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 choose to develop, manufacture, and market a new item that could potentially cost $50,000 to $150,000 to produce plus inventory costs, they would definitely take their time to ensure they may be making a good business decision in moving forward with the product (i.e.: they have done their homework on the product). Therefore, you can summarize “homework” as the whole 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 more hours, effort and money (i.e.: “risk”) that a company must spend to develop New Invention Idea, the more they will evaluate the potential license. Keep in mind that even if a product seems to be simple and affordable, the whole process of developing and manufacturing is rarely basic and low cost. Companies will evaluate such criteria as customer comments, retail price points, unit cost to manufacture, competitive landscape, manufacturing feasibility, market opportunity, etc.
Inventors often wonder if they have to perform Research on their invention. As discussed, this can depend on the option you may have elected for taking your product or service to promote.
Option 1 – Manufacturing on your own – If you are intending on manufacturing and marketing the invention all on your own, then yes you will have to perform due diligence. Essentially, you become the manufacturer in the product and as a result you need to carry out the research on your own invention just like other manufacturers would. The situation i have found is the fact that many inventors who choose to manufacture their particular inventions do little, if any marketing research, that is a big mistake.
Option 2 – Licensing for Royalties – if you are planning on licensing for royalties, i then believe you can minimize your due diligence efforts, because just before any company licensing your invention, they will perform their very own due diligence. Should you be employing a company like Invention Home, the expenses to advertise your invention to companies can be minimal – therefore it might cost you more to actually perform research than it could to just market the I Have An Idea For An Invention to companies (which, is ultimately your very best type of due diligence anyway). Remember, you should have taken time to perform your basic market research along with a patent search earlier along the way to be assured that your product will be worth pursuing in the first place (i.e.: the item will not be already on the market and there is a demand).
Let me summarize. If you are planning on investing a substantial amount of cash on your invention, then it is best to analyze the chance first to make sure it’s worth pursuing; however, should you can actively advertise your invention to companies with minimal cost, you can be confident that an interested company will do their own due diligence (not rely on yours). Note: it is usually beneficial to have marketing homework information available when you discuss your invention opportunity with prospective companies; however, it is far from easy to get this info so you need to balance the effort and expense of gathering the information with all the real need for having it.
I also will provide you with some research tips.As discussed, the concept of marketing due diligence is always to gain as much information as is possible to create a well-informed decision on making an investment in any invention. In a perfect world, we might have 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 simple to come across.
In case you are not in a position to pay an expert firm to accomplish your marketing evaluation, it is possible to perform the research on your own; however, you must understand that research ought to be interpreted and utilized for decision-making and by itself, it has no value. It is actually everything you use the information that matters. Note: I might recommend that you just do NOT PURCHASE “market research” from an Invention Promotion company. Often sold being a “first step” (they’ll usually approach you again with the expensive “marketing” package), the information is largely useless because it is not specific research on the invention. Rather, it is off-the-shelf “canned” industry statistics, that will possibly not assist you in making an informed decision.
Before we get to the “tips”, let me clarify that “homework” can come under various names, but essentially each of them mean the same. A number of the terms that I have seen to describe the diligence process are:
· Marketing Evaluation
· Commercial Potential
· Invention Salability
· Profitably Marketable
· Consumer Research
· Invention Assessment
All these terms is actually discussing the study to gauge the likelihood of your invention’s salability and profitability. The question of whether your invention will sell can do not be known with certainty, but you can perform some steps that will help you better understand the likelihood of success.
Again, if you are intending on manufacturing your invention by yourself, you should consider 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.
Some suggestions for marketing research are the following.
1. Ask and answer some fundamental questions
– Is 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.
– Can be your invention a solution to your problem? If not, why do you reckon it can sell?
– Does your invention really solve the problem?
– Can be your invention already on the market? If so, precisely what does your invention offer within the others?
– How many competing products and competitors can you find on the market?
– What exactly is the range of value of these items? Can your product fall into this range? Don’t forget to element in profit and maybe wholesale pricing and royalty fee, if any.
– Can you position your invention as a better product?
2. List the advantages and disadvantages that can impact the way your invention sells and objectively evaluate your list
– Demand – can there be an existing need for your invention?
– Market – does a market are available for your invention, and if so, exactly what is the size of the marketplace?
– Production Capabilities – will it be easy or difficult to produce your invention?
– Production Costs – can you obtain accurate manufacturing costs (both per unit and setup/tooling)?
– Distribution Capabilities – will 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 – have you got a price point advantage or disadvantage?
– Life – will your invention last over 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 – could 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 in the field.
– Demand objective feedback and advice.
– Speak to marketing professionals.
– Ask sales representatives in the field.
– Ask people you know inside the field.
– Speak with close friends and family members that you trust.
– Demand input on the invention such as features, benefits, price, and if they could buy it.
Through the diligence stage, existing manufactures have an advantage in this they are able to talk with their potential customers (retail buyers, wholesalers, etc.). In my experience, just about the most key elements that the company will consider is whether their existing customers would purchase the product. Should I took Inventhelp Commercials to your company to talk about licensing (assuming they can produce it at the right price point), there exists a high likelihood which they would license the product if an individual with their top customers decided to sell it.
Whether a retail buyer is interested in purchasing a product is a driving force for companies considering product licensing. I’ve seen many scenarios where a company had interest in an invention but 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 in an idea who jump in a new product each time a retailer expresses interest in it.