Hi Susan,
The answer is yes, it's called "Share Equity" and it is used all the time in business, but many inventors don'r know much about it so I'll explain.
Think of your invention as a “company” As such, it has 100 “shares” of value associated with it. Each of the 100 shares can have either a positive or negative value assigned to it along with a single vote.
For this example we’ll use our Obvious Ideas LLC “Twist Cap” product. (Of course we can’t talk about the real numbers involved but I’ll use some numbers to create the example) The first thing we do is start looking at the things we can bring to the table ourselves – we happen to know how to build prototypes. So right off the bat we know we can build the parts needed to prove this is a great idea. Now let’s look at the things we can’t do very well. We can’t write a Patent, so we’re going to need a patent attorney. We can’t do graphics, so we’re going to need a graphics person who can work on the artwork and packaging. We can’t sell into retailers or do fulfillment, so guess what?....We’re going to need that person as well. Oh, and did I mention we’re broke?....so I guess we’re going to need someone who can find us some money.
We already discussed that we have 100 points to work with, and each point has a vote. That tells us if we want to maintain control over the project we have to keep 51 points to ourselves. That logically gives us a maximum of 49 points to trade off in equity for those skills we don’t have.
In the case of our Twist Cap product that picture hypothetically looks like this.
Patent Attorney = 10 shares
Graphics Person = 5 shares
National Rep/Fulfillment Manager = 5 shares (plus sales commissions)
Funding Finder = 20 shares
Controlling Member = 60 shares
In this example you see we only had to trade out 40 shares to get done all the parts we needed to develop our product. The product is developed, it’s sold to retailers, and it’s making money – now we simply use that share division to divide each dollar of profit. The controlling member receives 60 cents, that patent attorney receives 10 cents…and so on. But what would that look like in terms of selling our Twist Caps? ….it may look like this. A pack of Twist Caps sells into a retailer at $1.00 per pack. Say we sell 8000 packs per day across the country. We have 31 cents of profit built into each pack. That equals $2,480.00 of revenue generated by that product every day. Now we compare our equity shares to that revenue and we can easily see that the Patent Attorney is going to make $280.00 per day, the money guy is making $560.00 per day, the Controlling Member $1,680.00 per day, and so on.
That sounds like very nice money….and far above the normal rates each skill would charge for their services – but remember with Share Equity….no one gets paid until the product sells.
