Nothing beats “mailbox money” when it comes to boosting your bottom line. That’s when you license an idea, innovation, or invention to another company in return for a royalty payment. Each quarter, magically, a royalty check shows up in your mailbox with a gross margin of 100%.
There has never been a better time to be an inventor. Big companies are desperate for your ideas. Procter & Gamble now gets more than half its ideas for new products from outside inventors. Five years ago, that number was closer to 20%.
But where you focus your creative energy has a huge impact on the payoff you can expect. If your idea is a big wow and highly proprietary—and you can show how to produce it profitably—the fair-market royalty is 25% of the gross profits generated from that idea.
Recently, Greg Lemmon, a mathematician at Eureka! Ranch, set out to find the profit margins in more than 200 industries. Those with the highest margins should provide the most fertile ground for inventors.
* Finance, credit, commercial banking, and other financial services head the list, with gross margins topping 50%.
* Next on the list are landlords, with a 47% profit margin. New ways of leasing and new concepts, such as mini-warehouses, offer great potential.
* Computer software publishing is hot, with 40% margins. It takes massive energy to create breakthrough software, but the profit per unit is enormous, too.
* Bakeries and tortilla makers have a profit margin of 31%. I guess the Atkins diet doesn’t rule after all.
* Soft drinks offer a 27% margin, which explains all those New Age and energy beverages glutting supermarket shelves.
Photo by Patti.