When inventors contact my company about Due Diligence I like to explain the idea with a simple example. Consider it this way, if a manufacturer is getting ready to decide 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 certainly take their time to ensure they are making a good business decision in advancing with the product (i.e.: have they 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 before you make the large financial expenditure. It can generally be assumed that the more time, effort and money (i.e.: “risk”) that a company must spend to develop Prototype Services Inventhelp, the more they are going to evaluate the potential license. Keep in mind that even if a product is apparently simple and low cost, the whole 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 produce, competitive landscape, manufacturing feasibility, market opportunity, etc.
Inventors often wonder if they should perform Due Diligence on the invention. As discussed, this will depend on the option you have elected for taking your products or services to market.
Option 1 – Manufacturing all on your own – If you are intending on manufacturing and marketing the invention by yourself, then yes you will have to perform due diligence. Essentially, you are the producer in the product and as a result you need to perform the due diligence on the invention just like other manufacturers would. The problem that I have found is that many inventors who opt to manufacture their particular 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 due diligence efforts, because before any company licensing your invention, they will likely perform their particular homework. Should you be using a company like Invention Home, the costs to advertise your invention to companies can be minimal – therefore it could cost more to actually carry out the due diligence than it would to just market the Patent Helper to companies (which, is ultimately your very best type of research anyway). Remember, you need to have taken time to accomplish your basic researching the market as well as 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 is not really already on the market and you will find a demand).
Let me summarize. If you are intending on investing a substantial amount of cash on your invention, then it is best to analyze the chance first to ensure it’s worth pursuing; however, should you can actively advertise your invention to companies with minimal cost, you can be reassured that an interested company will perform their very own homework (not depend on yours). Note: it will always be beneficial to have marketing due diligence information available while you discuss your invention opportunity with prospective companies; however, it is really not easy to obtain this information so you have to balance the time and effort and cost of gathering the details using the real need for having it.
I also offers you some homework tips.As discussed, the thought of marketing research is to gather as much information as you can to produce a well-informed decision on making an investment in any invention. In a perfect world, we might have got all the relevant info on sales projections, retail pricing, marketing costs, manufacturing setup and unit costs, competitive analysis, market demand, etc. However, these details is not always easy to find.
Should you be not in a position to pay a specialist firm to accomplish your marketing evaluation, it is actually easy to carry out the research on your own; however, you must understand that research ought to be interpreted and employed for decision-making and by itself, it has no value. It is everything you use the information that matters. Note: I might recommend that you 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 information is largely useless as it is not specific research on the invention. Rather, it is off-the-shelf “canned” industry statistics, that will possibly not help you make a knowledgeable decision.
Before we reach the “tips”, let me clarify that “research” can come under various names, but essentially all of them mean the same thing. A few of the terms which i have witnessed to illustrate the diligence process are:
· Marketing Evaluation
· Commercial Potential
· Invention Salability
· Profitably Marketable
· Market Research
· Invention Assessment
Each one of these terms is essentially talking about the investigation to evaluate the chance of your 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 to help you better understand the chance of success.
Again, if you are intending on manufacturing your invention by yourself, you should look at performing marketing research on the product. If you are planning on licensing your invention for royalties the company licensing your invention should perform this research.
Some suggestions for marketing due diligence are the following.
1. Ask and answer some basic questions
– Is the invention original or has somebody else already develop the invention? Hopefully, you have already answered this query within your basic research. Or even, check trade directories or the Internet.
– Is the invention a solution to a problem? If not, why do you think it is going to sell?
– Does your invention really solve the issue?
– Can be your invention already on the market? If you have, precisely what does your invention offer on the others?
– The amount of competing products and competitors can you locate on the market?
– Exactly what is the range of value of these items? Can your product fall into this range? Don’t forget to factor 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 which will impact how your invention sells and objectively evaluate your list
– Demand – can there be an existing need for your invention?
– Market – does a market exist for your invention, and if so, what is the dimensions of the current market?
– Production Capabilities – could it be easy or difficult 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 a lot better than other products (including better, faster output, less noise, better smell, taste, look or feel)?
– Market Barriers – will it be difficult or simple to enter your market?
– Regulations and Laws – does your invention require specific regulatory requirements or are available 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.
– Request objective feedback and advice.
– Talk to marketing professionals.
– Ask sales representatives inside the field.
– Ask people you know within the field.
– Talk to close family and friends who you trust.
– Demand input on the invention like features, benefits, price, and if they could buy it.
Throughout the diligence stage, existing manufactures have an advantage in that they are able to talk with their customers (retail buyers, wholesalers, etc.). Within my experience, probably the most crucial elements that the company will consider is if their existing customers would purchase the product. Should I took How To Patent Something With Inventhelp to some company to discuss licensing (assuming they might produce it in the right price point), there is a very high likelihood which they would license the merchandise if an individual of the top customers consented to market it.
Whether a retail buyer is interested in buying a item 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 move on the idea as their customer (the retailer) did not show any interest inside the product. Conversely, I’ve seen companies with mild interest inside an idea who jump at a new product whenever a retailer expresses interest in it.