When inventors contact my company about Due Diligence I like to describe the idea 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 definitely take their time to ensure that they are 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 “research” as the entire process of gathering all the information necessary to make a good business decision before 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 Idea Patent, the more they will evaluate the potential license. Keep in mind that even if a product is apparently simple and affordable, the entire process of developing and manufacturing is rarely easy and low cost. Companies will evaluate such criteria as customer feedback, list price points, unit cost to manufacture, competitive landscape, manufacturing feasibility, market opportunity, etc.
Inventors often wonder if they need to perform Research on their own invention. As discussed, this can depend on the option you have elected for taking your product to advertise.
Option 1 – Manufacturing by yourself – If you are planning on manufacturing and marketing the invention on your own, then yes you need to perform research. Essentially, you are the maker in the product and as a result you should perform research on your own invention just like other manufacturers would. The issue that I have found is the fact that many inventors who elect to manufacture their particular 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 prior to any company licensing your invention, they are going to perform their own research. In case you are employing a company like Invention Home, the expenses to advertise your invention to companies can be minimal – therefore it may set you back more to completely carry out the due diligence than it might to just market the Inventhelp Inventions Store to companies (which, is ultimately your best form of due diligence anyway). Remember, you should have taken enough time to accomplish your basic consumer research as well as a patent search earlier during this process to be confident that your product or service will be worth pursuing in the first place (i.e.: the item is not really already on the market and there exists a demand).
Let me summarize. If you are intending on investing a large amount of cash on your invention, then you should always analyze an opportunity first to make certain it’s worth pursuing; however, should you can actively market your invention to companies with minimal cost, you can be reassured that an interested company will work their very own homework (not rely on yours). Note: it is usually beneficial to have marketing research information available when you discuss your invention opportunity with prospective companies; however, it is not easy to obtain these details so you need to balance the time and effort and cost of gathering the data using the real necessity of having it.
In addition, i will provide you with some due diligence tips.As discussed, the concept of marketing homework would be to gain as much information as possible to make a well-informed decision on making an investment in any invention. In a perfect world, we would 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 easy to find.
If you are not in a position to pay for a professional firm to do your marketing evaluation, it is possible to perform research by yourself; however, you must know that research ought to be interpreted and used for decision-making and alone, it provides no value. It is what you do with the details that matters. Note: I might recommend that you just do NOT PURCHASE “consumer research” from an Invention Promotion company. Often sold as being a “starting point” (they’ll usually approach you again with an expensive “marketing” package), the information is largely useless because it is not specific research on your own invention. Rather, it is off-the-shelf “canned” industry statistics, which will not always help you make a knowledgeable decision.
Before we arrive at the “tips”, let me clarify that “homework” can come under various names, but essentially they all mean the same. Some of the terms which i have experienced to explain the diligence process are:
· Marketing Evaluation
· Commercial Potential
· Invention Salability
· Profitably Marketable
· Market Research
· Invention Assessment
Each one of these terms is essentially referring to the investigation 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, however you can perform some steps that will help you better comprehend the chance of success.
Again, if you are intending on manufacturing your invention by yourself, you should look at performing marketing due diligence 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 highlighted below.
1. Ask and answer some fundamental questions
– Is the invention original or has somebody else already come up with the invention? Hopefully, you might have already answered this question inside your basic research. If not, check trade directories or perhaps the Internet.
– Can be your invention a solution to your problem? Otherwise, why you think it can sell?
– Does your invention really solve the issue?
– Is your invention already on the market? If you have, precisely what does your invention offer over the others?
– The number of competing products and competitors can you discover on the market?
– What exactly is the range of cost of these products? Can your product or service fall into this range? Don’t forget to element in profit and possibly wholesale pricing and royalty fee, if any.
– Can you position your invention being a better product?
2. List the pros and cons that can impact the way your invention sells and objectively evaluate your list
– Demand – will there be a current need for your invention?
– Market – does a market are available for your invention, and if so, exactly what is the dimensions 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 – will 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 longer than other products?
– Performance – does your invention perform much better than other products (including better, faster output, less noise, better smell, taste, look or feel)?
– Market Barriers – could it be difficult or simple 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 inside the field.
– Request objective feedback and advice.
– Speak with marketing professionals.
– Ask sales representatives in the field.
– Ask people you know in the field.
– Speak to close relatives and buddies whom you trust.
– Request input on the invention such as features, benefits, price, and when they might buy it.
During the diligence stage, existing manufactures have an advantage in this they are able to speak with their customers (retail buyers, wholesalers, etc.). In my experience, just about the most key elements which a company will consider is whether their existing customers would purchase the product. If I took Inventhelp Invention Service to your company to discuss licensing (assuming they might produce it on the right price point), you will find a high likelihood they would license the item if an individual of the top customers decided to sell it off.
Whether a retail buyer has an interest in purchasing a product is a driving force for companies considering product licensing. I’ve seen many scenarios in which a company had interest within an invention however they ultimately atgjlh to pass through on the idea as 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 at a cool product each time a retailer expresses interest inside it.