How to commercialize your invention

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(FORTUNE Small Business) -- Dear FSB: I work for my family caulking business. The equipment we use is top dollar, but the designs are poor. If I had a better idea, and did not want to manufacture the product (but instead just license the idea) how would I go about it? What should I know before starting the process?

- Justin Lovell, Richmond, Va.

Dear Justin: There are generally two ways to make money on an invention. The first is to manufacture and distribute the product yourself.

Most people, however, don't have the technical or financial resources for this approach, says Chuck Huff of Dallas, Texas-based Invention Marketing Services.

So many inventors seek to license their ideas to a company who might want to manufacture and distribute their products, Huff says.

Start planning your approach by first taking some time to document your idea. "That's one thing most inventors don't spend enough time on," Huff says. Describe its function and include drawings. It may help to approach this task by creating a user manual, Huff says.

Once your idea is fleshed out, conduct some market research and identify any competing products. Huff suggests doing preliminary work on your own, before you spend money to bring in the professionals.

"Say you've invented a new toothbrush," Huff says. "Go to Google (GOOG, Fortune 500)'s 'Images' section, type in toothbrushes and see what comes back."

After you vet the market and decide your concept is worth pursuing, you'll want to conduct a patent search. You can do a preliminary search by visiting the United States Patent and Trademark Office website.

Or, you can bring in a professional patent agent or attorney to conduct a search for you at a cost of $600 to $900, Huff says.

Filing for patent protection before you shop your idea around will give you credibility with interested parties, Huff says. You'll also want to draw up a trade-secret or non-disclosure agreement so that you feel safe discussing your idea with potential investors and companies.

The next step? Pull together a presentation and identify target companies that might be interested in your idea.

Companies like Huff's will help you package your approach and also compile lists of target companies that might bite on your product. For example, Huff's basic service package costs $3,250.

At this stage, you'll also want to build a working product sample, says George Davison of Davison, Inc., a product development company based in Pittsburgh.

A good prototype should demonstrate your intentions to key decision makers and inspire others who lack your vision.

"This is by far the best way to communicate with a target company," Davison says. "You need to communicate in the company's language."

Research each potential partner's mission statement, branding and pricing strategies as well as its manufacturing processes, Davison says.

Understanding this will help you streamline your presentation and approach. "This way your idea will be more easily understood and accepted by people who will have input on the acceptance or rejection of your product," Davison says.

Huff adds that aspiring inventors need to develop a method to track the companies that they've contacted and follow up with them.

Ultimately, keep in mind that it's a tough world out there. "What nobody wants to tell inventors is that 98% of these new product ideas are never going to make a nickel," Huff says.