When inventors contact my company about Due Diligence I like to clarify the reasoning with a simple example. Think about it this way, if a manufacturer is getting ready to choose to develop, manufacture, and market a new product which could potentially cost $50,000 to $150,000 to produce plus inventory costs, they would most definitely take their time to ensure that they may be building a good business decision in moving forward using the product (i.e.: have they done their homework on the product). Therefore, you can summarize “research” as the whole process of gathering all the information necessary to make a good business decision before you make the large financial expenditure. It can generally be assumed that the more time, effort and cash (i.e.: “risk”) that a company must spend to develop New Invention Idea, the more they will likely evaluate the potential license. Stay in mind that even if a product is apparently simple and low cost, the process of developing and manufacturing is rarely easy and low cost. Companies will evaluate such criteria as customer opinions, list price points, unit cost to manufacture, competitive landscape, manufacturing feasibility, market opportunity, etc.
Inventors often wonder if they need to perform Homework on their invention. As discussed, this may depend on the option you might have elected for taking your product or service to advertise.
Option 1 – Manufacturing by yourself – If you are intending on manufacturing and marketing the invention all on your own, then yes you will have to perform research. Essentially, you become the manufacturer of the product and as a result you ought to perform the homework on your own invention just like other manufacturers would. The problem i have found is the fact that many inventors who elect to manufacture their own inventions do little, if any marketing homework, which is a big mistake.
Option 2 – Licensing for Royalties – if you are intending on licensing for royalties, i believe you can minimize your research efforts, because just before any company licensing your invention, they will likely perform their particular homework. If you are using a company such as Invention Home, the expense to market your invention to companies can be minimal – therefore it may cost more to really carry out the due diligence than it would to just market the Invention Prototype to companies (which, is ultimately your very best form of homework anyway). Remember, you need to have taken time to do your basic consumer research as well as a patent search earlier during this process to be confident that your products or services will be worth pursuing in the first place (i.e.: the item is not really already on the market and you will find a demand).
Let me summarize. If you are planning on investing a substantial amount of cash on your invention, then you should always analyze the chance first to make sure it’s worth pursuing; however, in the event you can actively promote your invention to companies with minimal cost, you can be reassured that an interested company will do their own due diligence (not count on yours). Note: it is usually helpful to have marketing due diligence information available while you discuss your invention opportunity with prospective companies; however, it is not easy to acquire this information so you need to balance the effort and expense of gathering the data with the real need for having it.
In addition, i provides you with some research tips.As discussed, the concept of marketing homework is always to gather as much information as possible to create a well-informed decision on investing in any invention. In a perfect world, we might have got all the appropriate information on sales projections, retail pricing, marketing costs, manufacturing setup and unit costs, competitive analysis, market demand, etc. However, this information may not be very easy to find.
If you are not in a position to pay a professional firm to do your marketing evaluation, it really is easy to carry out the research all on your own; however, you need to understand that research ought to be interpreted and employed for decision-making and on its own, it offers no value. It really is whatever you use the information that matters. Note: I might recommend that you simply do NOT PURCHASE “consumer research” from an Invention Promotion company. Often sold as being a “first step” (they’ll usually approach you again having an expensive “marketing” package), the details are largely useless because it is not specific research on your invention. Rather, it is actually off-the-shelf “canned” industry statistics, which will not necessarily assist you in making a knowledgeable decision.
Before we arrive at the “tips”, let me clarify that “research” can come under various names, but essentially they all mean the same. Some of the terms i have seen to illustrate the diligence process are:
· Marketing Evaluation
· Commercial Potential
· Invention Salability
· Profitably Marketable
· Researching The Market
· Invention Assessment
Each one of these terms is basically talking about the research to gauge the likelihood of the invention’s salability and profitability. The question of whether your invention will sell can not be known with certainty, but you can perform some steps that will help you better comprehend the probability of success.
Again, if you are intending on manufacturing your invention on your own, you should look at performing marketing homework on the product. If you are intending on licensing your invention for royalties the company licensing your invention should perform this research.
Some suggestions for marketing research are the following.
1. Ask and answer some fundamental questions
– Can be your invention original or has another person already develop the invention? Hopefully, you have already answered this query within your basic research. If not, check trade directories or perhaps the Internet.
– Is the invention a solution to your problem? Or even, why do you think it will sell?
– Does your invention really solve the situation?
– Is the invention already on the market? In that case, what does your invention offer within the others?
– The number of competing products and competitors can you locate on the market?
– Exactly what is the range of price of the products? Can your product fall into this range? Don’t forget to factor in profit and possibly 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 the way your invention sells and objectively evaluate your list
– Demand – will there be an existing interest in your invention?
– Market – does a market exist for your invention, and if so, what exactly is the scale of the market?
– Production Capabilities – could it be easy or hard to produce your invention?
– Production Costs – can you have accurate manufacturing costs (both per unit and setup/tooling)?
– Distribution Capabilities – could it be easy or hard to distribute or sell your invention?
– Advanced features – does your invention offer significant improvements over other similar products (speed, size, weight, convenience)?
– Retail Price – do you have a price point advantage or disadvantage?
– Life – will your invention last more than other products?
– Performance – does your invention perform better than other products (including better, faster output, less noise, better smell, taste, look or feel)?
– Market Barriers – will it be difficult or easy to enter your market?
– Regulations and Laws – does your invention require specific regulatory requirements or are there special laws that must definitely be followed (i.e.: FDA approval)
3. Seek advice or input from others (consider confidentiality)
– Target professionals / experts within the field.
– Demand objective feedback and advice.
– Speak with marketing professionals.
– Ask sales representatives inside the field.
– Ask people you know within the field.
– Speak with close relatives and buddies that you trust.
– Request input on the invention including features, benefits, price, and when they might buy it.
During the diligence stage, existing manufactures come with an advantage in that they have the capacity to talk with their customers (retail buyers, wholesalers, etc.). Inside my experience, probably the most important factors that a company will consider is if their existing customers would get the product. If I took Inventhelp Innovation to some company to discuss licensing (assuming they could produce it on the right price point), there exists a very high likelihood they would license the merchandise if one with their top customers decided to sell it off.
Whether a retail buyer is interested in investing in a item is a driving force for companies considering product licensing. I’ve seen many scenarios where a company had interest within an invention nevertheless they ultimately atgjlh to move on the idea because their customer (the retailer) did not show any interest within the product. Conversely, I’ve seen companies with mild interest in an idea who jump in a new product each time a retailer expresses interest within it.