On October 15, 2012, I went on the record with inventor coach, inventor and author, Stephen Key. To many Key is known as the man behind InventRight, which is a comprehensive 10-step program to help aspiring inventors.
Over the past several years, however, Key is becoming known as an author. Nearly two years after his first book — One Simple Idea: Turn Your Ideas Into a Licensing Goldmine — was published it continues to be in the top 50 books for small business on Amazon.com, and is #1 in small business marketing. In this segment of my interview we will learn that the book is still selling 100 copies per week, which is no small accomplishment two years later.
The reason for our interview was the impending release of Key’s second book — One Simple Idea for Startups and Entrepreneurs: Live Your Dreams and Create Your Own Profitable Company — which was officially released on November 5, 2012. This follow up One Simple Idea book is already #3 in small business marketing and #6 in home based small business books on Amazon.com.
We pick up our conversation with where many inventors stumble as they attempt to move from idea person to small business person. We also discuss lessons learned from a Big Bang Theory episode, as well as the important of taking reasonable risks, protecting your innovations (Key is a fan of provisional patent applications to start) and the importance of knowing the market for your product. For part 1 of our conversation please see: Discussing Startups & Entrepreneurship with Author Stephen Key.
QUINN: That part about the business end is where most inventors would stumble.
KEY: Yeah, they do. And these great crowd funding sites, like Kickstarter, right? Which are really remarkable that you can go out and test an idea and see people’s interest. And they’re going to put money towards your product. Which is really great, but what do you do after you get that $100,000 or $50,000, now what? So I think if you are an inventor, licensing is a great model for you. Because you’re going to let a company that already has a shelf space, that already understands manufacturing, and they’re going to do all the heavy lifting for you. So that’s really a good fit for an inventor, licensing. You do lose control. But if you just want to be creative and let someone else do a lot of the work, it’s perfect. But if you really want to start your own company, and that’s what this second book is about. It’s about taking a simple idea. Taking the necessary steps. So you are finding that one product that’s going to have a nice little business for you. You’re going to find the crumbs that the big guys leave on the table. So you can start a business that doesn’t require a lot of money. But take away some of that risk. Really know if you’ve got an idea that has legs before you get going.
So those two people, the entrepreneur and inventor are so different. And I didn’t realize how different they were until I had to wear all those different hats myself. And it’s one thing that’s really fun to come up with new ideas, right? But now what do you do? And I think, you know, I can see an entrepreneur or an inventor in a room and I can spot them out a mile. The way they dress, the way they hold their head, the way they look. You can just see it. The way they present themselves. They’re just a different breed. So this is really the flip side, the new book’s the flip side to licensing, venturing. But it’s done—there’s a lot of books out there with start-ups, and I know that. But this is not a book for the guys that have ideas like Steve Jobs, you know? Big ideas. This is for small, simple ideas. But the strategy also for this book is about once I have that first idea, and I’m paying the bills, and I’m running a little company, and I’m really happy about it. How do I keep it going? And I don’t think a lot of inventors realize any more than one product you’re going to need line extensions, you’re going to need to look down the road, you know, what do I have next? Because you always have to keep innovating to stay ahead. To keep your little company afloat, to keep people wanting a new product. And I think a lot of the other books don’t talk about that and they don’t really talk about doing the math even at the very beginning say look, is this going to make sense for me to do this? Am I going to actually put enough money in my pockets so I’m happy and I’ve got a smile on my face?
QUINN: I want to go back to doing the math in a minute. But I think to some extent that what you just said there about what’s next, constantly having your eyes opened and trying to innovate and move forward is something that obviously you’re not taught in business school either. You know what I’m saying, that tongue in cheek. But you look at a lot of the really big companies out there and they just, during times of trouble, the downturns the first thing they do is they cut R&D.
QUINN: As if looking less is going to find more. And it strikes me that this is a lesson that needs to be learned by people in business at every level.
KEY: You have to stay current. And things are moving so quickly now that stores, and consumers are demanding new, new, new. So if you look at some of the companies that have, you know—I mean, even some of the big guys that have lost their edge. You see that all the time. A company’s been around for 40 years and next thing you know they’re gone, right? So it doesn’t matter if you’re a large company or small company you have to be current and look ahead and keep innovating. And they don’t have to be innovations, but small innovations. To keep pushing out for lower cost, and my product does this.
With the guitar picks it was interesting, when we finally ran out of designs, you know, we kind of went to a point where, what do we do now? That’s when I became a busy licensee and realized, you know, I needed that license. I wanted a license in and get access to Mickey Mouse and all the library of Walt Disney characters, and it just changed our business completely. I went to a licensing show and I realized, wow, that’s a whole ‘nother area that brought us into Wal-Mart and 7/Eleven. And we became a Taylor Swift, we sold a lot of her stuff. And everything changed.
But you’re always looking ahead at what’s next. How can I stay ahead of the competition? How can I give people what they want? So I think it’s a big deal. Especially since things are moving so quickly now. So it’s one thing to start it one idea, but you just have one product idea and you think I’m gonna start this big company around it, I think you need to think twice on that. I think you have to look at, hey, what line expenses do I have, how do I build this brand, what is my next idea? And keep it going. Because once you’ve done all that work and you’ve got the distribution and you’re in the stores, and you’ve got all that, now it’s time to say, all right, what’s coming next? Because they’re gonna ask. Those stores are definitely going to ask.
QUINN: And if you don’t have what’s next somebody else will.
KEY: Absolutely. So you have to be current and we saw that we ended up being probably the large—we have more designs for guitar picks than anybody in the world and from every lifestyle, from country and western, to religious guitar picks, to girls rock, to every—and I found that we just increased our audience is what we did. But where we stayed true is that you have to conquer your first niche first. Don’t run too fast. Don’t start adding products right away. Keep them in same focus we started with. The heavy metal crowd. We conquered that, we owned that space. And then we said, all right, let’s branch out to another space. So you don’t want to run too fast.
QUINN: Right. And you see that in all kinds of businesses. The one probably most people could identify with would be Krispy Kream. They had some success and opened stores everywhere. And then they closed stores everywhere. You have to take it in bite-sized chunks, I guess.
KEY: Well, look at even Apple Computer, they were willing to cannibalize a product just to introduce a new one. They weren’t afraid of that. And the companies that are afraid to take that other step or cannibalize an existing line because something new’s coming, they’re a dinosaur. You have to be fast and willing to move on with those opportunities.
QUINN: What advice do you give to somebody who’s cognizant of the fact that they don’t want to move too quickly but they don’t want to move too slowly. Is there any kind of rule of thumb or kind of analytic or something that you tell them to keep in mind?
KEY: Yeah, I would just say, look, the first thing find out if your idea really has legs. And if you need to build a prototype and you’re on a limited budget, find a way of getting that prototype made. If it’s a local college and maybe you can get it done for free, some engineering department, try it. Or maybe go to E Lab. If you cannot build a prototype, have someone draw your idea up. And then once you’ve got this thing that really kind of comes to life, show it to some people that have been in that space.
You can try to license it to a company and see what they have to say, or show it to an angel investor, someone in town that you know that’s looking for opportunity. Those guys are brutally honest. They will pick it apart in a heartbeat. Or take it down to the local retailer that you know and say, hey, look, would you order this? I mean there’s all these little things that you can do to say, hey, am I on track? And it’s not asking your friend, it’s not doing that, it’s asking people you don’t know, or going to a trade show and show it to some other types of potential licensees, and, but, hey, am I on track? Am I thinking correctly? And then once you realize, hey, there’s an opportunity here.
Of course protect it along the way, I’m big for provisional patent applications. Especially with the new laws that are coming up. I want to thank you for contributing to the new book. But there’s ways of doing it where you’re not really spending a lot of money, right? You’re testing first. And then once you get that green light, you go, hey, I’m on here. Start to look at the manufacturing of it. Say, look, how can I get this made? But I think another really important part of this is realizing my product is going to have a fit a certain price model.
If I have a new hammer innovation and I go down to Lowe’s or Home Depot, I have to look all the hammers and make sure that my hammer is going to fit within a certain price point. I cannot be too low or too high. It’s gotta kinda be right in there. And a lot of times we don’t do that up front. We have this great idea and we don’t realize, hey, there’s that little area that it needs to fit into. If it’s too high it’s never gonna work. And then that comes back to doing the math, right? How many stores will carry it? What is the wholesale price? You know, at the end of the day can I pay my bills? Is there enough profit margin in it that it’s worth me going down this road? And I think that’s the part we all miss. We get so excited about our ideas that we don’t forecast. And we don’t really look at it. What I like to do, I tell everybody, if you have a little idea find the competitors, go to their websites, look at their store locator. They all have it on there. See how many stores that they’re in. Then do the math yourself and say, look, if I was able to get half the stores at this wholesale price, and my profit margin’s X, what am I gonna put in my pocket to even bother?
QUINN: Right. Now, are you a fan of The Big Bang Theory?
KEY: On, yeah, absolutely.
QUINN: Okay. Did you see the episode where Penny decided she was going to start selling flower shaped hair barrettes? And she made these barrettes with beads and so forth. And then she wound up getting like one order, two orders, and then all of a sudden she got thousands of orders. And she had the guys helping her to fulfill this order. And after they go through and do this whole thing they’re trying to figure whether or not any of this is worthwhile, you know, ‘cause they’re all engineer nerds. So they were doing the math just like you’re saying, and it turned out that you can make almost no money. It would be insulting to call it minimum wage even in a Third World country because of the time it took and what you could sell the stuff for. I thought that that was just a great episode. And if you haven’t seen that I would suggest you find it online.
KEY: Well, I think that’s typical to tell you the truth. I think there’s a lot of people out there that just get so excited, and they should be excited. But they go down that road, they love it so much and then at the end of the day they realize, jeeze, you know, I’m having a hard time selling it. I don’t understand the business. Guess what, maybe I’m not gonna make any money. I think it’s the best opportunity in the world today, number one, it’s easy—the playing field is level. I mean, there’s ways of getting your message out to a lot of people with social media. There’s this opportunity that you don’t have to sell in bricks and mortar, you can sell around the world. I mean, you can do all these things today for the first time. And then manufacturing sourcing, it’s easy to find sourcing overseas and here in the United States you got that down. I mean there’s all this stuff to stay up to speed so quick. There’s mentors out there. There’s great classes, and this book. There’s everything for you to learn about an industry basically overnight if you study hard enough. You can go to trade shows. I mean, everything’s available at our fingertips. But it does take, it takes passion because you’re going to hit a lot highs and lows. It does take some time. But you have to be onboard about it.
QUINN: In the inventor space we always tell people one thing which is find a support group. Find a local inventors group. Like the one you guys operate out in the Northern California area. Where would you send an entrepreneur or a want-to-be entrepreneur? Or somebody that has this idea. Is there a support group or group of people that they can join locally or online or something like that?
KEY: Well, you know it’s really funny that you mention that. There are a lot of entrepreneurs and inventors groups across the country. And I’ve seen quite a few in the last couple years. And they all do things a little bit differently. But I think if you don’t belong to one you should. Because you’re gonna find someone there that has more information than you do. And you’re going to find them bringing in speakers that are going to help you along the road. I think you have to do that. Number two, there’s a lot of local colleges that are teaching entrepreneurship. I mean, you should take a class, meet the professor.
Absolutely find out a little bit more about it and investigate. But also find someone that’s doing something maybe not the same thing that’s in that space that’s running a small business and go visit them. And find a mentor. Find someone to say, look– find someone that’s got a lot of gray hair that’s been in the battles for a while, that’s been up and down, that’s willing to share and just ask. And be polite, of course, but ask them about themselves and basically they’ll probably never shut up. And you learn so much about the whole process. But at the end of the day you have to jump in, right? At the end of the day you have to take that leap. And it’s risky, it’s scary, it’s exciting, your hands are gonna be sweating.
I’m all about, look, let’s take some small steps here. Let’s do the homework, let’s find small ideas, simple ideas, inexpensive ideas so we can test the waters without a lot of risk. And so that’s what the book is really about, is how can we start small. How can we create a profitable company on a simple idea? How do we compete against some of these other companies? Because I love today, being small is being fast, agile. You’ve got these great tools at the USPTO. Everything is at your fingertips. These guys are slow, and we can take full advantage of that. So I sometimes when people say, well, there’s a big disadvantage, I think that’s wrong. I think we’re the ones that have the advantage. People and companies want to go home at 5:00, when you’re an entrepreneur and inventor you’re thinking about this 24 hours a day. But you have to build your team, you have to be smart about it, you gotta protect it, you gotta do the math, you’ve got to test it, and then pull that trigger.
TO BE CONTINUED…
In the final installment of my conversation with Stephen Key we will discuss, among other things, when you know it is time to quit your day job and move full-time into the wonderful world of being an entrepreneur.