Free Book Summary A Simple Idea – By Stephen Key

Stephen Key was a mentor to Tim Ferriss. If you’re not familiar with Tim, he wrote two best-selling books, The 4-Hour Workweek and The 4-Hour Body. One Simple Idea is an instruction book on how to license his ideas. Licensing is one of the most lucrative business models in the world. Think of these companies, Microsoft, Oracle and Apple. All of these companies license their ideas and make more money per person than 99% of all other companies. I’m a big fan of real estate, but if you need to make money with less risk and less capital requirements, then licensing is the way to go.

Why is this important to me?

Most people are not familiar with the power of licensing and royalty controls. This book shows you how to do it, and I’ll expand on why.

Why license? I have owned several businesses and I can tell you that licensing is by far the most lucrative of all. When you own the IP (intellectual property), your marginal revenue from the next license sold is infinite. That’s a pretty good profit margin by anyone’s standards.

Inversion is one of the most powerful learning strategies in the world. Inversion means to look at the opposite or reverse of something. I told you earlier that Licensing is one of the best models out there. Let’s use investment to show you why. When you sell someone else’s stuff, you’re only as good as your next sale. This means that no matter what happens, you always have to buy what you sell. Therefore, your gross profit can range from 0% to 50% depending on your cost structure and level of competition. This is what Wal-Mart does. Keep in mind that they are the best cost reducers in the world and competing with them head-on would be a disaster.

Suppose you are a consulting or service company. Once again, you are only as good as your next consulting job. I know consultants make a lot of money, but for every hour they consult, they lose that hour of opportunity to do something else. Therefore, you are exchanging hours for dollars.

One Simple Idea is packed with great information and Stephen’s 10-step plan that shows you how to do it. We will touch some points.

First of all, there are two main reasons for obtaining a license. Number 1 is royalty checks. You can earn money while you sleep. Now you are NOT exchanging dollars for hours because you can be doing something else and still get checks. Number 2 is omnipresence. You can do it from anywhere in the world. You don’t have to be handcuffed to a desk in some locked vaulted building. All you need is a computer and ideas.

Stephen outlines several key factors for successful licensing. In the interest of time, I will highlight some of the topics in this review.

1. Look for ideas: You don’t have to be Einstein to come up with an innovative idea. If you have ever gone shopping, then you may come up with ideas. The key here is to focus on the things that are really bothering you. If they bother you, they might bother others. This is a starting point for a new idea. Think about problems and find solutions. This also gives you a reason to go shopping.

2. Demonstrate your idea: The traditional licensing model works like this. Find an idea, build an expensive prototype, spend a small fortune on patent protection, and hope it sells. This is why most people don’t think of licensing as a viable career because the hurdles SEEM too great to overcome. Testing your idea before spending money is now easy to do. Google has built in traffic. It is a ready platform for creating and testing ideas. An easy way to do this is to create a video of your idea and ask for feedback. You can do this for a few hundred dollars. This process alone will save you tons of headaches and money. You need to test the idea before doing anything else.

3. Protect your idea- Contrary to negative belief; most companies do NOT want to steal your idea. The traditional way to protect your idea was to apply for patents. This is a very expensive endeavor. One thing Stephen points out to avoid this is a PPA. This is a provisional patent application and it costs $110 to submit. This gives you Patent Pending status, which is all you need for 1 year to test your idea and bring it to market. This concept can pay this book 5,000 times.

4. Present your idea: If you decide to take your idea to market, then you need to be educated in business. This means that you need money, administration and accounting, production, sales and marketing. Then after you have all this, you need customers. This is like a beginner climbing Mount Everest in winter. All odds point to his death with this approach. Presenting your idea to the big boys is the way to go. They have the brand, infrastructure and distribution channel to reach millions of people RIGHT NOW. Pitching your idea is the best way to go and the scariest. Everyone hates cold calls, but this is necessary for you to present your idea. This is much easier than it sounds because companies want new ideas and that is the hook for you to get into.

One Simple Idea is a great guide to help you turn your ideas into a royalty check.

I hope you have found this brief summary useful. The key to any new idea is to work it into your daily routine until it becomes a habit. Habits are formed in as little as 21 days. One thing you can take away from this book is the PPA. The biggest obstacle to getting ideas to market is the sheer cost of getting protection and the fear of someone stealing your stuff. For $110, you can protect it for a year, and if it makes you money, it can protect you for longer. Remember, in this game, the first to market wins.