How to earn money by licensing businesses?

Earning potential: High

Licensees are contracted to rent your ideas to manufacturers, according to Stephen Key, author of One Simple Idea: Turn Your Dreams into a Licensing Goldmine While Letting Others Do the Work. Getting paid passively through licensing is a legitimate - although not simple - way to earn money.

Essentially, the process involves coming up with a new idea, pitching it to a manufacturer, and then agreeing to an ongoing royalty agreement with the manufacturer once the idea has been accepted. Something is fascinating about the fact that ideas aren't required to be groundbreaking or even expensive to prototype.

An idea Key shared that broke through was as follows: I used an indoor Nerf set to shoot hoops in my office since I loved basketball. There was only a small image of Michael Jordan on the backboard. Wouldn't it be cool if the backboard itself was shaped like Michael Jordan?

The contract was sent to me within three days of contacting Ohio Art. As a result of the royalties I earned over a decade, I was extremely fortunate. Every major retailer carried the Michael Jordan Wall-Ball; there were even Saturday morning commercials. As far as I recall, my first year's earnings were around $100,000. For $10, that's not bad."

Key maintains low costs by

Filing a provisional patent (estimated $100).

Creating a sell sheet to pitch manufacturers (under $80).

Key has been able to pitch and sell licensing agreements to Fortune 500 companies with just these two factors.