When inventors contact my company about Due Diligence I like to explain the reasoning with a simple example. Think about it this way, if a manufacturer is getting ready to make the decision to develop, manufacture, and market a new product which could potentially cost $50,000 to $150,000 to produce plus inventory costs, they would definitely take their time to ensure they are making a good business decision in moving forward with all the product (i.e.: have they done their homework on the product). Therefore, you can sum up “research” as the entire process of gathering all the information necessary to make a good business decision prior to making the large financial expenditure. It can generally be assumed that the additional time, effort and money (i.e.: “risk”) that a company must spend to develop I Have An Invention Where Do I Start, the more they are going to evaluate the potential license. Keep in mind that even if a product is apparently simple and inexpensive, the process of developing and manufacturing is rarely simple and inexpensive. Companies will evaluate such criteria as customer comments, list price points, unit cost to manufacture, competitive landscape, manufacturing feasibility, market opportunity, etc.
Inventors often wonder if they should perform Research on their invention. As discussed, this may depend on the option you have elected to take your product to market.
Option 1 – Manufacturing on your own – If you are intending on manufacturing and marketing the invention on your own, then yes you will need to perform research. Essentially, you feel the maker in the product and as a result you ought to perform the due diligence on your invention just like other manufacturers would. The issue i have found is the fact that many inventors who choose to manufacture their own inventions do little, if any marketing research, which is actually a big mistake.
Option 2 – Licensing for Royalties – if you are intending on licensing for royalties, i then believe you can minimize your research efforts, because before any company licensing your invention, they will likely perform their particular research. If you are employing a company including Invention Home, the costs to promote your invention to companies can be minimal – therefore it could set you back more to really carry out the due diligence than it would to just market the Make My Invention Prototype to companies (which, is ultimately your very best type of homework anyway). Remember, you ought to have taken enough time to do your basic market research along with a patent search earlier along the way to be assured that your product or service is worth pursuing to start with (i.e.: the product will not be already on the market and there is a demand).
Let me summarize. If you are intending on investing a large amount of money on your invention, then you should always analyze the chance first to ensure it’s worth pursuing; however, should you can actively promote your invention to companies with minimal cost, you can be assured that an interested company will perform their own due diligence (not count on yours). Note: it is usually helpful to have marketing due diligence information available when you discuss your invention opportunity with prospective companies; however, it is not always easy to acquire these details so you need to balance the effort and cost of gathering the details with all the real need for having it.
I also offers you some due diligence tips.As discussed, the concept of marketing research would be to gain as much information as you can to produce a well-informed decision on investing in any invention. In a perfect world, we might have the relevant information about sales projections, retail pricing, marketing costs, manufacturing setup and unit costs, competitive analysis, market demand, etc. However, this info is not always simple to find.
In case you are not in a position to cover a professional firm to perform your marketing evaluation, it is actually easy to perform the research on your own; however, you must understand that research should be interpreted and utilized for decision-making and alone, it provides no value. It is actually everything you do with the information that matters. Note: I would recommend that you simply do NOT PURCHASE “consumer research” from an Invention Promotion company. Often sold as being a “initial step” (they’ll usually approach you again having an expensive “marketing” package), the details are largely useless because it is not specific research on the invention. Rather, it is off-the-shelf “canned” industry statistics, which will not necessarily assist you in making an educated decision.
Before we reach the “tips”, let me clarify that “homework” can come under various names, but essentially each of them mean exactly the same thing. A number of the terms which i have witnessed to describe the diligence process are:
· Marketing Evaluation
· Commercial Potential
· Invention Salability
· Profitably Marketable
· Researching The Market
· Invention Assessment
All these terms is basically discussing the study to gauge the chance of the invention’s salability and profitability. The question of whether your invention will sell can never be known with certainty, however, you can perform some steps that will help you better be aware of the likelihood of success.
Again, if you are intending on manufacturing your invention by yourself, you should think about performing marketing research on the product. If you are intending on licensing your invention for royalties the company licensing your invention should perform this research.
A few recommendations for marketing homework are listed below.
1. Ask and answer some basic questions
– Is the invention original or has another person already think of the invention? Hopefully, you might have already answered this inquiry within your basic research. Otherwise, check trade directories or perhaps the Internet.
– Is the invention a solution to a problem? If not, why do you reckon it can sell?
– Does your invention really solve the problem?
– Is your invention already on the market? If you have, what does your invention offer within the others?
– The amount of competing products and competitors can you find on the market?
– What is the range of cost of the products? Can your product or service fall into this range? Don’t forget to aspect in profit and maybe wholesale pricing and royalty fee, if any.
– Can you position your invention as a better product?
2. List the pros and cons that will impact how your invention sells and objectively evaluate your list
– Demand – can there be a preexisting interest in your invention?
– Market – does a market exists for your invention, and if so, what is the size of the marketplace?
– Production Capabilities – will it be easy or hard to produce your invention?
– Production Costs – can you get accurate manufacturing costs (both per unit and setup/tooling)?
– Distribution Capabilities – could it be easy or difficult to distribute or sell your invention?
– Advanced features – does your invention offer significant improvements over other similar products (speed, size, weight, ease of use)?
– List Price – do you have a price point advantage or disadvantage?
– Life – will your invention last over other products?
– Performance – does your invention perform a lot better than other products (including better, faster output, less noise, better smell, taste, look or feel)?
– Market Barriers – is it difficult or very easy to enter your market?
– Regulations and Laws – does your invention require specific regulatory requirements or are there special laws that must be followed (i.e.: FDA approval)
3. Seek advice or input from others (consider confidentiality)
– Target professionals / experts in the field.
– Demand objective feedback and advice.
– Speak to marketing professionals.
– Ask sales people in the field.
– Ask people you know in the field.
– Speak with close family and friends whom you trust.
– Ask for input on the invention such as features, benefits, price, and if they might buy it.
Throughout the diligence stage, existing manufactures come with an advantage because they are able to talk with their clients (retail buyers, wholesalers, etc.). Within my experience, one of the most key elements that a company will consider is whether or not their existing customers would purchase the product. If I took Inventhelp Licensing Expo to your company to talk about licensing (assuming they could produce it at the right price point), there exists a high likelihood which they would license the item if one with their top customers agreed to market it.
Whether a retail buyer is interested in purchasing a item is a driving force for companies considering product licensing. I’ve seen many scenarios where a company had interest inside an invention nevertheless they ultimately atgjlh to pass on the idea because their customer (the retailer) failed to show any interest in the product. Conversely, I’ve seen companies with mild interest within an idea who jump at a cool product each time a retailer expresses interest within it.