How To Make Money On Invention Ideas

No week passes by without at least one “would-be” inventor telling me that they have a billion-dollar idea and they want $1-million dollars upfront plus 10% royalties. Sounds good to me – no argument here. A million bucks upfront is exactly what I want for every one of my clients.

Getting the $1,000,000.00 upfront might be a little bit much to ask for by an unknown inventor with an unproven invention, and unfortunately, it probably is not going to happen. Nevertheless, there definitely are some billion dollar inventions in the marketplace. Lipitor, the popular cholesterol drug by Pfizer, grosses more than a billion dollars a year as does the game changing Apple iPhone. Although these products are two that quickly come to mind, there are many more.

So let’s see where the money is being made on those billion-dollar inventions. For our purposes, we’ll use the very popular iPhone which just launched the latest generation iPhone 4.

The cost for the parts and labor necessary to make the $500.00 retail iPhone 4 is just $179. Here’s where the money is being made: (source: Time May 16, 2011)


$ 61.00 Japan
$ 30.00 Germany
$ 23.00 South Korea
$ 11.00 USA
$   7.00 China
$ 48.00 Unspecified
$ 321.00 Apple’s profit

This is absolute proof that innovation is more profitable than fabrication. The greatest amount of money on a product is generally earned by the patent holder. Although manufacturing jobs are often outsourced to other countries, it is the American ability to out-think and out-create the world that makes the United States the world’s greatest economy. People imply that China is creeping up, but as you can see above, China is merely a source for cheap labor making pennies while American companies make the big bucks.*

Now of course, the iPhone wasn’t invented one evening at the kitchen table by Steven Jobs and placed on store shelves the next morning. It took years of research and development, trial and error, sweat and tears on the part of many talented and high priced individuals to create the original iPhone. Then even more time to improve the product through several generations to the version we have today.

So how good is the USA when it comes to innovation? It is 2 times better than the rest of the world combined. With twice the innovation power, America is more than capable to overcome any economic problem.

* China’s cheap labor may be coming to an end sooner than later. In the past year, costs have increased 18%. The higher costs are expected to grow even higher as the country develops a real middle class. China will soon learn that it’s impossible to put the capitalist genie back into the bottle. People everywhere want a better life for themselves and their children. Making it even tougher on China, is the increase in the cost of oil that they need for their own consumption as well as to ship parts and finished products to the United States and Europe. China is just a source for inexpensive parts and cheap labor with both costs growing higher everyday. Soon the world will be looking for the next place that has cheap labor and China will no longer be the place where everyone goes. Remember – it is better to innovate than it is to fabricate!

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4 Responses

  1. This is very informative most people feel strongly about buying U.S made products. Its good to know that the scales although slowly are turning back in our favor and also good that the Chinese people are learning as well

  2. Dynamite. Invention Guru for president 2012. This is the American Exceptionalism and the failure of Communism (or anything that looks like Communism or leans toward Communism.) In a free society, like the US, if you strive and come up with something that helps many (I have bought 5 iPhones for family memebers over the years) you will be rewarded. If you’re not, then you’re only doing it for charity, and it’s way too much work just to make things a little easier for folks. Like it or not, it’s the profit motive (“greed”) that lights that fire. The reward only comes after innumerable refinements, many hours to make it worth something.
    There are no overnight successes in anything. Even people in music who are discovered and suddenly stars, worked a long time at their craft hoping to be found. Inventors who think they came up with the greatest idea and just want someone to give them money and develop the idea, had better expect that money to be much much less than the buyer expects to make in the end, since now they’re inheriting all the risk.

  3. Your title was a bit misleading, however I am glad I took the time to read it. I always knew it was going to go something like that, but was not reminded of it until now. Patients is a virtue and I believe the USA has what it takes to wait this all out.

  4. If you willing to put sweat and effortless time into your idea, and dream one day to bring your invention to life. Then the day when you wake-up one morning and you realize that the time has come, that your dream has come true then I believe that is the first step in making money.
    Next step is convince others that your dream is beyond imagination and everyone in the world love to have this. You already know that your idea is great but can you convince others. Once you get past that stage, you should not have any problems. Sure there maybe obstacles ahead but with help from others, you will find a way to raise above it and reach your dream.
    There is no one sure route on how to make money from your idea. There are many roads one can travel to achieve your goals. To answer everyone question on how to make money from your idea, solely depends on you.
    Everyone’s final dream, I believe, is you make a name for yourself.

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