Hello, ladies.
Welcome to this solo episode
of the Hourly to Exit Podcast,
where I ask and answer,
does your expertise based
business have inventory?
Per Investopedia inventory
refers to a company's
goods or products that are
ready to sell, along with
the raw materials that
are used to produce them.
Inventory can be categorized
in three different ways.
Raw materials work in
progress and finished goods.
So now let's look at
the typical stages
of development for an
expertise-based business.
Most of us start by providing
one-on-one services in
our chosen field, which
is usually the area of
our prior employment.
Many of us are ex-corporate,
so maybe you're marketing
or finance it or legal.
during this initial stage, we
develop our expertise through.
Obviously our firsthand
experience that we brought
from us from employment.
From that, we may have some
original ideas about the way
things could be done better.
Maybe that was the impetus
behind going out on our own.
As we get clients, the type
of work that they request from
us will learn something new
with every client engagement
that will add their expertise.
Many of us will get
certifications or additional
training, and depending on
your field, you also may need
to do continuing education.
We may do research, either
primary or secondary when we
find holes in our knowledge
or we need something to
support, one of our theories.
And occasionally we will
need to use a subcontractor
who has an area of expertise
that we don't have.
And so those subcontractor
deliverables will
also be something that
feeds our expertise.
Now, what I would call these,
Elements during the initial
stage of developing our
expertise based business.
I call them raw materials.
They're all the pieces, the
nuts and the bolts and the
screws and the things that
we bring together, that
will form our expertise.
Now as our expertise matures,
we will develop internal
resources so that we can
predictably and efficiently
deliver the results
that our clients value.
At this point, we've been
servicing our clients
we figured out what they
want and how the best way
to deliver it to them.
And so at this point we start
creating some infrastructure.
To deliver those one-on-one
services more predictively
and efficiently, and therefore
more profitably, of course.
So those include systems
and processes and SOPs,
templates, frameworks,
and methodologies.
And I'm even gonna put
employees and contractors in
this category, even though
it's a little bit kind of to
the left, but basically, call
these the work in progress
stage where we have taken
all the raw materials from
that initial kind of building
our expertise stage, we've
figured out, the best way to
serve our clients, and now
we're starting to put the.
Scaffolding in place
for to serve them.
and then I add the, employees
and contractors in there
because they are the extension
of building these structures
that helps you, serve your
one-on-one clients, when you
have these kinds of systems in
place and frameworks in place
and templates so that they can
also serve your clients, and
provide those same results.
So that's the work
in progress stage.
Now, eventually we hit a
revenue ceiling or an impact
ceiling because there's
only so many, clients we can
serve on a one-on-one basis.
so we start looking for ways
to increase our revenue or
increase our without just
putting in more hours.
So we know what that means.
We need to, figure out a
way to decouple our income
or to decouple our in.
Packed from ours.
And so we start looking
for resources that tell us
how to scale, how to add
leverage to our business.
And probably we are
either hiring a business
coach or we are following
a business coach.
You know, we're listening
to their podcast, we're
reading their books.
but in any case, however
you engage the same.
advice is that you need
to turn your expertise
into intellectual property
so you can create new
scalable revenue streams.
So these are things like
programs and courses and
books, maybe even software.
I do put productized
services in this one.
Templates that are now
being sold as opposed
to use internally.
And, licensing when you
have any of these things
above that third parties
wanna use as well.
So these I call finished
products cuz they are the
things that you are literally
selling that is not your
time, but they are things
that are separate from you
that you'll be selling.
So those are your
finished products.
we have raw materials.
We have work in progress
and we have finished goods,
and these occur throughout
the development of our
expertise-based business.
And what is each and
every one of them?
Intellectual property.
So just because you don't
have a stockroom filled
with shelves of physical
materials, that doesn't mean
that you don't have inventory.
You do have inventory.
Now, of course, this
is not the, accounting
definition of inventory.
this is not the
cost of good solds.
It's gonna go onto your
financial statements.
But the common sense,
notion of inventory,
where you have the.
Inputs, the raw materials,
the structures that you put
in place to help, yourself to
create those finished goods.
And so you need to take
the same care with your
inventory that a car
manufacturer does with its
parts or that a retail store
takes with its merchandise.
So with your intellectual
property inventory, you need
to be thinking about the
creation, the development.
Protection and of
course the monetization
of your IP inventory.
And so now we're gonna just
go back over those stages
of inventory and talk about
the best way to manage it.
In the context of intellectual
property and these stages
apply whether that IP is owned
by you or licensed to you.
So first, raw materials.
at this stage of development,
it is most mostly about making
sure that you are using and
understanding contracts cuz
it's contracts that govern
the creation ownership.
Assignment and
licensing of rights.
With respect to copyrights.
So at the raw material
stage, it's all about the
contracts, with the exception
of your original ideas.
So when you have original
idea, first we're making
sure that we are creating
copyrightable materials by
putting them in tangible form.
Of course, they have to
be original and have some
element of creativity,
although that's a.
Fairly low bar.
when you are putting your
ideas, expressing them in
tangible form, their original
ideas, you are immediately
creating, copyright
ownership in that, element
that you create in that
material that you create.
And it does not
require registration.
We'll talk about registration
later, but at the raw
material stage, it is just
important to make sure that
you are putting your original
ideas into tangible form.
Then the client work.
So here, I'm sure your
clients are gonna request
agreements, so now it's
important for you to make
sure you understand those
agreements that you're reading
them and that you understand.
Who owns the deliverables.
Now, sometimes you're
creating something completely
original for a client.
maybe you're doing something
very creative, like,
creating a new logo for them.
But if you're doing something
that is based on your original
ideas, they're coming to
you because you know how
to, train, workplaces to
have a better culture.
So you have your own
ideas around that.
You wanna make sure that those
client agreements reflect
the fact that some of those
deliverables are your original
materials and that you will
retain ownership in them.
when we are going out and
getting certifications
or trainings or
continuing, education.
That is a circumstance of you
borrowing or being licensed
the right to use someone
else's intellectual property.
Here it's important.
Again, it's a contract.
A license is a contract.
We need to understand
the limits of your rights
to use those materials.
typically you will have the
right to use, know, anything
you get in a certification
program or training
program, you can use them
And providing one-on-one
services to your clients.
But what you can't do
typically is sublicense those
materials to somebody else.
You can't create a training
program that you're selling
to somebody else using
the materials that you got
from a training program or
certification program, right?
So we need to make sure
that we understand the
limits of our licenses,
and that is about
understanding the contract.
When we're doing research,
whether you're using AI or
other sources, make sure that
you are tracking the third
party materials that you are
incorporating into your work.
Now here, if you are using
AI or if you are using
other sources, you need to
make sure that, you are.
not infringing
anyone's rights.
AI in particular.
I mean, I'll
confess that chat.
G B T is the one that
I'm familiar with.
They don't provide attribution
for what they provide to
you, so you will need to use
other sources like Grammarly
to make sure that you aren't
infringing anyone's rights
if you are, using research,
depending on how you're using
it, if you're not transforming
it anyway, if you're just,
maybe you're taking someone's.
pie charts or someone's,
you survey results and
you're incorporating
them into your work.
if this is something
that are going to be,
selling, you should have
permission to do that.
so that's important
to know there.
then your subcontractor.
Deliverables always,
always did I say, always
use a written agreement
with subcontractors.
That is the only way to ensure
that you own the deliverables.
In the absence of a written
contract, the subcontractor,
the human being who created
the deliverables, owns
the copyrights in it.
So you need to have that
written agreement so that
you own those deliverables.
And the other thing that
you get with your written
agreement is that you
can make sure you put in
there a requirement or
a warranty, that those
deliverables are original.
You don't want
your subcontractor
delivering, some ai.
Crapola, right?
So you wanna make sure
that you have clarification
about the nature of
those deliverables so
you can depend upon them.
And if your subcontractor is
using their own preexisting
materials, again, like
they have some area of
expertise that you don't
have, and so they're using,
their own foundational
materials to help you then.
They, of course, are going to
want to reserve rights in that
preexisting material, but you
need to make sure that the
rights that you do get the
license that you get to use
your preexisting material is
sufficient for your purposes.
Let's say you do need
to use it with your
clients, then you will
need a right to sublicense
it, to your clients.
Or maybe you need to
use it more than once,
whatever it may be.
You need to make sure that you
have the rights that you need.
In the deliverables from your
subcontractors if you're not
going to own them outright.
All right, so that was
the, raw material stage.
Now, the work in progress
stage that is really pretty
much about positioning.
So it's less about,
contracts, but more about
how you are becoming the
go-to person in your space.
So you've.
Figured out the way that
your clients like to be
served, what the best
results are, the best way
to create those results.
And you're building that
infrastructure, the systems,
the SOPs, the templates, the
frameworks, methodologies.
And so at this point you
are focusing on getting
those nailed, right?
So.
there are some
circumstances where you
can copyright a system,
a process, or a method.
Generally you cannot,
because the system itself
is kind of an idea.
remember, it's the expression
in tangible form that, can
be, protected with copyright.
but, My opinion is not
the most important thing
that's happening here.
The most important thing
that's happening here
is making sure that
you are known as the
authority, in the space.
So I like to use the analogy
of the cook and the chef,
the work in progress Stage
when you're working on
your positioning, think
of your systems or your
SOPs or your templates
and things as the recipe.
And we're not worried
about being the cook.
I can't, couldn't do
a thing with any of
anyone's recipes, frankly.
But you need to worry about
being the chef and given them
Michelin star service and
that is that work in progress.
state is.
Building those systems.
even if they can't be
copyright, they're very
valuable In enhancing your
brand and your positioning,
you become the authority
with respect to the outcome
that your framework provides,
and there is potential to,
protect it with trademarks.
if you heard me talk about
copyright versus trademarks
before, you know my.
gross bias is toward
copyrights that when you
have corporate clients,
your corporate clients,
don't care what your
trademark is, frankly.
so as long as they get the
outcome that they receive, you
can call it anything you want.
if you fall in love with the
name, then you fall in love
with the name and, trademark
lawyers will certainly tell
you if you have a name that
it would kill you to lose
then, go for your trademarks.
But when we're talking about
like where to put our focus,
it is in making sure we become
the authority in, the outcome
that your framework provides.
So that is the work in
progress stage where we're,
it's all about positioning.
Finally the finished
product stage.
Here we are squarely
in copyright
registration territory.
when you have an asset that
is going to be a direct
revenue driver, meaning
something that you are selling
directly to the end user,
it makes sense to register
it in the copyright office.
So just a reminder that
your copyrights attached.
As soon as you created them,
you put them in tangible form.
But registration is required
if you want to enforce
your copyrights against
an infringer in court.
So to use courts, for
compensation and to,
enforce your rights
against infringers.
it does need to be registered.
And if it is registered in
a timely basis, then there
are also statutory damages
that are available to you.
So there are, a number of
business reasons in order.
to encourage registration
for those things that
are revenue drivers.
So again, the finished
products, you know, your
group trainings and programs,
courses, books, et cetera,
and productized services,
probably cannot be registered.
but maybe some of the
underlying materials
can, templates and then
licensing, you You've put
together a whole program,
around your framework that
includes, workshop materials,
scripts and worksheets
and things like that, and
those things that are being
licensed to your licensees.
You would certainly want
to have those registered.
So in some you have
inventory and the form that
it takes is intellectual
property, and you have that.
At every stage of your
expertise-based business, it's
not all about registration,
as I just mentioned.
It starts at the beginning
when you're starting to
develop your expertise that
you're, making sure that
you're putting your original
ideas, intangible thought.
Form so the
copyright attaches.
At that time, you are
making sure that you
are using contracts with
your subcontractors.
Always you are reading any
agreement that the client
puts in front of you to
make sure that there are no
restrictions yeah, you're not
giving them your expertise.
and I forgot, you know,
I'm just gonna throw this
in, uh, and you've heard
me talk about it before,
is making sure that there's
not non-compete provisions
in there or anything that
restricts your ability
to develop your expertise
by working with other
clients on similar matters.
You, really wanna make
sure that you are reading
those cuz those are niche
killers and frankly,
they're expertise killers.
and then, the same as
with any company that
has inventory retailers
or car manufacturers.
You need to make sure you're
tracking it and then you
know what you own and what
you control, whether it is
something that is original
to you, something that is.
Created by a subcontractor
and assigned to you through
contract or something that
you are licensing from a third
party through a certification
program or, through research
and that you are tracking your
rights in your intellectual
property inventory, cuz
that is the only way
that you can protect it.
So I have created a visual
summary of today's episode.
you can find a link to
that in the show notes just
to help you kind of wrap
your head around it, I've
talked about a lot here.
So of course, as always, you
can find me@thinkbeyondip.com
if you have any questions.
Thanks.