Seacliff Products (Seacliff) is an innovative company that has developed a patented fishing hook. Seacliff has initially developed a do-it-yourself-kit for sale while they find a suitable business partner to license the product to. Seacliff has forecasted hefty sales for year one and a tidy increase for year two.
Seacliff has developed the Supreme hook, an innovative, live bait holder. Tests have indicated that there are appreciable increases in fish hook up. Having increased fish hookups allows the user to have greater enjoyment while fishing.
The Business Model
Seacliff will be utilizing a laser-focused business model that allows them to focus on their core competencies while outsourcing the activities that do not add significant value. Seacliff is a design company, therefore they will concentrate on the design of useful products. They will find a strategic partner who can take over production, marketing, and distribution activities. The outsourcing of non-essential activities will allow Seacliff to realize significant profits without the liabilities of marketing, manufacturing, and distribution. Licensing allows a company the right to produce the Supreme hook while Seacliff will realize a steady stream of revenue without the capital costs normally associated with selling a product. Seacliff enjoys nice profits and the product is supported by a professional marketing department and an established distribution and production system. Seacliff is currently looking for a strategic partner and expects to enter into negotiations in the near future.
The fishing market for the Supreme hook is quite large. The overall market is valued at $300 million. There are over 39.1 million anglers in the U.S.A. who have fished over 618 million days while taking 807 million trips. What is even more exciting is the growth rate of this industry. Between 1955-1996 the number of anglers has increased at over twice the rate of the U.S. population.
The whole foundation of the business model is to concentrate at what you are good at. Seacliff has taken this premise to heart by focusing on design. The owner’s (name omitted) education is a JD/MBA from Willamette University. This dual degree provided him with valuable insight into business development as well as the attractive legal tool of licenses and patents. Following graduate school, he was unsure of what direction his career should take him so headed off to Oregon to be a fly fishing guide. During this 2 year stint, he became enthralled with fishing and thought that he wanted to remain in the industry. He went back to school and got a Masters in Engineering on the premise that he could pursue the design and development aspect of fishing related products. It was near the end of his last graduate degree that he developed the Supreme hook. Based on his previous degrees (JD/MBA) he felt comfortable to form his own company and find a manufacturer to license his soon to be patented product.
Seacliff is an exciting company that shuns the typical need for extensive start-up capital for production by licensing a patented product. By licensing the product it frees up Seacliff’s time to concentrate on value added activities such as future designs. Profitability will be reached by month one.
The mission of Seacliff is to maximize the profit potential of its newly patented fish hook invention (the Supreme) via licensing and other means, and to further develop other innovative products suitable for the fishing gear market.
1.2 Keys to Success
The keys to success in maximizing profits in licensing this patent are:
- To separate the manufacturing of the Supreme from its marketing.
- Search out a manufacturer capable of producing the hook and give them exclusivity.
- Locate a suitable marketing company with substantial fishing gear expertise who recognizes the potential of the Supreme and is willing to commit the necessary marketing budget.
- Structure a reasonable, well-thought-out, exclusive licensing agreement that will insure a mutually-profitable partnership arrangement between marketer and Seacliff.
The keys to success in profiting from the patent in make-it-yourself kit form are:
- Recognize that there is a narrower market for the kit.
- Follow the time-tested price structure formula which provides attractive margins to everyone in the distribution chain (manufacturer’s representative, wholesaler, and retailer).
- Reach the narrow market niche through free publicity in fishing magazines and catalogs, website, trade shows, etc.
- Keep overhead low and stay alive until word-of-mouth begins to generate clients.
The main objectives are:
- Locate a suitable manufacturer who is willing, on an exclusive basis, to produce the patented Supreme hook at a reasonable price. This would, at the retail level, cause the Supreme to sell for under 150% of a normal hook of similar size.
- Locate a medium-sized fishing gear marketing company who recognizes the potential of the patent and is willing to commit the resources to successfully mass-merchandise the Supreme, both domestically and overseas. Enter into an exclusive license arrangement that contains the normal safeguards and will allow for a three percent royalty on all purchases from the exclusive manufacturer.
- Successfully bring the product in kit form to market. Reach break even point (370 kits) within the first three months. Sell 8,333 kits in the first year.
- Complete the website design.
- Join the American Sportfishing Association (ASA); secure a booth for the ASA trade show in Los Vegas this coming July.