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profitable. It is the fastest to set up but the fastest to die off due to price competition with other resellers.
The profitable life span of each product is short unless an exclusivity agreement prevents others from
selling it. Reselling is, however, an excellent option for secondary back-end28 products that can be sold
to existing customers or cross-sold29 to new customers online or on the phone.
To purchase at wholesale, use these steps.

1. Contact the manufacturer and request a “wholesale pricelist” (generally 40% off retail) and terms.
2. If a business tax ID number is needed, print out the proper forms from your state’s Secretary of
State website and file for an LLC (which I prefer) or similar protective business structure for
$100–200.

Do NOT purchase product until you have completed Step 3 in the next chapter. It is enough at this
point to confirm the profit margin and have product photos and sales literature.
That’s reselling. Not much more to it.

Option Two: License a Product

I not only use all the brains that I have, but all that I can borrow.
— WOODROW WILSON

Some of the world’s best-known brands and products have been borrowed from someone or
somewhere else.
The basis for the energy drink Red Bull came from a tonic in Thailand, and the Smurfs were brought
from Belgium. Pokémon came from the land of Honda. The band KISS made millions in record and
concert sales, but the real profit has been in licensing—granting others the right to produce hundreds of
products with their name and image in exchange for a percentage of sales.
There are two parties involved in a licensing deal, and a member of the New Rich could be either.
First, there is the inventor of the product,30 called the “licensor,” who can sell others the right to
manufacture, use, or sell his or her product, usually for 3–10% of the wholesale price (usually around
40% off retail) for each unit sold. Invent, let someone else do the rest, and cash checks. Not a bad model.
The other side of the equation is the person interested in manufacturing and selling the inventor’s
product for 90–97% of the profit: the licensee. This is, for me and most NR, more interesting.
Licensing is, however, dealmaking-intensive on both sides and a science unto itself. Creative contract
negotiation is essential and most readers will run into problems if it’s their first product. For real-world
case studies on both sides, ranging from Teddy Ruxpin to Tae-Bo, and full agreements with actual dollar
amounts, visit www.fourhourblog.com. From how to sell inventions without prototypes or patents to how
to secure rights to products as a no-name beginner, it’s all there. The economics are fascinating and the
profits can be astounding.
In the meantime, we will focus on the least complicated and most profitable option open to the most
people: product creation.

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