter. They really want to create ideas. They want to come out with ideas. And they like building prototypes. But they only want to wear a few different hats. Where an entrepreneur really wants to do more than that. That person I found is a little bit more outgoing, wants to start a company, wants to be in control. Really it’s a different mindset and it requires different skills as well. One Simple Idea, the first book was about licensing, the second book, One Simple Idea for Start-Ups and Entrepreneurs is really about, hey, I’ve got an idea, how do I bring it to market so you don’t have a garage full of stuff you cannot sell or even a warehouse of stuff that you cannot sell.
QUINN: So this book would be for people who are just really starting a business, any business whether it’s based on something that could be patented or not?
KEY: Absolutely. It’s not service, it’s not really a service oriented book. If someone wants to start a fast food restaurant or sandwich shop, no. My new book is still for products. If I have an idea, what do I do next? And then I want to start a business. And what I realized through my own experience, you know I started a company a few years back selling guitar picks. And it was a great experience, but it’s very, very different than licensing and it’s extremely different than just being an inventor. So—
QUINN: How did you get into guitar picks?
KEY: You know, I had licensed quite a few items and the royalties were slowing down. And I had to kind of reinvent myself. And a friend of mine came over to my office that had been in the music business. And he showed me a little guitar pick with an alien’s face on it and said this guy does extremely well with just a little alien face on the guitar pick. And he asked me if I could come up with different designs. And so I did. And my first designs were terrible. They didn’t work. And then I went down to the mall and I noticed that kids were wearing skulls. And so we designed the first guitar pick in the shape of a skull and it was an instant hit. In fact, we took it to a trade show and started handing them out and before you know it you couldn’t even get to the booth it was a mob. And I knew instantly we had a hit on our hands.
QUINN: That’s great. I mean, that’s great for two reasons. One is you identified that I’ve got to do something because what I was doing is starting to wind down. And then, two, is you looked around and saw what people might be interested in and then filled the gap.
KEY: Yeah, I think what my philosophy’s always been even with licensing or even starting the company is looking at the market and creating a product for what the market needs. A lot of inventors and entrepreneurs might come up with an idea that solves a problem, but I’ve always took a different approach. I would let the market tell me what it’s looking for or what it needs or what’s missing. And I like to refer to it as looking for a sleeping dinosaur. By that I mean something that is old and tired. Don’t reinvent the wheel but come up with a small change in existing products. So number one, you’re guaranteed that there’s a market for it. And number two, the technology exists.
I realize that a lot of companies, especially the big boys leave a lot of crumbs on the table. And those crumbs for a lot of us who want to run a small little company, it’s still a million dollar company, it could be up to a $10 million company, but that they don’t care about that. So there’s a lot of opportunity for people that want to start a small business. But you have to realize that if you start small, which we did, it allows you to be able to inventory, demo it, it requires very little shelf space, it’s easy to ship, it has all those great things. It’s inexpensive so it’s easy to start. If you keep it simple you guarantee there’s a market for it. So there’s a formula that I realize that just works.
I think a lot of people that start out they don’t test their product correctly. Their packing or their product. They start, they try to jump in too fast without taking the necessarily slow steps. So what’s really interesting about the protection sample, you’d mentioned that, too. I have a large patent portfolio, the company purchased who purchased my company a while back. But what I realized when you start a company you need to product yourself in many different ways. With good IP of course, patents or trademarks or copyrights for your brand. But you need to get your product out on the shelves very quickly. Find that opportunity that gives you that uniqueness. Find that small little opportunity for you, start small. And have great customer service. These are all the things, the way to protect yourself. Good relationships with retailers, have those customers love you. And start small, start simple so it’s affordable that you can do it yourself. And test, test, test.
You really don’t have a garage full of stuff that you can’t sell at the end of the day. And that’s what I found when speaking to all these inventors and entrepreneurs just last year with the first book. That they all had these terrible stories. And it was a tragedy that they weren’t looking at it by what the customer was looking for. They were looking at what their own needs were. And they weren’t testing enough. They were running over and having things made over in China. I think it’s great, but first manufacture it here in the United States, make sure it works. Maybe you won’t make as much money and maybe it won’t be profitable at the very beginning, but at least you can test, you can move quick, and if you do hit something you can always go overseas with it.
QUINN: Yeah, and that’s what I always try and preach to people is that you’ve got to do a limited run. And the goal with that limited run is not to make money. I mean, you’re in this to make money overall. But that is a step in the process to determine whether or not it makes sense to move forward and whether you need to tweak things and so forth. And I do think some people go out so quickly and want to just go big time. But it strikes me in listening to you talk that whether your ultimate goal may be to license this, or whether your ultimate goal is to set up a company and do it yourself, a lot of the initial steps really are identical. Do you see it that way?
KEY: Yes. They’re exactly identical. I’m glad you mentioned that. Because at the very beginning you need to say, look, is there an opportunity here? Do I have a product that’s going to work? So you need to test early. And I tell everybody, even if you want to venture yourself, manufacture yourself, or even license, try to license at first to companies. Get their feedback. Understand the good points, the bad points. Understand manufacturing. Do all the testing, even at the very beginning, it doesn’t matter. So you understand, number one, it can be manufactured. Number two, I can protect it. Number three, people do want it. And then you can determine which path you want to take. And sometimes they collide. Sometimes you can start a company and then license it later. A lot of people have done that. Sometimes you’ll manufacture and you might even license certain parts of the industry as well. So—
QUINN: If you’re licensing, too, and you have some short run success, that will help you there as well, right?
KEY: It’s the number one thing to do to take away risk. The whole thing that everybody I think is stressing, even though shows like Shark Tank which I’m not particularly wild about, they do teach some wonderful lessons. Number one, hey, do you have any test results? Have you sold any? And if you can take way that risk with a limited run, even though maybe you’re right, maybe you’re not going to make any money, but that is going to speak volumes to anybody, to raising money, do I go forward, to license it, is test the market. Ask this: will someone reach in the back of their pocket, pull those dollars out and purchase it? That is really the key to all of it.
QUINN: Right, right. Now let me ask you this, because I really am interested in getting your thoughts on this because I think maybe the answer is different when you’re dealing with the start-up or entrepreneur mentality. I always tell inventors that they are overwhelmingly likely to succeed in an area where they have some familiarity. Now, they can get that familiarity in a number of different ways, just through hard work and research and so forth. But so many inventors will come out and jump in where they are not knowledgeable, like in the baby area. They have a new baby and would love to have a “this” and they run down that whole path. But they don’t really know all the safety regulations or the industry. And they don’t really care to inform themselves. But it also seems to me that on the entrepreneur side that you maybe don’t need to be quite as familiar because there really is a different set of skills that go into success. What are your thoughts?
KEY: Oh, that’s a great question. Well, sometimes if you’re not from the industry you can look at things differently. Like with the guitar pick. We ended up selling tens of millions of guitar picks. We sold probably more guitar picks than the big guys were selling because we expanded—it wasn’t just a guitar pick for players, it was a souvenir for everyone. It was lifestyle.
I don’t play guitar, and I looked at it very differently. So I wasn’t boxed in. Now, did I know the industry? No. So what I did was I teamed up with someone that had experience. My partner Rob Stefani had been in the music business, he was a musician, he had a music store for 20 years. So he knew all the buyers, he knew the distribution, he knew everything, right? So it’s a combination. I do believe in having the freedom to think and not be confined by what has been done before you, but also studying. Either go to trade shows or ask a lot of questions. You’ve got to be as fast as you can or team up with someone in that industry because at the end of the day an idea is great, but you have to execute it. And you have to know everything from manufacturing to retail, the distribution channels, to the laws, the regulations. And it’s nice to have someone that understands that part of it.
TO BE CONTINUED…