Bob Serling - Inventing Products and Licensing Them for Evergreen Royalties

Boom, boom, boom, boom, boom.

What's up, everybody? You're listening to the Hustle and Flow chart podcast with your boys, Mount Wolf and Joe Fear. Good morning, Vietnam.

Wow.

I assume somebody in Vietnam's listening.

Probably. Hey, Vietnam, remember. Remember those commercials back in the day? We were young lads and we would be watching. Usually these came on in the middle of the day. So, like, whenever we ditched school or, you know, like, told our parents we were sick or had to sort of throat.

Where are you going with this?

I'm basically. Remember these commercials? The inventor commercials.

Yes, I do.

The wheel and the caveman.

And those are still on to this day.

Dear God. Do they look the same? Like, how dated they were and probably.

I don't remember them back in the day. I just know they're still recently on where they're like, teaching you, like, pay us X amount of money and we'll show you how to get your invention made.

That's all I knew of what inventions and inventors are.

Yeah.

Is that thing like. And we had some other friends that have done, like, you know, have created products, done Kickstarters and all that fun stuff, but that's not what Bobbo is doing.

No. And by the way, this is the Hustle and Flowchart podcast that you're listening to. I forgot to, like, tag it on the intro. So if you forgot what show you're listening to, this is Hustle and Flowchart.

Okay. Yeah.

All right.

Check that radio dial.

Continue. What is Bob teaching us today?

So Mr. Bob Serling is gracing us with his praise presence for the second time on the Hustle and Flow Chisel podcast.

Hustle and Flow Shart.

Jesus. That's Matt's issues.

Yeah. So Bob came on here and he. So if you wanted to dig into Bob's history, his. His. His story and kind of all this fun stuff that he's done in his career being an entrepreneur. Go check that out@evergreenprofits.com or check it out in your podcast app and look for Bob. But this one, we dig into inventions and how this could actually be really good for an entrepreneur who has like. And this is us. So it's not like demeaning anybody but, like, squirrely brains, that just like shiny object syndrome or I want to test this or blah, blah, blah, you know, but can't really. Or don't. Don't say can't, but aren't really stoked to run a business or manage a business like day to day ops where it gets a little boring and draining.

Yeah. No, this allows you to sort of dive into other industries, other niches, test things, have some fun with it.

Yeah. He gives us, like, a perfect way to capitalize on our squirrely brains as entrepreneurs.

It's also a great side hustle, though. We talk about how, like, if you are in a day job and you want to start dabbling in some entrepreneurships and some building a business on the side, the inventing stuff is a great way to do it. But first, I want to talk about what this is not. This is not how to get an idea for a product. Go and get it a prototype made. Spend thousands of dollars on a prototype. Go and get a trademark and a patent on the thing for thousands of more dollars. Spend years and years and years to get that patent process followed through and then shop it around and hopefully maybe sell your product or get a royalty deal on your license. We're not talking about that. We're actually talking about how to come up with an idea for a product and. And basically sell that idea to somebody within, like, days or months.

Yeah. And the way when I was listening to Bob, so Bob's got so much history when it comes to inventing all sorts of different products, all the way from insurance or, you know, plans and products.

Skateboards.

Skateboards and kids toys. He's worked with guys like Tony Hawk and all these big companies. So it's like when I was. We've known Bob for a little while, we mastermind with him and all that, but it's like, I never got, like, a good picture of, like, what is this invention process? And then not only just invention, like, the creation and finding these gaps and all that stuff, but also, like, licensing and cashing out on these things and getting paid for years for your work that you might do part time. And that's why, like, when all that came together, I'm like, oh, my God, this is like a side hustle. You could be an inventor in a space that you have passion around or have some knowledge, maybe.

Yeah.

So it's. Yeah, it was really cool. And I think it's just a good use of. If you. If you feel like you have some creative stuff going on and you want to, you know, bring a product to market, this is a good way where you don't have to do all that. Yeah. And we're expensive stuff.

We're talking about how to do it all, how to find the potential people to buy or to license and pay you royalties and how to structure the royalty deals and how much you can make off the royalty deals. I mean, we really, really dive in deep on it. And there's a lot of info, a lot of stuff that you need to understand in this one. A lot of stuff that you're probably going to want to take notes on.

You're probably going to want to hurt your hand and, you know, it's going to really hurt after you use, like, scribble all these bullet points because, you know, Bob just rattles them off fast, you know. But we got your back.

Yeah. We took notes for you, actually. Stephen took notes. Thank you, Steven. So Stephen took notes on this episode for you. And you can go get those notes. All the tips, tools, strategies, resources, tactics, all of it broken down into notes that you can easily follow along to. Just go to hustleandflowchart.com comp c o m P short for companion.

You gotta go there quick, though.

Yes. You gotta go there quick.

Gotta be speedy. So once this thing drops, the episod episode drops. It's there for about a week. Then after that, it's some different ones, different comps.

Yep. The notes are available for a limited time after this episode goes live.

So go to hustleandflowchart.com comp hustleandflowchart.com Comp.

C O M P. Get those because they're gonna go away. You can still get them, but they're gonna go away.

You'll get other free companions, but they'll be. Not for this show if you're after a week.

Right?

Yeah.

So go.

There's ways to get them.

Yes, Go get them.

Go get them.

Let's go talk to Bob.

Hey, Bob.

Hustle and flow. Chisel. Yes.

Shart everything. Bob, you're back.

I am back. Back with you guys.

Yeah, man. Round two. Is it round two or three?

No, this is round two.

We just talk a lot.

So I feel it's two or it's round four if you count the two times I interviewed you guys for my podcast.

Good point, good point.

Somewhere between two and four, depending on your math skills.

Well, how you been doing? I know.

Been doing fine and been watching all the activity on your guys end. Things are just blowing up for you. That's great.

Yeah, I know. It's, you know, and occasionally we'll also exchange some bird pictures. You know, business is great. Yeah, that's good. But you know, we're really focused on the birds, right?

Absolutely. And you gotta be, you know, this is breeding season and you get all that activity.

Right. Yeah.

You know, birds.

You would love that. I think I would, too, but Matt would Be like, okay, you guys can have fun.

I look photography. I've just never been, like, the bird photographer. I could see eventually maybe getting into it.

Yeah.

Yeah. Well, you know, it's funny because I always said, well, I don't care much about landscapes, but I saw these pictures of this woman. I belong to the Sierra Club's photo group, and there's a woman in the group, and she shoots night sky landscapes. And she just had a picture of the Milky Way over the desert in Anza Borrego, which is our local desert here in San Diego. And it was so amazing, I started thinking, wow, that's something I'd like to learn.

Yeah. Those are what, long exposure?

That's my favorite.

That's a short exposure. You only use a long exposure if you want to get that star motion where they show streaks.

Yeah, I love that.

Yeah. I mean, that's what I love. I love night photography. Specifically. I like urban landscape. Night photography, that's like my favorite. But I also like to do landscape. Just like night landscape photography. We actually go out to the desert quite a bit. And I've taken a lot of photos out in the desert, too. But that's. I love it.

Yeah.

I just never really got into birds. I don't know. I've had a. I don't know about them, I guess, like, if I see a bird, I couldn't tell you. That's a rare bird or that's a bird that hangs out there all the time.

I've honestly learned a lot from you, Bob, and that is the God's honest truth. It's like these hawks. I'm like, you know, and this is for everyone listening. I'll snap a picture and send it to Bob. I'm like, what is this? It's like this random hawk.

And then he cc's me on it just so he. So I know that he's sending Bob bird pictures.

That's right.

I know you enjoy, but you never respond.

It's our own private bird network.

That's what it's become.

I love it. Oh, man.

Now we actually have to give you probably quite a bit of credit for the success of this podcast.

Podcast, to be honest, I do believe so.

Because you, you know, we had you on the podcast, and then after having you on the podcast, you connected us with, like, a handful of people, one of them being Roland Frazier, who went on to connect us with a bunch of people. But I feel like you were sort of the. The top of this, like, pyramid scheme of all these people that we got onto Our podcast.

You're the Godfather. You're.

You're at the top of the. You're at the top of the pyramid right now.

Yes, I'm the Godfather of Connectus. Well, you know, it's. It's like anything else when you meet people and they're doing something and it's really good. I hate to do this, but I'm going to be serious for a second, and it's really good and it's really quality and it's different. You want to share that with people. And, you know, I. I'm a fossil now. I've been around for ages and I have a lot of connections. And so I just asked you guys, do you know these people? These people, these people and those you didn't. I connected you with because I really like what you guys do a lot. And in turn, you guys connected me with some good people, too.

So it's difficult to connect you with us because you know everybody, but we're like, we'll try our best. Promise.

But yeah, I mean, and, you know, you take someone like Roland, and I've known Roland for many years before he was quote, unquote, Roland, you know, before he was so well known, but now that he is that well known and he gets, you know, hit by a lot of people. Oh, can you do this? Can you look at that? I'm very.

You know, very selective about who I introduce to him, and I'm very selective about who I introduce to anyone as well. But when I know somebody is as busy as Roland, I'm very careful. And I knew that he just loved what you guys are doing. So thank you. Yeah.

Sorry that hurts you so much to say that, but I'm just kidding. That was awesome, man. Thank you.

Well, I mean, just in the time we've known each other, you've. You've done a lot, and you've. Obviously, your history, you've done a lot. You know, you and I worked together super briefly a long time ago.

Yeah, that's right.

Yeah. And doing some design work on PDF stuff. I forget the exact process.

Yeah, yeah. You had designed a PDF for one of my licensing programs on licensing intellectual property.

That's what it was. So that's perfect. Segue into this whole conversation of licensing and inventing and stuff.

Yeah. If anybody's listening into this and they're looking for the backstory and how Bob got into what he's doing now, we'll link you to episode one, where we dive pretty deep into that one. This one I want to just kind of like jump in and get right into the, into the cool stuff that you're working on.

Yeah, yeah. So things have changed probably since the last time we chatted, huh. On the podcast now kind of with the focus or back into the focus of inventing, more or less.

Yeah. I mean, inventing is one form of licensing and I am focusing more on it for a couple reasons. One, because I really enjoy it and two, because it, it's massive. There's a lot of money in it and it's easy to do. It doesn't take any real training.

So I really enjoy it. And I think it's also just the perfect fit for any entrepreneur or business owner.

Yeah.

So where do we start with this topic? Like if somebody's thinking about doing, you know, doing inventing or they have an idea just in their mind, maybe they haven't prototyped, they haven't done anything yet. Maybe they just got this idea, something that if this was in the world, this would be really cool. What do they do with that idea? Where's the starting point?

Okay, so let's talk about that in a minute. Let's start though, for people who may not have ideas but have great skills and don't necessarily know it. So let me just set the stage a little right now. Just in the United States, major corporations pay outside inventors or product developers. And it's the same title. Usually when you work in it professionally, you call yourself a product developer because an inventor sounds like a guy who lives in his parents basement.

But major corporations pay $14.3 billion in royalties to outside inventors.

Wow.

And a lot of people don't know that. In fact, they award a lot of money. They hold contests to find new product ideas. And a lot of those contests nobody enters because they don't think they can do it. But the truth is, anybody can. Everything I've ever invented for a bunch of different markets, from toys to software to insurance products, I never had any, any previous experience in those markets. But what I had were the two skills that every entrepreneur has, which is the ability to solve problems and the ability to spot opportunities. And a lot of times opportunities that other people overlook. So that's why I always say that it's the ideal side business for any entrepreneur or business person because it doesn't take long. It can easily be done part time, a few hours a week. The royalties can be huge when something hits. But again, it doesn't take any special skills other than being able to see a problem and come up with a solution or see an opportunity. That hasn't been capitalized on and run with it that way.

So when you're saying inventions, then it's not just physical things, like what? You know, doing some games and whatnot. You know, stuff you'll find in the store. But it sounds like you said insurance programs as well and software.

Yeah, I invented an insurance program, and I, you know, I don't know anything about insurance, which is funny because now I have a second insurance program that I'm developing. But I was working with a company who trains insurance salesmen or salespeople, Salesmen, sales women. And they said, well, gee, we're having trouble with our product. And, you know, a lot of times if you tell people you invented stuff, they're fascinated by that. And just kind of the end of the engagement, they said, we're having trouble with our product. Could you help us? And in that avenue, again, it's called product development, they said, could you help us develop a better version of it? So I said, sure. And I did. And we sat down and we brainstormed some stuff and. And we came up with a better version that they then sold. And I made a night. That one I did for a fee I didn't have a royalty on. But, you know, again, I never had any experience. But the process is the same. The process of looking at.

Problems and how you solve them or looking for opportunities is the same. And so if you have that, which all us entrepreneurs do, then you're 90% of the way there, right?

Yeah. Solving problems and spotting opportunities. So are there some tactics for both of those things? I mean, us as marketers and business owners?

Yeah, there are. So this ties back into what Matt was asking about. If you have an idea, what do you do? Well, traditionally, if you look at the conventional inventing process, or you talk to a patent attorney or you go to an inventors group meeting, they'll say, oh, you got to get a patent right away and you got to build a prototype. That's crazy. Most people waste the US Patent Office. I think their statistic is that Most inventors spend $45,000 and up between their patent and their prototype. Now, the sad part about that is they also say that less than 2% of patented products ever make it to market, and that's because people are going about it the wrong way. So if you have an idea, like Matt said, what you want to do, all the research you ever need is out there, and it's there for free. And Amazon and Google and various trade associations have spent tens of millions of dollars to Compile this research. So say, for example, I want to invent a new action toy for kids, which is one of the categories I invented. I don't have to even think about what to invent. All I need to do is go to Amazon.

And put in a search that says top 50 action toys, children ages.

8 to 14. And it's going to spit out a list and I'm going to look at those toys. Then I'm going to take my idea and I'm going to measure. So if I already have an idea, I'm going to measure my idea against those things. There's the best. That's what people are paying for. I don't see something that's even remotely close to what my idea is. Then I'm swimming upstream and I'm going to waste a lot of money. But if I see something even similar or some feature of something out there that I can adapt to my idea, then I've got something good going for me. Now that is if you already have an idea.

But my approach is I don't go in with an idea of a specific toy. I go in with an idea for a market. So again, I'll say, okay, well, I want to do an action toy for kids, or I want to do an educational toy, or I want to do a game, whatever it is. I'm going to go to Amazon and Google.

And Google Shopping especially and put in best selling action toys, kids ages 8 to 14 or whatever that range is. It's going to put all those things there. It's going to show me everything. Now here's what's cool. And this is why companies are always looking for things. Whenever you have any product, it doesn't matter what it is, you're never really buying. It's never static, it's always going to be improved.

Look at the iPhone. They come out with a new iPhone, what, every 18 months, something like that. Or look at almost any product that you buy. But mundane things, look at your barbecue. Well, next year there's going to be a new model of that barbecue and two years after that a new model. As technology changes and you know, all of a sudden there's going to be Bluetooth controlled temperature gauges and stuff. So when I go out and I find the top 50 best selling toys in the category I'm looking for, I'm then going to probably look at the top five and I'm going to say, what can I add to this? And this is where opportunity spotting comes into play. What can I add to this? A Small improvement that will make it better and more fun for kids. And that's what I'm going to try to develop and license to the company. And who am I going to license to? I'm going to license it back to the company that's selling $60 million a year worth of that or their nearest competitor.

Okay, that makes sense.

It makes it a lot easier. So I've rambled on for quite a while.

I'm curious. I guess this is probably where you're going to go next anyway, but I'm curious. Let's say you find this action toy and you have an idea to improve it. Are you going and getting new prototypes made up, or are you just kind of like mapping out what the new idea would be and then patenting the idea and then selling the idea? Like, I'm curious where that goes from there.

I guess that's a great question. So the two most costly things that just sink entrepreneurs are patents and prototypes. So real quick on this season of Shark Tank. A guy comes on and he's got this little handle for carrying a baby seat. And it takes the stress off your arm. And they're looking at it, and the sharks are looking at, oh, that's cool. That's a great idea. And.

They say, okay, so how many have you sold? And he said, well, we've sold. I don't know what. It was, like $30,000 worth. He said, what have your cost been so far? He says, I put in $750,000 for my patents and my prototypes. One of the sharks stands up and says, you know what? You're dead in the water. Here's why. And he walks up. It was Robert Herkovic, who. He and his wife recently had twins. He walks up and he takes the baby seat without the device, picks it up. He strings his arm through it and picks it up. He says, this is how our pediatrician showed us to pick up the seat. That solves the problem you're trying to solve, and we don't have to pay anything. And within seconds, it was like dominoes falling. Every shark said, I'm out, I'm out, I'm out, I'm out. But the point is, he spent $750,000 on that, and he was out that. So when you develop based around something where there's a true need to improve it, and when I mean true need, I'm saying that the company wants improved versions of that. Number one, you don't have to patent, because, for one thing, probably 40% of all products are not patented. So you can always check that if it's not patented, you don't need to patent it.

Secondly, they've already. They hold the patent, so there's nothing for you to patent.

True.

And then in terms of what you develop.

That one's a little harder to answer. Matt. It depends. If it's. You want to prove that what you're going to do will work. If it's obvious, all you need is a professional sketch that shows.

That shows their product what your addition is and has little call outs as to how it works. 90% of the time, that's what I use. If it's more complicated, then I'll actually buy their product, say it's a kid's toy, and whatever my enhancements are, I'll find on other products that are similar. And I'll take a Dremel and cut them up and a hot glue gun and glue it together. So for under 100 bucks, I can make a demonstration model. Then I'll add that demonstration model to the professional sketch. So the sketch shows what a much more refined version would look like than my Frankenstein version.

And especially when you're licensing something back to a company that already has that product, it's going to be easy for them to understand what you're suggesting.

Gotcha. So from like a, like a legal standpoint, then if they already own the patent on it and you kind of improve upon what they've got.

You know what stops them from. If you're just to show them the sketch or show them the version that you made, which just stops them from going, okay, cool, we're just going to make that and sell it. You know, how. How are you going to. How are you getting something out of that transaction?

Okay, so first of all, most companies are honest and ethical. As long as you're in the Western hemisphere, if you're. Unfortunately, if you send your stuff to China to be manufactured or to the Philippines or somewhere and you're not using a bonded agent, and this goes way, way beyond what we're talking about here today.

90% chance you're going to get ripped off. But in the Western hemisphere, and let's talk just about the US because that's where I invent and that's where I really know, number one, there's nothing in it for them to rip you off. They're only going to pay you a 5% royalty. If you came up with a great idea and then they steal it from you. First of all, they're gonna think, wow, if Matt had one great idea for me, he May have two or three more down the line. So they're happy to pay you that 5% royalty.

You gotcha.

True. Yeah.

Okay, so that's the one thing. But you're also legally protected because you have a paper trail or an electronic trail of emails. And the documents you sent that show that you're the originator of that idea and, and that you showed them that idea. If they then take that idea to market without you, and you've got this email and text communications back and forth, it's easy to.

Prove that you were the originator. And when you do that.

They pay what's called treble damages, which is 300% of the money they made on it.

Oh, my God.

Wow.

They want to risk 300% or did they want to pay you your 5%?

Yeah, that makes sense.

Interesting.

You know, I have, I've actually been in scenarios before. This is more in, like the software space and stuff where I've seen somebody's software, I've contacted them, I've told them, hey, here's a cool feature that I think you should add to it. I know this is not totally apples to apples, but, you know, I've told them, here's a cool feature that I think you should add to it. And then they would say, cool, thanks. We're probably going to add that in two weeks later, that tool that features in there. And I say, hey, so you added that feature based on my advice? And they say, no, we were planning on doing that anyway.

Well, yeah, that's why the way you would approach them is, hey, I've got, you know, I've been using your software for four years. I program myself. I'm, I've been a developer. I have a couple ideas I haven't seen you do that I think will be really beneficial for you. Are you willing to discuss them under a confidentiality agreement? And software is different. You need a confidentiality agreement with software.

Yeah, because with software it is pretty easy for them to say, cool, that's a great idea. We were planning on adding that anyway and then just kind of cutting you out of the mix.

Yeah, and it depends on the size of the company, too. If you're working with a mega corporation, let's say you came up with some addition to QuickBooks and they're not going to cheat you. But the local software company that's doing a half a million dollars a year.

They'Re not paying their bills as easily. They may be a little prone to take advantage.

But.

And that's why, when, when. Well.

The Short explanation is you want to tell them you have an idea and then present it under a confidentiality agreement.

Yeah, just make sure you're good there.

Because obviously now you have some good relationships built in a network around these potential companies you license this to. How does a pitch process look like for someone who is following what you're saying here? Is there a way that you approach these companies to get on the radar?

So with major corporations, what you'll find is that if you go out to their website, you look for inventors relations or product acquisition and they're all going to have that. Now normally they want you to fill out a form and that's what you don't want to do because that's going to go to a low level screener. So what you want to do instead is spend a few minutes searching LinkedIn. Usually and other places there are other paid services where you can get people's contact information and you want to find out. Now the cool thing is that with big companies and any company that's looking to acquire new products, they don't hide that, they advertise it and they'll put their contact information in their LinkedIn profile. So.

Just about two weeks ago I was looking at a new toy company who has some interesting toys and they're doing, they're probably doing about.

$750 million a year in sales, which is kind of a medium sized, low end, medium sized toy company. All I had to do was go to the LinkedIn page for their company and I found.

The name and email address for the head of product acquisition within about 30 seconds. If I can't find that, then I would say I would go into Google and I'd search on news for ABC Toy Company and then that's going to bring up all their press releases and in there they'll almost always quote either the head of operations or the head of product acquisition or what. Because when they're talking about their products and they want to roll them out and they want to get press, it's the product acquisition people that talk to the press.

And it doesn't take long. You can do all that in five minutes because as I said, they're not hiding it. They want that information known because they want bonafide inventors and product developers to contact them. Sure, but you want to go directly to them because if you go through the submission form on their website, then number one it indicates that you're brand new and don't understand the game and number two, it goes to a screener and screeners are never your best option.

Yeah. And that's the case with almost every. Every company out there, for sure.

Yeah. Now, are there any, like, specific, like words that you use or any specific messaging that you'd like to make? Sure. Goes into that initial email pitch.

No, I keep just, I keep it really short and I just say, you know, I've been a fan of your toys for a long time and I've seen the growth of this and that. You want to do a little research or you can even say, I just recently found out about your company. I'm really impressed, particularly with these two or three toys. I've got an idea for this one that I think would really make it a lot more fun for kids to play with. Would you be interested in seeing it? And that's all it takes. It doesn't have to be any more than that.

Got it.

That's a copyrighted pitch, by the way.

Only if we're able to reproduce those in the notes.

That's all it takes. Because you're not. I'm joking, of course.

I know.

I know.

Because it's nothing more than that. It's just a conversation. It's like if I was to come to you and say, hey, I've got an idea of somebody who'd be a great speaker for your podcast.

I've got four or five you want to talk about it. And oh, by the way, I'm friends with Sue Smith and you guys know sue and I know sue, then you're probably going to say, okay, yeah, I'll talk for five minutes and see if this is worth it or not. So it's just a human to human communication, really.

Yeah.

I really think this is going to kind of blow some people's minds because I think the general thought on inventing is you have to. You have to be a super creative mind, a super creative thinker who's constantly got new ideas. Once you have an idea, you have to go and get that idea prototyped and patented and then maybe put it on Kickstarter to get some interest. And then once it's gone through that Kickstarter process, then you go through the round of raising cat. And, you know, I think that's what people think of when they think of inventing is that whole long, arduous process that could take years and years and years before anything comes to fruition and you're actually in profit.

Yeah. And that's the typical route if you're going to manufacture something and sell it yourself. But look at all the time and effort it takes to do that. And if you really want to have your ideas stolen, put them out on Kickstarter.

Do you ever use that as a research spot or is that too unproven.

Or every foreign knockoff company in the world watches Kickstarter and Indiegogo and all those with a keen eye, and they're out there and your stuff is being knocked off before. Before your campaign has even raised 10 bucks.

Yeah. Faster than you could produce a prototype.

Whatever it is, think about how it mitigates your risk. If you look at a product that's already selling well and you invent an improvement for that and you take it to that company, they have all the tooling, you're not going to pay for any of that. So before the call, we talked about this one toy I developed. And, you know, I did a sketch and a crude glued together model, like I said, and my entire investment was about $130. And so we showed it to them. And this was a branded toy and it used the branding and names of big famous skateboarders, the most famous being Tony Hawk. But then there was another company called Zero, which was as big as Tony Hawk at the time. And there were six other ones. Well, just the licenses to deal with Those people were 20, 30 million dollars that the company paid for, not me. And then they put, I think they put 1.2 million into manufacturing it and another million into advertising it. And that was all before the product ever hit store shelves.

All of that out of their pockets, not yours.

All of their pocket. My out of pocket was $130. I didn't run any of the risk. It didn't take me years to learn how to manufacture. I didn't have to hire it. Their attorneys updated their patent. They sent an engineer to China to work with their manufacturers. And this was an improvement for one of their existing toys. They sent one of their engineers to China to work with their factories to create the molding for all that, all this stuff. I mean, there were literally probably 60 people on their team behind the scenes working on doing all this stuff.

So are you a part of that process? Are they consulting with you throughout it all?

Nope.

Wow, that's cool.

Very little. They'll show you stuff because they get a kick out of it too. And so they'll send you updates and say, hey, look at this. We, we just completed the design for the packaging. What do you think? And sometimes they will ask you, like, I named that toy as well as developing it. And they also used a photo that we had Created of it. And they'll say, is it okay if we use the photo? But they love the name and I included that in it. And so they keep you up to date. But those did. I mean, I don't know anything about mass manufacturing. They never asked me about that.

That's why. And this is a licensing relationship is what you're describing here, right?

Yes, exactly.

Got it. So describe that really quick, because before the call, I thought this was cool and I wrote it down. You said all of this is really great for entrepreneur brains, like everybody here and those listening, because it's like the shiny object syndrome. You want to keep solving problems, finding gaps, and then doing more of that forever. Like running a business and manufacturing. Not that fun.

If you're running a business, the shiny object syndrome will kill you.

Yeah.

Oh, yeah. You can't jump from thing to thing to thing like we all do.

Sure.

Because we have creative minds. But if you're developing products, you want to jump from thing to thing to thing, and you have the opportunity to. And it doesn't hold you back. It actually advances you because you're not doing the manufacturing, the marketing, the shipping, the customer service and any of those things, you have time to devote just to that creative side of it. And that creative side benefits from being able to see more and more opportunities and more problems that can be solved. So.

You know, I mean, we. We jokingly refer to it as shiny object syndrome, but with something that is a detriment if you're manufacturing or just running your own business is actually a great asset if you're licensing. Yeah, that's what.

That's what sounded so cool is because you could stay in creation mode all day long. And for us entrepreneurs, you know, typically that's the. That's the lane we want to stay in and everything else. So licensing. Should we even touch on that now? Or do you want to get back.

Whatever you want to touch on?

Before we go there, I'm curious real quick. Are there any specific niches or industries that you are kind of excited about right now? I know you talked about toys and insurance. Are there any other ones that are kind of like sort of hotbeds for this kind of thing?

No, that's what's cool about it. First of all, I always tell people inventory for a category or a market that you either already have experience in or that you enjoy. And so for me, I like gadgets and toys. So household gadgets, toys, insurance, I just fell into totally by accident. But, you know, I thought, well, gee, here's this other idea that could be really big, might as well put it out there. So I work mainly in, in toys and household gadgets more than anything else because I enjoy them. But like I've got, occasionally I have a mentoring program and I don't take many people into it, but maybe a couple a year. And the one guy, he really loves cars and automotive accessories. So. And that's a massive market.

It's huge.

So if you love pets, that's a massive market, you know, so probably anything that isn't a highly regulated market. Another way. So food products are very hard to develop for because before a food company will even talk to you and you have to provide them with laboratory testing that shows it's safe, it's non poisonous, it isn't choking, it is this and that. And those tests are going to cost you anywhere from 20,000 to $75,000. So really only there are a few companies that do food development, product development, and they're very specialized and they're well funded.

That makes sense. Yeah. Food is a tricky industry to be in. And supplements as well. I know, it's a very similar, expensive, long process. You're like, yeah, exactly.

Anything that goes in your body.

How about bird inventions though? You're all about bird.

You know, you got to look at the size of the market.

I love photography and birds. It's a minuscule market.

So I hear birds don't spend much.

That's right. Bird doesn't spend.

That market's tiny.

I mean the real answer. And that's a great question question because it's not like there's a hot market. So apps aren't a hot market, but it might, might be hot to do an app for an industry that you really like and there isn't that good nap out there or there is a good app out there, but you see a problem that that app isn't addressing, then you send them that little email that we talked about before that Matt asked about, said, hey, you know, I've been using MapMyRun for the last six months and I really like it. That's one of Under Armour's apps, by the way.

Right, I remember that one.

But there's.

A couple features I think you could add that would make it even better and I'd love to share them with you. Do you license this type of stuff from outside developers? So you let them know right there by asking the question. So it's not. Yeah, yeah, we're, we're always interested in ideas. Just send them, you let them know you Want a licensing arrangement right up.

Right up front. Yeah.

I mean, you know, people might look at apps and say, oh, it's a hot market or it's a saturated market, but that's the wrong way to look at it. You have to look at apps within the area that you're focused on that you really enjoy working in.

So when you're spotting these gaps, I'm curious, because you probably have a good eye and everyone should be. If you're dealing with the markets you're passionate with or knowledgeable about, are there specific types of indicators or gaps that you're looking for that are just no brainers when you look at these current products out there that you want to improve?

Yeah. I mean.

There'S multiple levels of looking at them. The initial level is just looking and say, okay, what could I do to this would either make it better or make it more cool or more fun or easier to use.

Okay.

Sometimes things will just jump into your mind, obviously.

Yeah. So knowing the market really is going to help those become a lot more obvious.

Right. Then I have a proprietary process that has 37 questions, and I'll go through those.

No, no, I'm not saying I'll go through them here.

It might take a while, but I.

Go through them when I'm looking at a product, and those stimulate some ideas.

So what are a couple of them? Do you have them off top of your head?

Yeah. Yeah. So.

One that I always like to ask is.

It'S a pair of questions that we call good cop, bad copies. What would be the best thing we could do that would make this so much fun that every kid would want it? And what's the worst thing we could do now? And this is interesting.

I like that.

So that when you say the worst thing. Well, what's the worst thing with children's toys? That they're a swallowing problem, that they could get burned, that they could get cut, that they could get maimed. All the things we enjoyed as kids that we're not allowed to do anymore.

Dang it. Lead paint can't lick the pit. No.

Right. But that really is how I developed my toy was with that question, because I thought, well, what a young boy. So there was this existing skateboard toy. There are these little plastic skateboards that are about 3 inches long called fingerboards, and kids slide them with their fingers and they do.

That's what I was looking at. And I thought, what would be the worst thing I could do? And so I immediately started to think, well, what did I like when I was A kid that kids can't do anymore. I like chemistry sets because they came with stuff that you could set on fire and you can. You can make gunpowder and it would explode and all these things. I thought, well, the way you stop a skateboard, whether it's a toy or a real skateboard, is you drag the tail and it scrapes and that creates friction. That stops it. I thought, well, kids love fire. What if I could make something that when they dragged it, would shoot off a bunch of sparks off that tail? And I started looking into it. And so the next question, One of the 37 questions, is, what is this like? And I thought, what is this like? What toys do that? Have you ever seen those little things that they use at birthday parties and New Year's Eve? It's got a little plunger, and you press it and the wheel spins and it shoots off sparks.

Sure. Yeah.

I thought, if they're doing that and they're selling that, it's got to be a cold spark that can't hurt kids. I can adapt that to the tail of this toy. So those two questions, the one I said, what's the best thing I could do? That didn't stimulate any ideas. What's the worst thing I could do?

That's where the good.

Something damaging. But then how do I take something that's damaging and fun and make it non damaging? And that's when I said, what's it like? And that's one of the other questions. What is this like? And it doesn't have to be what it's like. Within your own category, is there anything that's similar? It doesn't even have to be a toy. It could be, you know, a device used in some other hobby or discipline. But that's what I thought about, was those little pinwheel things that you plunge. And I knew right there, I mean, that that creates a cold spark. It can't be that hard to do. And then I went out and I. I got some stuff that sparked, and I bought some of these skateboards and a Dremel and some hot glue. And oh, by the way, when I said I spent 130 bucks, that included buying the Dremel and the glue.

You didn't have one of those. You weren't an official inventor by that point.

Yeah, I wasn't into the toy dissecting business yet.

Wait. And so that exact. This is kind of blowing my mind right now because that's just two of these 37 questions. You're saying three of them? Yeah, yeah. That was three yeah, that was three. Yeah, I guess. And then just the combination of that. Is there a process that you do after you have these answers where you can now mold those in together, or is it like a gut thing? Thing like, oh, this is the toy or this is the concept?

It's not really a gut thing because I had never developed a toy before. I didn't have any experience. I had no experience in the insurance industry when I developed that.

So. But I didn't really need much beyond that because, number one, I knew that they were selling like $15 million a year worth of these skateboards.

They were really popular. 15 or 20 million dollars a year. And I knew that there was another toy that created a cold spark, so I didn't really have to take it beyond that. I knew I had a concept that I thought was really cool now. I did. I did. So I live in San Diego, close to the Encinitas ymca, and Tony Hawk and a couple other skateboarders developed the skate park there. So I went over to the skate park and I took my little toy model over there and I showed it to the kids, and they loved it. Right. And.

So, you know, I did a little shirt sleeve research, but I don't know, I kind of intuitively knew, just having been a boy who loves stuff that made rude noises or smoked or sparks or caught on fire exploded, that I had something that was a good idea.

Bob. Nothing's changed, by the way. Still do all of the above.

Do you still wander around the YMCA trying to give little boys free toys?

Hey, you know, that sounds funny. I have to be very careful because a lot of times I'll do my initial research on Amazon, but then I go into toy stores and I walk the aisles, and I want to see how people are interacting with the toys that I think are hot. If there's a lot of business and if you spend a lot of time in a toy department and you're an adult on your own, after a while you start getting some funny looks.

I haven't stopped laughing through.

I'm just getting these visuals as you're still talking about.

You know, it's really a shame, but I can't give out candy anymore.

Halloween, you go away somewhere. The house is closed. Well, I'm just. I'm still blown away that this. This is like you just laid out the entire thinking process and it only took a few questions. So you answered the question. My previous question about your 37 question process.

It kind of circles back, Joe, to what I said. It isn't rocket Science.

That's what I'm loving about this. All.

You don't have to go get a degree in industrial design or anything like that. And all you have to do is watch Shark Tank people come on with all these ideas. Some of them are terrible, some are amazing. And they're not professionals. They never went to design school or, or. And they're not industrial engineers or mechanical engineers. I mean, some of them may be, but they're just people who have ideas. And that's what's cool about this. If you're an idea person, then it fits in perfectly with creating products.

To license to me, I would never want to manufacture a product because then you. All of those costs, all of the risk and all those headaches are on you.

Yeah, no, the licensing. Just to go back to that. Now, what does that look like without going super deep on licensing, but just kind of what's possible?

Well, kind of like some of the deal structures, right?

Yeah. So once you're in talks, you have the approval and you're chatting with the.

Company, that's real easy to. So, number one, you're always going to use the company's licensing agreement because they have a small army of lawyers on staff, and they're never going to use your agreement, they're going to use theirs.

But that's not a problem because what you're really looking at is what's your royalty rate, how often are your royalties paid, and are there any other things that might harm you? So, for example, royalty rate depends on the industry. For toys, it's between 4% and 7% usually. So I usually say think about 5%, and pretty much for physical products, 5% is the rate in almost any industry.

Now, you're paid that based on the wholesale cost of the toy or product, any product sold to distributors. So let's say you've created a new oven mat or a coating for. Not an oven mat, but an oven glove, a coating that makes it easier to grip stuff and not drop it. Well, and if that thing sells for $20 on the market and they sell it for $5 to the distributor, then your 5% comes off of that $5, because that's what the company gets paid. They don't get paid 20 bucks. So you get that and you get it forever. As long as that product sells, you continue to get your royalty. So those are the main things. What's your rate.

And how often do you get it? Now.

I always ask to get my royalties once a month. Most companies will accommodate that. If you say, look, this is How I make a living. Everybody else gets a paycheck every two weeks or once a month. I'd like my royalties once a month. Most companies will pay once a month, some pay once a quarter. And you know, you can live with that. That's the only other thing. And then you look for little things. You don't want to be responsible for any costs they have. You don't want to be responsible for filing the patent. You don't want to be responsible for any liability they may run into if they get sued.

Because they've done all their testing, you know, for any product, whether it's an automotive product or a toy or a household product or a new remote control, whatever it is, it all goes. Undergoes rigorous safety testing in the United States and in the west, in all westernized countries. So they've already done that. So if they get sued, it's not your fault. Either they didn't do their testing properly, or more than likely it's just some whack job was trying to make some easy money. You want to make sure that you're not a party to any lawsuits they might be in. And other than that, that's all you look for in the agreement.

Now, do you, do you ever know how much money is coming to you or do you find out when the checks are?

They send you a full report. Oh, you do have. There's always a clause in there that gives you the ability to review their books. Have your CPA review their books. I've never done it because, look, they're either going to be a little short and pay you a little too.

Not enough or a little more than they should. There may be a little tiny glitch, but there's never anything big. And they give you, you get a printout, you know, all the sales. And I mean, I used to get these like 30 page printouts for the toy that showed every toy across the world where they're being sold. We sold 95 units in March at this Toys R Us in Shanghai. We sold 670 in March at the Toys R Us in New York. And, and then the drugstore chains that carry all this stuff. I mean, it's spelled out to the T. Wow.

RIP Toys R Us, by the way, just shout out to them.

Actually, Toys R Us may come back.

Really? Oh, because of you. That's interesting though.

There are a couple investors looking to bring it back.

Ah, okay.

Interesting.

I'm taking notes about it. I'm like, this could be like a perfect side hustle for someone listening, someone who wants to just maybe it's a week in Creative Warrior or something, you know, scour some of these things and whatever niche that you're interested in. And I'm curious couple things. So if like, would you agree that someone could do that if they side hobby?

Yeah, I mean that that's how I do it. It's not like you're out there doing it 40 hours a week. You're going to do it maybe five hours a week because there's only so many ideas you're your head can hold anyway and.

You know, and then you've got to have your sketch develop and that sketch you can get it. You. I use either. There's some really good artists these days on Fiverr and there's definitely good artists on Upwork and you know, the sketch is gonna a good professional sketch with call outs that show show what your improvement to a product does. You can get those done for about 200 bucks. It is ideal from that standpoint, Joe, in that it really is almost a part time. Not almost. It is part time. I mean you could develop a big design firm and hire a bunch of designers and do it full time and there are ones that do it. But then you're back into that headache of running a business with a bunch of employees. Right.

And I'm seeing it as like a great just an idea creation thing. Like, hey, Matt and I throw around ideas all the time for just random whatevers. Like, hey, maybe we could sketch this and hire someone. And then using some of these outreach concepts you've laid out, that can get a licensing deal.

And there's, as I said earlier, companies that have no prejudice against as to how big or small you are, they realize that a great idea can come from anywhere. And you know, you guys know that. About three months ago, I was approached by a company that does $5 billion a year in toy sales.

They approached me about developing a board game for them. Now I don't do board games. My brain doesn't think that way. Creating a board game is almost like writing a novel. You have to put all but. And so you might say, well, that was an opportunity Bob missed. But I immediately said, you know, I don't do board games. And I think I just waste your time. What I love is this category of toys. Do you have anything in that category? And they said, yeah, sure we do. Let me send you about 8 links. So all of a sudden I'm now an approved developer for this huge multinational company.

Awesome.

By having told them no and being honest, not saying, oh yeah, I can do that.

We just saved them a lot of time and yourself a lot, lot of stress.

Here's what I do and if that fits what you do. And it just happened that it did fit. So now I've got this development contract, I'm on their.

List of approved developers, which is a great thing to have.

Good for you. Yeah, no, I didn't know that. So I didn't know that. I guess that completed that beginning of the story. Super cool. I'm just an average dollar per deal size. I know they're completely different but if someone were to look at this as hey, this could be a good part time thing. You know when you go to a licensing deal, is there a way to kind of be like, okay, well this is a, worth this kind of amount, you know, this, this potential.

No, because you never know how well something's going to sell and how long it's going to sell for. So you never know. I mean there's no metric that you can go abc. But you do know that if a company, you know, if they're 100 million to billion dollar company, there's a good chance they're going to sell a lot of something or they aren't going to license it. So I think on the low end, 30, $40,000 a year as long as your license is good. On the high end, I've made as much as a million and a half.

Got it. Cool. That's what I was kind of shooting for. Right.

That's a wide range.

But even the low end there, if you're just spending a part time, maybe it's a, you know, have someone on your team. If you're a company you can have like someone kind of help manage you.

And it depends on other things. So I, we don't want to go too deep down this but say like my toy, it had Tony Hawk's logo and like I said this other company, zero and another really big company, World Industries, they all had to be paid too. So that cuts in to my share and the toy company share. The truth is the talent.

The big name brands or you know, if you could get Jay Z and Beyonce on, they're going to make a lot more money than the company or me.

Yeah, yeah, they're taking the lion's share.

So you know it's going to vary and if a product sells really well, so something like a household gadget where it's not tied to a big name, you may actually end up making more money than something tied to a big name. Because the big names get so much up a piece of the pie.

Yep. I like that. No, thanks for laying that out because now there's a pretty good picture of someone can kind of take what you just said here, and it's like, hey, this is a great thing to just test out.

And now, without further ado, welcome to Matt's question.

The loop that I opened 10 minutes ago.

I know I've been pointing to Matt like, it's your turn, your turn.

All right. So my question was, do you hire an attorney or keep an attorney on retainer to review any of the contracts and licenses?

You know, Matt, in all seriousness, you have asked some really amazing questions today. There's things that I take for granted and I don't think to talk about because I've been doing it. And what you just asked is really important. Absolutely. And one of the big mistakes that a lot of inventors, and especially new inventors make is they take their contract to a patent attorney. And a patent attorney doesn't understand business contracts. You want to take it to a business attorney who has experience with licensing, and they're pretty easy to find. Almost any business attorney does. Ask them specifically.

If they have.

Experience with licensing. If you don't know where to find an attorney, go to the trade association for that industry. So I would go.

To the American Toy association and say, can you recommend a good business attorney who understands licensing agreements for toys? They'd send me a list of 10 of them. If it was an automotive product, whatever the.

Trade association is for auto retailers, automotive product retailers. Rather, I'd go to their trade association. Same question. Do you know a good business attorney who's worked with licensing agreements in the automotive accessory market? We sure do. Here's 10 of them, and that's how you find them. But it's always got to be a business attorney with licensing experience and never a patent attorney for that.

And probably not Legal Zoom.

Yeah, don't stay away. You know, side tangent. They actually made one of our. I think the first time we opened Evergreen Profits, they made the name of the company, Matt's personal email address and sent it to the state and all that stuff. And that was totally Legal Zoom. Like screwing up a form and no one checked it. So don't use LegalZoom. They are not a sponsor.

I don't think they will ever sponsor a side tangent.

Yeah, this is interesting.

So the 37 question process that you have, is there a way to direct people to acquire this or pay you for this?

I do teach workshops in it, but what I recommend that they do instead before that. And if they want to dig even deeper and see if they have a real interest in this. I have a free five part training program on inventing because there are so many myths about inventing and the conventional inventing process is just a mess. When you look at people who are spending 45, 50, $100,000 on patents and prototypes with no hope of getting that thing to market, it's because the conventional process is just horrible.

So I have this little five part course that shows people what to look for and what to look out for. And it's called the New Rules of Inventing.

And I can either give the link now or you can just put it up in the program notes. Whatever you think.

Both of them. Yeah, go ahead.

Okay, so it's www.salesgrowthsystems.com inventing. And you can just sign up there and get the five part course over five days. And I think at the end of it there's a link where you can sign up to see if you want to join a workshop that I teach on this process. And so that's really kind of the way to do it. But I really, rather than just jumping into the workshop, I think it's best that people just kind of get a little more information about how the process works. Some of the things we couldn't touch on all of them today.

Yeah, yeah.

Are there any good books that you've read lately? We always ask what books that you recommend that you've read over and over. Recommended a lot, but we asked that last time. So I'm curious if there's any more recent books that you've really enjoyed.

Ah, God. There was one. I'm trying to think of what it was. You know, I'm. A lot of people read four or five books a month. I think reading books can become a shiny object syndrome. I think you can constantly be looking for books and ideas instead of focusing on your business and what you're doing. So I mean there's only a few. I'm really judicious about how much outside reading. Hang on, I'm going to turn towards my bookshelf and see if there's anything in particular.

Well, you did mention actually before you.

Hopped on the call.

Yeah, yeah.

The one book I really liked was. And it ties into this. It's about using your brain capital. It's how to Be a Capitalist Without Any Capital by Nathan Lotke.

Yeah, that's a good one. Yeah.

Should be a sponsor of the show by now.

Named after a potato pancake. I want to Read their book.

All right, we're gonna have to clip this out, send it to Nathan.

Nathan needs to be a sponsor of the show. I feel like we've given that book more show shout outs over the last, like five or six episodes than any other book we've talked about.

That's pretty cool because that shows.

That it's a really good book. I think James Schramko told me about it.

He probably did. Yeah.

You know, I'm really careful. Everybody's got their top 50 books you have to read. I only take just like, I only recommend people if I really know them and believe they're great. I only take book recommendations from people who I really respect. And James is one of those. So when he said, hey, this is a great book I think you'd like, then I decided I'd definitely take a look at it.

Yeah, yeah. No, it's a very good, like, lateral thinking book. Just kind of approaching things in ways that most people aren't approaching them in. And it's really just a lot of various. Lateral.

Yeah. And it ties into this conversation. It seems like this whole inventing conversation.

Is very lateral, which again, kind of shows my own bias. I really lean towards that type of thinking.

Sure.

A lot of us do. Cool. So the link, we will put it in the show notes.

It's salesgrowthsystems.com inventing. Is there any other links or resources you want to point them to or just tell them to go there?

I think that's the best way to do it because like I said, there's a free five part course course, one part every day for five days. And then from there there's a link to the workshop I present. And those are really the only things I have because for the most part I'm, you know, I'm trying to spend time really inventing stuff rather than just, you know, talking about it. So I don't have zillions of resources on it. And also because that's all that's needed, as you've seen, it is needed. Not. It's just not super science. You don't need this gigantic skill set to do it.

Yeah. And in all honesty, to everyone listening, Bob is one of the most authentic guys and just down to earth, exactly like this. And I don't know anybody else who's done what you've done in inventing or even licensing for that matter. So if you have any ounce of interest in this, definitely go over there and talk to Bob. Like, find a way to do that. Because it's interesting. It's so lateral. This applies to every single person here.

We should give out Bob's phone number. We can call him.

Oh, okay. Let me pull it up really quick.

I give my phone number to people who can find stuff that will explode or catch on fire.

Yeah, don't do that. Awesome, Bob. Well, this is. Yeah, it's opened my eyes to inventing, and actually, I'm kind of curious. I'm like, Matt should open up a weekend inventing shop now. Yeah. Get our team to do all the interfacing for us. Thank you, Bob.

All right, you guys. Well, thank you as always. I had a blast talking with you.

Yeah, same. All right, we'll see you later.

Okay, Bye. Bye.

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